1. What is MiFID?
“Directive 2004/39 / EC on Markets in Financial Instruments Directive” (MiFID – Markets in Financial Instruments Directive) is a directive on investment services issued on 21 April 2004 by the European Parliament and the Council. It entered into force on 1 November 2007 in the European Union and led to the amendment of the Law of the Spanish Securities Market.
The MiFID represents the biggest change in legislation on financial markets across Europe and introduces a single regulatory regime for investment services in Europe.
2. Modifications and objectives supposed
The MiFID defines new harmonized European legal framework, which modify the bases of the financial services sector and posed a significant impact on the organization and relationship of business investment services to its customers standards.
The main objectives are:
– Strengthen potección investors. MiFID requires the monitoring of strict rules in defense of the interests of customers in all EU countries
Regulates the conditions to give investment services (authorizations, information, customer knowledge …) and requires lenders to assess the suitability and appropriateness of an investment based on their client.
– Improve transparency. The MiFID sets out requirements in reporting to clients. This requires a higher level of transparency throughout the business relationship.
3. What changes involve?
A – A categorization of customers since the levels of information, training and investment experience are different. For this MiFID classifies clients:
- Counterparty eligible. Basically between financial institutions and grants in this case the lower level of protection.
- Professional clients. Those who have experience and knowledge to assess risk and make their own investment decisions. Mainly large companies, public organizations and institutions
- retail customers. The vast majority will be part of this category as customers that are not classified in the two previous categories. In this case the MiFID provides the highest level of protection.B – A classification of products as not all have the same complexity or the same level of risk. The directive distinguishes:No MiFID products:
- Current accounts
- Booklets Savings View
- Time deposits
- Deposits fixed and floating rates with guaranteed capital.
- Pension Fund and voluntary social provision.
- capital guaranteed structured deposits and Unit linked.
- MiFID products, which are divided:- Non-complex products:
- Shares and other securities.
- Units and shares of harmonized collective investment (investment fund and OEICs).
- Bonds and Obligations (Own issues, government bonds and corporate bonds)
- money market instruments: Treasury Bills and Notes- Complex products:
- Financial derivatives: swaps, interest rate hedging, futures and OTC options and warrants Insurance Exchange and .
- Financial contracts for differences: CFDs .
- Units and shares of collective investment institutions harmonized (hedge funds, funds of hedge funds), under certain circumstancesC – New Policies
- best execution principle: ESI required to give all reasonable steps to obtain the best possible result in the execution of a customer order. Best resultao is not limited to the price, but includes the cost, speed and likelihood of execution, among others.
- Incentive policy: establishing control over those payments received or made by ESI in developing its activity rpestación investment services, in order to prohibit those unnecessary or inappropriate. Only those allowed previously communicated to the customer, detailing the nature and amount and also increase the quality of service. 4. Rights retail customer:
- Right to information regarding the nature and risks of financial instruments, central execution of orders, incentives, expenses and costs associated with the hiring of the service.
- The right to know the policies, processing of orders, conflict of interest and safeguarding financial instruments. (All available and searchable at any office or at this page)
- Right to have the contracts and orders executed included in the records.
- Right to request the change of “retail” category that has given Caixa Penedès and which should have been reported. To make the change Caixa Penedès follow the procedure established for such cases. The voluntary change from retail to professional, where the requirements are met, is always moving to a lower level of protection. 5. Adaptation of the product to the customer. MiFID provides for two types of evaluation or test, according to the different circumstances, the client will have to make:- Suitability test.Wide to determine the investment capacity questionnaire, knowledge and experience of the client and the risk profile, with the determination of the investment objectives, the expected return and the time horizon. This test shall apply when there is portfolio management, and always with the signing of a preliminary contract.- Test of convenience.
Questionnaire was used to evaluate the experience and knowledge of the client whenever we ask the provision of a service related to a MiFID investment product. Test results show the suitability of the product for the customer and therefore improving the level of protection.