FCA Consultation on MiFID II

On 29th September the FCA launched a third consultation paper on the MiFID II directive. Now, this may appear to be a very dry subject, of little significance to individual investors, but the current UK regulations implementing MiFID have a profound effect.

These regulations lie at the heart of a number of problems affecting us, for example:

  • Ability to participate in share placings. Often only “qualified investors” can participate in placings and the criteria for being qualified may be hard for many individual investors to satisfy.
  • Access to company research. Much research is restricted to professional or “elective professional” investors. Again, it can be hard for many individual investors to meet the criteria for these categories.
  • Ability to trade “complex products”, which again can be restricted to professional investors (or only offered to individual investors with professional advisors). These products can include important hedging tools such as options and warrants. There was a risk that shares in investment trusts might be considered to be “complex products” under MiFID II but, fortunately, this risk appears lower now.

The objective of these regulations is to protect retail investors from being misled but, as with so much well-meaning regulation, the effect has not been as intended, rather it creates an unlevel playing field, where professionals have access to information and are able to trade in advantageous ways that many retail investors find themselves barred from.

So, in order to protect our members interest, ShareSoc intends to study the consultation paper (or as much of its 568 pages as we can!) and make a submission to the FCA. If you have any interest in these matters, you can find the consultation here: https://www.fca.org.uk/publications/consultation-papers/cp16-29-mifid-ii-implementation and we would be happy to take your views/comments into account in our response. Please contact us to let us know your views.

Mark Bentley