ESMA Yesterday Published Draft Standards on Investor Protection on MiFID II, but Will Miss its July Deadline
01 July 2015
1 July 2015 - The European Securities and Markets Authority (ESMA) yesterday (30 June) published its final report on draft technical standards on investor protection relating to the revised Markets in Financial Instruments Directive (MIFID II).
Commenting, Michael Thomas, partner in Hogan Lovells financial institutions group, said:
"To a large extent, the draft technical standards in this final report are low-hanging fruit from ESMA's point of view; they didn't have much feedback to the December consultation on these topics. The real deadline will be the end of September when the industry was promised the rest of the draft RTS on more tricky technical issues such as transparency, reporting obligations and derivatives trading – that's where the real bunfight is taking place."
Weighing in at 131 pages, the final report is shorter than ESMA's previous MIFID II blockbusters such its MiFID II publications in May 2014 (844 pages) and December 2014 (over 1,600 pages).
The final report covers the majority of the draft technical standards on investor protection topics that ESMA is expected to develop. It deals with largely non-controversial aspects of topics that are already well-known to the industry:
• the procedures for financial services firms to apply for authorised status;
• information required of firms applying to passport into other jurisdictions;
• information required from non-EEA firms wishing to provide services into Europe;
• co-operation between regulatory authorities.
ESMA has noted the lack of feedback and final drafts of standards have hardly changed from previous versions released in December 2014.
The final report is submitted to the European Commission for endorsement of the draft technical standards. The Commission then has three months to endorse the standards.
Yesterday's final report states that the remaining draft technical standards that ESMA is mandated to develop under MiFID II are expected to be published "by the end of 2015".
The report glossed over the fact that ESMA will miss its deadline to produce a further 31 draft regulatory technical standards (RTS) by 3 July 2015. According to the MiFID II Directive, ESMA should have delivered over 30 further technical standards in this release.
Citing delays in the process, Steven Maijoor, Chair of ESMA, in a letter dated 11 May 2015 to Jonathan Faull (Director General for Financial Stability at the European Commission), explained these other draft technical standards will not be ready until the end of September.
Hogan Lovells has created a MIFID II microsite to help explain what will change under MiFID II, and how those changes may affect financial services firms. The microsite is available at http://www.hoganlovells.com/mifidii/.