MiFID GENERAL PRESENTATION practical example of Lamfalussy process

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MiFID GENERAL PRESENTATION (practical
example of Lamfalussy process)
Conference on Implementation of Markets in
Financial Instruments Directive (MiFID) Split
14 June 2007
J a n o v a r Ministry of Finance, Czech
republic
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DISCLAIMER

• The Ministry of Finance of the Czech Republic, as
  a matter of policy, disclaims responsibility for
  any private publication or statements by any of
  its employees.
• The views expressed herein are those of the
  author and do not necessarily reflect the views
  of the Ministry or of the authors colleagues on
  the staff of the Ministry.

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Financial integration legislative developments

• In June 1998, the European Council invited the
  European Commission to prepare a framework for
  action to develop the Single Market in financial
  services. In May 1999, the Commission published
  the Financial Services Action Plan (2000-2005),
  which was endorsed by the Lisbon European Council
  in March 2000.
• The FSAP consisted of a set of 42 measures
  intended to improve the Single Market in
  financial services by filling gaps and removing
  remaining barriers to provide a legal and
  regulatory environment that supports the
  integration of financial markets across the EU.

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Lamfalussy process

• The Committee of Wise Men, chaired by Baron
  Alexandre Lamfalussy, outlined in its report of
  15 February 2001 several shortcomings in the
  legislative system for securities.
• The report proposed a four level approach with
  regard to the legislative process in order to
  solve these problems.

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Transposition of Lamfalussy Directives

• The Directives adopted on the basis of the
  so-called "Lamfalussy approach" fall into two
  categories "level 1 Directives", which set out
  framework principles and "level 2 Directives",
  which set out the implementing measures that
  allow these principles to be put into practice.
• There are four "level 1 Directives
• Markets in Financial Instruments Directive
  (MiFID)
• Market Abuse Directive (MAD)
• Prospectus Directive (PD)
• Transparency Directive (TD)
• All four are crucial pieces of EU legislation on
  securities and investment business.

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What is MiFID?

• The Directive 2004/39/EC on Markets in Financial
  Instruments (MiFID) was adopted by the European
  Parliament and Council on 21 April 2004 (OJ
  L145/1 of 30 April 2004).
• It will replace the Investment Services Directive
  93/22/EEC.
• Extends the coverage of the current ISD regime
• Introduces new and more extensive requirements to
  which firms will have to adapt

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Implementing measures (L2)

• The Level 2 implementing measures were adopted
  10 August 2006. These comprise one implementing
  directive and one implementing regulation
• Commission Directive 2006/73/EC of 10 August
  2006, on organisational requirements and
  operating conditions for investment firms (ID)
  and
• Commission Regulation (EC) 1287/2006 of 10 August
  2006, on record-keeping obligations for
  investment firms, transaction reporting, market
  transparency, admission of financial instruments
  to trading (IR).
• The MiFID and the Level 2 Directive are due to be
  transposed into the national laws of Member
  States by January 2007 and apply by November
  2007. The Level 2 Regulation will be directly
  applicable, at the same time.

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• 2004/39/EC (MiFID)
• 2006/73/EC (ID)
• 1287/2006 (IR)
• CESR
• CESR is shortly to publish guidance on BE,
  inducements, passport and transaction reporting
• COM
• Launching infringements for late or faulty
  transposition
• Scrutinising Art.4 notifications, and esp.
  justifications
• Source
• The role of CESR at Level 3 under the Lamfalussy
  Process, Ref. CESR/04-527b
• http//www.cesr.eu

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Key cross-cutting issues

• Timing of transposition 31/Jan/2007, Timing of
  implementation 1/Nov/2007
• Maximum/minimum harmonization
• Directive/regulation
• Linkage to existing IOSCO and CESR standards
• Cross sectoral co-ordination (CESR, CEBS and
  CEIOPS)

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MiFID Transposition questionnaire results summary

• Source http//ec.europa.eu/internal_market/securi
  ties/docs/isd/implementation/mifid_transposition_t
  imeline_en.pdf

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What significant changes does MiFID make?

• Range is wider
• A deeper degree of harmonization
• Cross border business
• Capital adequacy directive,
• Banking consolidation directive

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Which firms will be affected?

• In general, MiFID will cover most, if not all,
  firms currently subject to the ISD some that
  currently are not and in some areas, the position
  for firms will be less clear-cut
• Future and option firms
• Some commodities firms
• Stock brokers and broker dealers
• Banks adn building societies
• Firms competing for the same type of business ?
  subject to same regulatory standards

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Lamfalussy Legue

• Source http//ec.europa.eu/internal_market/securi
  ties/docs/transposition/table_en.pdf

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A new strategic approach

• With the completion of the FSAP, the future
  approach to the integration of financial services
  in Europe was being discussed. Many other Member
  States and industry practitioners firmly have
  believed that a second raft of new legislation
  or a FSAP Mark II is neither required nor
  desirable.
• Instead, new EU legislation should be considered
  on a selective basis, and only where absolutely
  necessary.
• Green Paper (03/2005)
• White Paper (12/2005) EU financial service
  policy for the next five years

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More information

• DG Markt MiFID website
• http//ec.europa.eu/internal_market/securities/isd
  /index_en.htm
• FAQ on MiFID http//tinyurl.com/ypcc6s
• Background notes to the MiFID IR and ID
  http//tinyurl.com/hsqx6 and http//tinyurl.com/yw
  x6qj
• MiFID Transposition State of Play
• Legal texts, historical info, other links
• CESR website
• http//www.cesr.eu/index.php?pagegroupsmac0id5
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• Expert Group MiFID Level 3

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Thank you for your attention !
jan.sovar_at_mfcr.cz or jan.sovar_at_yahoo.co.uk