The revised Directive 2014/65/EU on markets in financial instruments (MiFID II) took effect throughout the EU on 3 January 2018. MiFID II and the corresponding Regulation (MiFIR) intend to enhance investor protection and improve the operations of financial markets, their efficiency, resilience and transparency. It aims to make European financial markets safer, thereby restoring investor confidence following the fallout from the financial crisis, and covers the majority of the financial services industry including banks, brokers, investors, asset managers and exchanges.
MiFID II generally does neither apply to fund managers nor to third country entities. In a recent Client Briefing my London colleagues explained why MiFID II may yet be an issue for third country fund managers.
If non-EU fund managers market and distribute their funds through intermediaries located within the EU some requirements introduced in MiFID II will indirectly also apply to the non-EU fund managers (non-EU AIFM). This is mainly due to the fact that the EU intermediary himself is subject to the regulation and needs to ensure compliance with MiFID II and the corresponding national implementations in the relevant EU Member States.
For example, when addressing the European market each non-EU fund manager in his role as manufacturer of the fund product will be required to define an intended target market for the interests in the fund distributed in the EU. Specifically, manufacturers of financial products are required to specify a target market of end clients/investors for whose needs, characteristics and objectives the product is intended, as well as a distribution strategy that is consistent with the identified target market. The manufacturers should then make available to any distributor information on the product, including the target market and distribution strategy. If the distributor is an EU investment firm acting as intermediary between the non-EU fund manager and investors located in the EU, the intermediary can only offer the interest in the fund to the defined end investors according to the manufacturer’s target market and distribution strategy.
Non-EU fund manager should also be aware that the implementation and enforcement of MiFID II rules may vary somewhat between the various EU member states.
You can download the full Client Briefing here