Jonathan Herbst, head of financial services regulation at Norton Rose Fulbright, says: “MiFID II is one of the most important pieces of the post-crisis regulatory reform puzzle, no one should underestimate its importance. Not only are there new markets requirements including those relating to position limits, algorithmic trading and transparency but there are also new conduct of business requirements that add up to change for firms.”
However, while these have all been approved they are not all in force just yet. MiFID and MiFIR will come into force 20 days after publication in the EU Official Journal, however Priips and Ucits V both have to be officially endorsed by member states and then countries have two years to implement Priips and 18 months for Ucits V to take effect.
But with the RDR having been implemented in the past 18 months, some of the new European rules are already included in UK regulation.
Peter Snowdon, financial services partner at Norton Rose Fulbright, notes: “We’ve seen a huge number of new rules post-crisis which are borne out of the European legislators’ strong investor protection agenda, and this is no exception. Lots of the changes we’re seeing are there to tighten up rules we’ve had for a while, but following the 2008 financial crisis the feeling was that they may not have completely achieved their original aim.”
With up to two years for some of these rules to come into effect, regulation looks like it is in for further change.
Nyree Stewart is features editor at Investment Adviser
European Long Term Investment Funds (ELTIFs)
At the same time as the European Parliament passed the rules for Priips, Ucits and MiFID/MiFIR, it also voted in favour of an EU proposal that aims to establish European investment funds that only invest in assets with a long-term focus – called European Long Term Investment Funds (ELTIFs).
ELTIFs are a proposed new type of collective investment framework allowing investors to put money into companies and projects that need long-term capital, such as infrastructure projects across Europe. Although to benefit from this cross-border passport, the new funds would have to meet rules designed to protect both investors and the companies and projects they invest in.
Following the debate in the European Parliament on April 17, the scope of these was expanded to also include shares or debt issued by small and medium enterprises (SMEs), and for ELTIFs to be encouraged to pay particular attention to environmental, social and governance characteristics of projects or companies they invest in. Sharon Bowles, chair of the European Parliament’s Economic and Monetary Affairs Committee, explains: “It is a well-known fact that since the financial crisis, project finance through banks has been restricted. This proposal is therefore very encouraging as it presents an alternative source of funding across the EU with a specific focus on the long term.
