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MiFIDInvestor protection
POTEZA BPD d.d.
Goals
Offer European passport for investment firms allow sales of financial products and services throughout
EU
Harmonise investor protection driven by rapid increase in both number and
sophistication of financial services and products
POTEZA BPD d.d.
Impact – wider coverage
Financial and investment services
Financial instruments
Execution venues
POTEZA BPD d.d.
Whom does it apply to?
INVESTMENT FIRM/BANK
Investm
en
t Ban
kin
g
Fin
an
cia
l Mark
ets
Asset M
an
ag
em
en
tFu
nd
s, U
CIT
S
Tre
asu
ry
Corp
ora
te F
inan
ce
DISTRIBUTIONRetail, Private Banking, Institutional Sales
Markets
MTFs
Syst. int.
POTEZA BPD d.d.
Impact - areas
Organisation
Market Transparency
Recordkeeping
Conduct of Business
Best Execution
General Organisation, Compliance, Internal Audit, Risk Management, Outsourcing, Conflict of Interest, ...
Transaction Data, Contracts, ...
Client Classification, Information to Clients, Suitabilityand Appropriateness Tests, Reporting to Clients, ...
Best Execution Policies, Monitoring of Policies
Pretrade – Posttrade Transparency, TransactionReporting to Regulators
POTEZA BPD d.d.
Client protection
Client clasification “Official” classification
Retail clients Professional clients Eligible counterparties Movement between groups on request
“Unofficial” classification Firm specific policies Breakdown by groups or/and financial products and
services
POTEZA BPD d.d.
Client protection
Suitability Test (Investment advice and Portfolio management) Obtain necessary information
About knowledge and experience About financial situation
Source and extent of regular income Total, liquid assets, investments, real property Regular financial commitments
About investment objectives Duration Risk profile and preferences Purpose
Appropriateness test (Other products and services) Based on knowledge and experience
Insufficient information for appropriate judgementEXECUTION ONLY – Suitability/appropriateness does not apply
POTEZA BPD d.d.
Client protection
Information to clients Depends on client classification
Retail – full and extensive information Professional – on request
Information on nature and extent of risk Proof of disclosing all information
Reporting to clients Timeliness and comprehensiveness of reports
POTEZA BPD d.d.
Client protection
Best execution Principle not strict rule Implementing and monitoring policy that enables all
necessary steps to be taken in order to insure best execution
Criteria for best execution Price Costs Spreads/Liquidity Market regulation Execution and settlement risks Ease of doing business, ....
POTEZA BPD d.d.
Final thoughts
Does increased client protection increases firms risks?
Cost vs. benefits
Sales efficiency
Post MiFID landscape?“ ..., because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns — the ones we don't know we
don't know.” Donald Rumsfeld
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