Regulatory update & key business challenges - PwC · PDF fileconduct a periodic re- ......

3rd PwC MiFID II Breakfast
Regulatory update & key business challenges
www.pwc.lu/mifid
Regulatory Advisory Services
October 2015

1 Update on Level 2 Regulation 1
2 PwC MiFID II Client Survey 3
3 MiFID II recordkeeping & disclosure challenges 8
4 Business Challenge 1 Client interaction 11
5 Business Challenge 2 Recordkeeping & data 16
6 Business Challenge 3 Reporting & disclosure 21
7 Conclusions C-Suite Blocker 30
Contents

PwC
October 2015
Update on Level 2 RegulationSection 1
3rd PwC MiFID II Breakfast Regulatory update & key business challenges
1

PwC
October 2015
Summary of recent events & Level 2 updates
Section 1 Update on Level 2 Regulation
2
Dec 2014
Sept2015
Sept2015
? Level 2 Delegated Act of EU Commission
Joint letter of UK, DE, FR to EU Commission
June2015 Statement of EU Parliament to EU Commission
Publication of Level 2 RTS for MiFIR
ESMA Technical Advice on MiFID & MiFIR

PwC
October 2015
PwC MiFID II Client SurveySection 2
3

PwC
October 2015
Programmemobilisation
Impact Assessment
Strategic Options
Gap Assessment
Implementation
When will you start with the different project phases?
Q3 2015 Q4 2015 Q1 2016 Q2 2016
3rd PwC MiFID II Breakfast
2 PwC MiFID II Client Survey
4
Source: PwC Luxembourg MiFID II Client Survey

PwC
October 2015
How will you organise and staff your project?
Section 2 PwC MiFID II Client Survey
5
28%
10%
28%
16%
8%
10%
Resource Types
Business
Legal
IT
ProjectManagement
Compliance
External
Size: Between 12 to 25 locally
Setup: Primarily cross-divisional/business
or group-wide
Combination with other projects:
PRIIPS Client Segmentation Pricing Strategy

PwC
October 2015
3.84
3
3.43.6
2.2
3.6
4
Product Design Service Offering ClientSegmentation
Distribution Reporting Funding andLiquidity
Operations &Control
Technology &Data
Impact from 1 (no) to 5 (radical)
Where do you consider the greatest impact?
6

PwC
October 2015
Where do you expect the greatest challenge/areas of concern?
7
4 4
4.4
4
2.2
3.4
3.8
Regulatoryuncertainty
Timely strategicdecision making
Implementationtimeline
TechnologyChanges
Stakeholder buyin and support
Projectresourcing/budget
Third partydependencies
Impact from 1 (no concern) to 5 (significant concern)

PwC
October 2015
MiFID II recordkeeping & disclosure challenges
Section 3
8

PwC
October 2015
MiFID II disclosure and recordkeeping mapping
Section 3 MiFID II recordkeeping & disclosure challenges
9
B2CRetail Clients
DataReport
Record
Target MarketInformation
Legend:
Target MarketFeedback
B2CRetail Clients
Client records
Orders & transactions
Position records
Product information
Service information
Client orders
Client Portfolio Reporting
B2BProfessionals & Nominees
Service/ Transaction information
Client Reporting
MiFID Firm
Compliance Report
Risk Management
Report
Internal Audit Report
COI records
Inducementrecords
Complaints records
Personal transactions
CSSF
TAF
Brokers & Counter-parties
Product Manu-
facturersClient
Transactions Reporting
ESMA
ARMs
Governance ReportingTAF

PwC
October 2015
MiFID II disclosure and recordkeepingScrutiny increases data and communication challenges
Section 3 MiFID II recordkeeping & disclosure challenges
10
Client Communication
Regulatory reporting
Data sources
Recordkeeping
Transactionreporting
Compliance, COI, Inducements &
complaints
The investment firms are subject to the pre-existing governance reportings(compliance, risk, internal audit) as well as to transaction and execution reporting to National Competent Authorities for legal entity and branch(es) respectively.
Regulatory disclosures
The internal governance is enhanced requiring registers and records to support the management of potential conflicts of interest, inducement justifications as well as the documentation of the adequacy of representativeness in case of independent advice.
Internal compliance
Transactions are subject to best execution and subject to the changes in market infrastructure introduced by MiFIR. Additional disclosure of clients concerned and intermediaries.
Transactions
KeyBusiness
Challenges
The client interactions are subject to extensive logging and recordkeeping duties. The service level agreed with the client
determines the governance duties.
Communication
The investment firm will be required to obtain product information, cost and
inducement disclosures/certifications as well as best execution confirmations
from its suppliers (products), brokers and business partners.
Data
MiFID II has extended the requirements to log client
interactions relative to service delivery and orders/transactions, to review suitability and portfolio
value and to record internal governance.
Recordkeeping

PwC
October 2015
Business Challenge 1 Client interaction
Section 4
11

PwC
October 2015
Client profiling & service contractQualification of services determines governance duties
Section 4 Business Challenge 1 Client interaction
12
Organisation Process IT Contract
Decision on whether to conduct a periodic re-assessment of suitability in case of Invest. Advice
Enhance client risk questionnaire and/or suitability test with risk tolerance and ability to bear losses
Implementation of new Client profiling procedure
Enhancement of new client advisor control processes
Implementation of review procedures
Implement new client profiling and scoring system (recommended)
Inventory (tracking) of client service levels (i.e. with or without suitability review, independent or non-independent, etc.)
Choice of media & update
Alignment of contracts with new client profile questionnaire
Review (& set-up if newly mandatory) invest. advice contracts
Define independent advice contracts (if chosen)
Key MiFID II requirements
Art. 24 (4),(5), 25 (2) MiFID IISec. 2.13 & 2.17 ESMA FA
Obligation to take into account for the suitability test 2 new criteria:
1. the clients risk tolerance when assessing its financial objectives
2. the clients ability to bear losses when assessing its financial situation
Extension of the obligation to conclude a client agreement:
Investment advice : Scope of the financial
instruments (whether broad or restricted)
Periodic assessment of suitability (ex-post)
+ If Independent advice: Selection process & proportion in-house /third party products (balanced product shelf)
Client profiling Client agreement
Obligation to conclude Content OR Notice
Investment services (new) Investment advice only if a
periodic assessment of the suitabilityis agreed with the client
(new) Custody services (if retail client)
Retail clients (new) professional clients
Client
Services

PwC
October 2015
Client profiling & service contractQualification of services determines governance duties
Section 4 Business Challenge 1 Client interaction
13
Accountable
Client assessment: Record-keeping of (1) client categorisation, (2) client agreements & (3) assessment of suitability & appropriateness
Communication with client: Record-keeping of the investment advice to retail clients, i.e. (i) the fact, time and date that investment advice was rendered, (ii) the financial instruments that was recommended and (iii) the suitability/appropriateness report provided to the client
Storage obligation
At least annual suitability revi

Regulatory update & key business challenges - PwC · PDF fileconduct a periodic re- ......

Documents

Transcript of Regulatory update & key business challenges - PwC · PDF fileconduct a periodic re- ......