Reed Smith Client Alerts

This briefing summarises some of the requirements in MiFID II1 that will apply to investment firms that operate in the FX derivatives and contract for difference (CFD) sectors.

Compliance with MiFID II is required from 3 January 2018.

Authors: Chris Borg Karen Butler David Calligan Tim Dolan Robert Falkner

Type: Client Alerts

Inducements 

MiFID II makes a number of changes to the inducements regime which will require investment firms to review, extend and amend their existing policies, procedures, controls and third party agreements (including client agreements) regarding the receipt and payment of third party commissions and benefits.

The new regime will pose significant challenges to trail commissions, and investment firms will need to consider how their commission and third party benefit arrangements meet the “enhanced quality of service” test and appropriately document this. The UK Financial Conduct Authority has made it clear that payment for order flow is not compatible with the provisions of MiFID II. Payments or benefits paid to EU independent advisers and portfolio managers may be prohibited unless they are minor, non-monetary benefits.