MiFID II

The EU’s Markets in Financial Instruments Directive II and Markets in Financial Instruments Regulation (together, MiFID II) update the 2007 MiFID rules (together, MiFID) that apply to EU brokers, segregated investment managers, advisers and trading venues. UK MiFID firms lost access to the EU internal MiFID marketing passport as a result of Brexit, but the MiFID framework was ‘onshored’ into UK law during the Brexit process. The UK therefore currently has a near-identical, parallel framework for UK-based MiFID firms, although some divergence will occur as the EU updates elements of its MiFID framework during 2022.

The EU’s Markets in Financial Instruments Directive II and Markets in Financial Instruments Regulation (together, MiFID II) update the 2007 MiFID rules (together, MiFID) that apply to EU brokers, segregated investment managers, advisers and trading venues. UK MiFID firms lost access to the EU internal MiFID marketing passport as a result of Brexit, but the MiFID framework was ‘onshored’ into UK law during the Brexit process. The UK therefore currently has a near-identical, parallel framework for UK-based MiFID firms, although some divergence will occur as the EU updates elements of its MiFID framework during 2022.

Whilst the current UK MiFID framework, in common with the EU regime, is not principally designed for the regulation of collective investment vehicles targeting unlisted companies, it nevertheless applied to a range of BVCA member firms because their group structures include a UK “adviser arranger” entity classified by the FCA as a MiFID investment firm (also known historically as “Exempt CAD” firms). These firms are now covered by the Investment Firms Prudential Regime and please refer to this BVCA policy page for further detail.

The BVCA engaged extensively with HM Treasury, the FCA and the EU authorities (via Invest Europe) on the development and implementation of MiFID II. Key areas of interest for the PE/VC industry included: transaction reporting, product governance, best execution, the ban on inducements, the treatment of local public authorities, telephone taping and third country firms. These are explored further in our dedicated Technical Briefing.

As regards the client categorisation of local authority pension scheme administrators under MiFID II, the Local Government Association, with the support of the BVCA, has produced template forms for the new UK ‘opt up’ procedure, set out in the FCA’s Second Policy Statement. These forms are available here, alongside a process flow and timetable.