The consultation marks the first step in the translation of the directive into implementable rules and regulations.
MiFID II, which will not be fully implemented until 2016, will address the residual effects of the financial crisis by improving financial market transparency and strengthening investor protection within the insurance and investment market.
The directive contains over 100 requirements, and ESMA will have to meet all of these in order to draft regulatory technical standards and implementing technical standards.
In order to ensure that it meets its goals in practice ESMA has also published a consultation paper and discussion paper online, which can be responded to until 1 August.
MiFID II features a variety of proposals aimed at improving the protection given to investors in the insurance and investment markets.
The proposals include:
- Limitations on the receipt of commissions.
- An enforcement of the clear distinction between independent and non-independent advice.
- Requirements to include risk identification in the manufacture and distribution of financial products.
- Powers for regulators to prohibit or restrict the marketing and distribution of certain financial instruments.
- -Requirements to provide clients with details of all charges related to their investment.
ESMA chairman Steven Maijoor described the consultation launch as an “important step in the biggest overhaul of financial markets regulation in the EU for a decade”.
“The reform of MiFID is an integral part of the EU’s strategy to address the effects of the financial crisis and aims to bring greater transparency to markets and to strengthen investor protection. These changes are key to restoring trust in our financial markets,” he said.
“We appreciate the magnitude of this exercise for stakeholders and strongly encourage all those affected by these reforms to provide their views to ensure that we can take them into account in our final proposals.”
Daniel Godfrey, chief executive of UK-based Investment Management Association said any conflict raised by ESMA’s consultation could be dealt with through commission sharing arrangements.
“If ESMA is seeking to improve governance on the payment of research, then the focus needs to be on getting suppliers of research to unbundle the costs so that asset managers can place a value on the research being supplied and to what they are paying.”
In January, John Barass, deputy chief executive of the Wealth Management Association said he feared that if MiFID II was allowed to over-rule national regulators it could eclipse the effects of the Retail Distribution Review on the UK financial advice industry.
He said the agreed MiFID II appeared to permit an override by national regulators, enabling them to impose their own rules on EU member countries, making RDR’s future uncertain.
“MiFID and the RDR have different definitions of independent and restricted services, which could mean the UK has to change its rules again barely a year after a significant overhaul," he said.