Information Givers and MiFID II

information givers

Information Givers and MiFID II

The forthcoming MiFID II requirements will introduce new T&C requirements for ‘information givers’.

What is MiFID II?

Information givers is an important part of MiFID II. This comes into force on the 3rd January 2018.

There are still some people who falsely believe that this only applies to the banks, investment managers and stock brokers. Unfortunately not. It will impact on many firms of  financial advisers. Areas such as senior management and governance requirements, inducements and staff remuneration, taping of calls and the level and how charges are shown to clients all come within the scope of MiFID II.

In this blog, I’ll take a quick look at an area that isn’t receiving much air time – information givers.

What are information givers?

This is terminology introduced by MiFID II. Perhaps not surprisingly, it describes someone who provides information to clients. This is, of course, something that isn’t new for financial advisers. And because of their current level of authorisation, it is unlikely that there will be any serious changes that affect them in this respect.

The main change will come with those people who give information to clients and who are not advisers. This might include those that respond to client requests, or those that contact clients at the instigation of their firm. This will potentially mean that para-planners, administration staff and in some businesses, hybrid roles like client managers will be classed as information givers. In fact, anyone who provides information on investment services or ancillary services. So providing details as part of an annual review or on the client’s investments, options and describing the generic tax position – could all be included.

The MiFID II Guidance is intended to enhance investor protection. It does so by enhancing the knowledge and competence of people in these roles. Thankfully, the level and intensity of knowledge and competence expected for those that only give information on investment products and services is lower than those who provide investment advice.  For example, the FCA have indicated that they will not set specific exam requirements for information givers. It will be for firms to assess their knowledge and competence taking account of the ESMA guidelines.

Click here for further details of the ESMA guidance

Is grandfathering allowed for information givers?

The bad news is that ‘grandfathering’ isn’t allowed. There are no transitional arrangements. So someone who currently provides information to clients (and who wants to continue to do so post 3.1.18) must be in  a position to comply from this date. That would mean having their knowledge assessed and being subject to suitable supervision.

There is a minimum period of 6 months before an information giver can considered to have appropriate experience. There is a maximum time period of 4 years to acquire the knowledge and experience they need.

What’s the impact on current T&C policies?

Currently, FCA T&C rules relate only to people who provide advice, those that supervise them, and a relatively small number of head office functions within insurers and investment managers. If the principles of assessing competence is applied to, say paraplanners, then the scope of T&C will expand dramatically.

This also means that the range of people required to formerly demonstrate their competence will expand also. This will include the need to  assess and supervise both conduct (behaviour) and knowledge. Knowledge is defined as qualifications and experience. If one or both of these elements is missing, then someone in-scope must be supervised. In other words from 3rd January 2018, all relevant people will need appropriate levels of knowledge and an appropriate level of experience, or they must be supervised.  The impact of this will be most felt on the unqualified or partially qualified para-planners.

Click here for the FCA views on the ESMA knowledge and competence changes (chapter 18)

Should we do anything if we’re NOT covered by MiFID II?

The answer is probably still yes. The ‘competence’ of employees is is becoming more and more unavoidable. In the ‘good old days’, it was just T&C that applied to advisers and a few other select categories of employee. We’ve always had the ‘competent employee rule’ under SYSC but no one really paid much attention to this. This has now been beefed up in preparation for MiFID II.

If you also look forward to SM&CR which arrives in around a year, the Certification rules will again apply to most employees. Senior managers will also need to demonstrate their competence. And guess what? The competence of most employees is still firmly on the agenda. In other words, all firms will need to define, develop and supervise the competence of it’s employees.

Click here for further details of SM&CR.

Key Implications?

For many adviser firms, the key things to consider before 3.1.18 are:

Define and identify those affected

  • Potentially re-writing job roles or job descriptions to clearly define roles post-MiFID II.
  • Determine what knowledge and experience an information giver in your organisation will need.
  • Carry out knowledge and competence assessments on information givers.  Assuming that they are competent because they have done the role for X years is not enough in isolation. You must be able to prove it.

Provide training

  • Staff education about the role of information giver. Firms should ensure that staff know, understand and apply firm’s internal policies and procedures designed to ensure compliance with MiFID II.
  • To quote the rules, information givers should: ‘understand the key characteristics, risk and features of those investment products available through the firm, including any general tax implications and costs to be incurred by the client in the context of transactions’.
  • Ensure you have supervisory coverage in terms of appropriately trained supervisors and and sufficient coverage. Remember that supervisors must have the knowledge and skills to do so – and be able to prove it.

Governance and oversight

  • Update T&C procedures to incorporate information givers and the knowledge and qualification requirements that will apply to them.
  • Firms should take compliance with the ESMA guidelines into account when certifying relevant individuals for the purposes of the current and future Senior Manager & Certification Regime.
  • Compliance oversight / governance will be required.

For details of our T&C services, click here

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Ian Patterson

Marie Patterson
Ian Patterson