Speech by Dan Waters, Director of Retail Policy & Asset Management Sector Leader, FSA
The Insurance Institute of London,
9 January 2008
Good afternoon Ladies and Gentlemen. I am delighted to have been invited to speak at the first of these sessions in 2008 and in such a historic venue.
1 November 2007, the day MiFID came into effect, seems a long time ago. Maybe it's because we’ve all had a few other things on our minds. But looking back, I remember the expectations in the days leading up to M-Day. The Financial Times ran a week of daily articles about MiFID to coincide with implementation. Many firms were burning the midnight oil to make sure that they had done what they needed to do. For regulators and for firms, this was the culmination of several years of intensive planning, negotiation, development - and of course spending.
And then, the sun still came up on 1 November, the Northern Line was still erratic on my way into work, the markets still opened on time, and sub-prime was again more widely and urgently discussed than MiFID 'systematic internalisation'. Firms were asking us and each other whether there had been problems. Had everything gone smoothly? I think that the fact that the transition did appear to go smoothly is a credit to firms and their representatives who worked so hard to achieve this. I'd like to think that the FSA's approach to implementation, our openness and constant dialogue with the industry, also helped.
Admittedly, I think there would have been a greater sense of European "Big Bang" if all Member States had fully implemented on time. As it is, change will be more phased, as implementation across Europe is embedded first in laws and rules, then in firms' procedures, then reflected in behaviour in the markets.
Partly for this reason, I think it will take a while for the 'MiFID effect' to be felt. In the UK, MiFID has largely been about refining, finessing and tweaking our existing regimes for the wholesale and retail markets. But in many other Member States, it heralds a revolutionary change in market models, business models and in regulation. Some have described it as a more 'Anglo-Saxon' model: for example, introducing customer classifications as the basis for a risk-based differentiation in protections; making rules in respect of conduct of business, including regulating investment advice; and no longer forcing trading to be conducted on-exchange. For many States, where some or all of these changes have had to be implemented for the first time, it is indeed revolutionary. I do think that over the months and years ahead it has the potential to fundamentally transform European markets in investment services and create a range of business opportunities.
That said, I also know that for some of you here today, MiFID has no direct impact at all. But most of you will, I think, have been directly affected by the broader changes to our investment business conduct of business regime, "COBS", which we introduced simultaneously with MiFID on 1 November. MiFID was one of the drivers, though only one. Many of you will also be keeping at least one eye on other EU developments relating to retail investments and insurance. MiFID is by no means the end of the story: many other chapters are still unfolding.
So, with this in mind, in my talk today I want to roam beyond just MiFID. I want to offer some thoughts on other elements of the wider EU agenda that are particularly relevant to financial advisers, insurance brokers, and the markets in which you operate. I will also address the important question of how the EU agenda squares with the FSA's own regulatory agenda – the RDR, the new ICOB Sourcebook and the rest. [more]
Speech by Dan Waters, Director of Retail Policy & Asset Management Sector Leader, FSA
The Insurance Institute of London,
9 January 2008
Good afternoon Ladies and Gentlemen. I am delighted to have been invited to speak at the first of these sessions in 2008 and in such a historic venue.
1 November 2007, the day MiFID came into effect, seems a long time ago. Maybe it's because we’ve all had a few other things on our minds. But looking back, I remember the expectations in the days leading up to M-Day. The Financial Times ran a week of daily articles about MiFID to coincide with implementation. Many firms were burning the midnight oil to make sure that they had done what they needed to do. For regulators and for firms, this was the culmination of several years of intensive planning, negotiation, development - and of course spending.
And then, the sun still came up on 1 November, the Northern Line was still erratic on my way into work, the markets still opened on time, and sub-prime was again more widely and urgently discussed than MiFID 'systematic internalisation'. Firms were asking us and each other whether there had been problems. Had everything gone smoothly? I think that the fact that the transition did appear to go smoothly is a credit to firms and their representatives who worked so hard to achieve this. I'd like to think that the FSA's approach to implementation, our openness and constant dialogue with the industry, also helped.
Admittedly, I think there would have been a greater sense of European "Big Bang" if all Member States had fully implemented on time. As it is, change will be more phased, as implementation across Europe is embedded first in laws and rules, then in firms' procedures, then reflected in behaviour in the markets.
Partly for this reason, I think it will take a while for the 'MiFID effect' to be felt. In the UK, MiFID has largely been about refining, finessing and tweaking our existing regimes for the wholesale and retail markets. But in many other Member States, it heralds a revolutionary change in market models, business models and in regulation. Some have described it as a more 'Anglo-Saxon' model: for example, introducing customer classifications as the basis for a risk-based differentiation in protections; making rules in respect of conduct of business, including regulating investment advice; and no longer forcing trading to be conducted on-exchange. For many States, where some or all of these changes have had to be implemented for the first time, it is indeed revolutionary. I do think that over the months and years ahead it has the potential to fundamentally transform European markets in investment services and create a range of business opportunities.
That said, I also know that for some of you here today, MiFID has no direct impact at all. But most of you will, I think, have been directly affected by the broader changes to our investment business conduct of business regime, "COBS", which we introduced simultaneously with MiFID on 1 November. MiFID was one of the drivers, though only one. Many of you will also be keeping at least one eye on other EU developments relating to retail investments and insurance. MiFID is by no means the end of the story: many other chapters are still unfolding.
So, with this in mind, in my talk today I want to roam beyond just MiFID. I want to offer some thoughts on other elements of the wider EU agenda that are particularly relevant to financial advisers, insurance brokers, and the markets in which you operate. I will also address the important question of how the EU agenda squares with the FSA's own regulatory agenda – the RDR, the new ICOB Sourcebook and the rest. [more]
© 2008 Financial Market Oversight UK