Thursday February 16, 2012 at 12:00
The Financial Services Authority (FSA) has thrown its weight behind a proposal to bring structured deposits within the scope of the revised Markets in Financial Instruments Directive (Mifid), as part of the European Commission's drive to lay down consistent selling standards for different retail investment products. That was the message from the acting director of the FSA, David Lawton, in a speech to the British Bankers' Association Mifid Conference.
In the UK, we have applied many of the Mifid conduct-of- business standards to insurance-based investments, in order to deliver consistency and reduce the potential for regulatory arbitrage, said Lawton. But he added: We have been disappointed that the Commission's Packaged Retail Investment Products (PRIPs) initiative looks set to be delivered piecemeal through Mifid II and the revised Insurance Mediation Directive.
The UK watchdog believes this approach will increase the risk of diverging standards, and will continue to press for consistent requirements across the retail investment market so that the revised Mifid achieves market integrity, stability and enhanced transparency.
Lawton said the FSA viewed Mifid as having been a success for the trading environment, but pointed to a number of key changes that are needed. These include providing regulators with better information about algorithms and strategies, as well as timely information on positions, and the right authority to consider the interaction between the financial markets and the underlying physical ones. The FSA also wants shortcomings to be addressed in transparency and risk management in OTC derivative markets, which the watchdog feels will be helped by the introduction of the Organised Trading Facility (OTF).
Lawton also spoke of investor protection, and how the new directive will broaden the range of covered investments.
With respect to the problems inherent in the current proposal for third-country access, Lawton said the FSA supports the ability of branches of third-country firms to passport under Mifid II, as the current access requirements risk curtailing investor choice and competition.