MiFID |
Preparations for MiFID are in full swing at the universal banks of the member states of the EU, including the investment service providers of the Hungarian capital market.
In the past few months the Committee of European Securities Regulators (CESR) has published quite some background materials for the purpose of appropriate interpretation and unified implementation of MiFID in Europe. The CESR dealt with the issue of best execution in its Q&A document and among others it published an important interpretative opinion concerning the selection of execution venues, which is to be taken into consideration by banks and investment service providers in their execution policy in line with MiFID. This opinion states that according to the MiFID investment service providers can specify a single execution venue in their policy in relation to financial instruments if they are able to justify it appropriately. In case the decision on a single execution venue is justified, it will significantly simplify compliance with the best execution requirements, since it is not compulsory to compare the price, costs and other conditions of a given security at several possible execution venues in case of each order.
Another important CESR statement concerns the scope of regulations pertaining to inducements. According to the main rule of MiFID certain inducements are prohibited. The CESR recommendation states that the scope of inducements as defined by MiFID does not include the internal bonus system of investment firms. As most investment service providers and banks incentivise their sales staff for selling different products, it was questionable how justifiable these systems are in view of the strict MiFID regulations concerning inducements. This issue was resolved by the CESR recommendation, however, the strict conflict of interest rules of MiFID are also applicable to the internal bonus systems.
