Monday, 29 january 2018 | Redacción CEU
The new European regulation on investor protection is already here. It is known as MiFID II and, in addition to completing its predecessor, it promises substantial changes in the financial field and, specifically, in the sector of investors and financial products. Its arrival implies new ways of operating and a greater transparency in financial advice. Entities, fund managers and investors themselves will have to adapt to this new regulatory framework because there is no turning back. What is MiFID II? Why does it matter so much in the sector? How does it affect investors?
There was not enough time. Although MiFID II came into force on January 3rd, it has only implemented in part. The Council of Ministers, through a Royal Decree Law, approved a part of the directive transposition, in particular, the one related to trading centers, regulated markets, multilateral contracting systems and organized contracting systems. However, although the transposition is not complete, the National Securities Market Commission has indicated that even when they have not been incorporated into Spanish legislation yet, the measures contemplated in this regulation are directly applicable since the mentioned date. The European Commission is determined and urges Spain to complete it within two months.
The first directive on Financial Instruments Markets (MIFID) came into force in 2007. It was designed with the aim of creating a single market for financial services, promoting transparency and increasing the investor security level. Shortly after, the crisis appeared on the scene and radically changed the set. The growing complexity of financial products, the new distribution channels and the increase in complaints also partly motivated the germ of a new regulatory framework that would finally be approved in 2014 by the European Parliament. MiFID II is a response from Brussels to the new post-crisis context, an attempt to correct the deficiencies of the past and to create a more transparent and safer space for investors.
What changes with MiFID II?
The main goal of this directive is the increase in investor protection. The MiFID II application helps investors to be aware of some issues that previously could not be clear when opting for a specific financial product offered by entities, in particular, the exact knowledge of how much they are charging them and what are the exact figures in absolute terms, not in percentage. When entities offer a service, they also receive a payment, an amount that fund managers pay to distributors, they are called rebates. Before this regulation arrival, investors were not aware, on many occasions, of this point. The new regulatory framework aims to prevent entities from trying to offer products that give them greater incentives, at least, without investors having knowledge of this interest. As we can see, this new regulation requires a greater level of transparency on behalf of the entities that will be key for the complete assimilation of this normative.