BRAXXON News - MiFID and CRD – A Common Platform
Simon Hills of the British Bankers Association spoke at the latest in Braxxon’s popular series of Lunchtime Briefings which was well attended by both sell-side and buy-side investment firms. His theme was the “Common Platform” approach to satisfying the requirements of MiFID and CRD. Although the two Directives have different objectives and requirements, there is considerable overlap in the impact on a firm’s policies and procedures and, as Mr. Hills said, “we do not organise ourselves around specific Directives”.
The Common Platform requirements are enshrined in the FSA’s new Conduct of Business Regulations, compliance with which becomes mandatory from 1st November 2007. The underlying principle that “A firm must take reasonable care to organise & control its affairs responsibly and effectively with adequate risk management systems” is translated into specific regulatory requirements to be met in seven areas.
• General organisation requirements (including business continuity)
• Employees, agents, senior managemt requirements
• Compliance & internal audit
• Risk controls (CRD)
• Outsourcing
• Record keeping
• Conflicts of interest
The regulation impacts all types of investment firm, from retail banks to hedge funds, and implies an element of “super-equivalence” and levelling up of prudential requirements, that has been accepted by the industry. Mr. Hills stressed that time is short to achieve compliance by November this year, and expressed concern that many firms apparently do not yet have their plans in place. He acknowledged the existence of an air of “regulatory weariness” in the industry but, in response to questions from the audience, warned that 2008 would see the arrival of new requirements. The regulatory agenda for next year will include provisions related to liquidity, the definition of capital and the availability of the AMA method of quantifying operational risk for those firms with the necessary systems.
Mr. Hills concluded by reminding his audience of the published guidelines available from the MiFID Connect organisation, set up by the relevant trade associations to promote a more pro-active response from the industry to the regulation.
Francis Morton, Braxxon’s Managing Director, thanked Simon Hills for a very concise and informative presentation and commented that Braxxon’s expectation, based on current work with clients, was for a significant increase in MiFID project activity in 2Q 2007 and a shortage of MiFID knowledge in the market.
For more information on Braxxon’s services and specific MiFID assessment and planning methodologies please call Francis Morton or Simeon Parker on + 44 (0)20 7436 2525, or email francis.morton@braxxon.co.uk.