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Implementation of MiFID

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Title: Implementation of MiFID


1
Implementation of MiFID
  • Legislative Adjustment New Rules and Regulations
    Introduced by the New Directive

Matja Albreht Assistant Director The Slovene
Securities Market Agency Split, 14. 15. June
2007
2
Disclosure
  • Any views expressed in this presentation do not
    necessarily reflect views of the Slovene
    Securities Market Agency.

3
Agenda
  • About MiFID
  • Financial Instruments Market Act (FIMA) in
    Slovenia
  • Status of adopting FIMA timetable
  • Novelties introduced by FIMA
  • Impact of MiFID on the EU accession countries

4
VISION
Markets in Financial Instruments (MiFID) would
play an important role in the wider European
economic reform agenda given the contribution
that deep and liquid capital markets can make to
encouraging investment, innovation, growth and
employment.
5
Financial Instruments Market Act
  • Markets in Financial Instruments Directive will
    be implemented in Financial Instruments Market
    Act (FIMA) in Slovenia, which will represent new
    legal environment for Slovene capital market and
    will replace the present Securities Market Act.

6
New Legal Framework in the Slovene Capital
Market FIMA
  • It will replace the present Securities Market Act
    (adopted in 1999).
  • It is fully harmonized with the following main
    Directives
  • Market Abuse Directive MAD (2003/6/EC)
  • Prospectus Directive (2003/71/EC)
  • Markets in Financial Instruments Directive MiFID
    (2004/39/EC)
  • Transparency Directive (2004/109)
  • ... and other directives 89/117, 97/9, 98/26,
    2001/34, 2003/124, 2003/125, 2004/72, 2006/48,
    2006/49
  • and regulations 2273/2003, 809/2004, 1287/2006.

7
Process of adopting FIMA
FIMA should be in reading in Parliament
MiFID entered in force
FIMA should enter into force
30.04.2006
01.07.2007
15.08.2007
TIMELINE
TIMELINE
31.01.2007
01.11.2007
01.08.2007
MiFID should be transposed by Member States
MiFID measures should be applied by industry
FIMA should be published in Official Gazette of RS
All executive acts should enter into force
8
Transposition delayed
Ministry of Finance Ministry of Public
Administration
FIMA
Nov.2006 draft sent in government procedure
?
Jan.2007 draft has been withdrawn
May 2007 draft sent in government procedure
9
Structure of FIMA
10
Novelties introduced by FIMA
  • Type of investment firm determined by authorised
    capital
  • Defining Small Investment Firm
  • Systematic internalisers
  • Borrowing/lending customers financial
    instruments/ funds
  • Outsourcing
  • Tied Agent

11
Types of Investment firms
  • The scope of services listed in the Article 8
    of FIMA that an investment firm can perform is
    determined by its amount of the authorised
    capital
  • Min. value of authorised capital 730.000 EUR
  • Investment firm can perform all services and
    activities listed in Article 8 of FIMA.
  • 2. Min. value of authorised capital 125.000 EUR
  • Investment firm can provide all services and
    activities, except
  • dealing on its own account
  • underwriting of financial instruments and/or
    placing of financial instruments on a firm
    commitment basis.

12
Types of Investment firms - continuation
  • 3. Min. value of authorised capital 50.000 EUR
  • Investment firm can provide all services and
    activities, except
  • dealing on its own account
  • underwriting of financial instruments and/or
    placing of financial instruments on a firm
    commitment basis
  • safekeeping and administration of financial
    instruments for the account of clients, including
    custodianship and related services such as
    cash/collateral management.

13
Small Investment firm
  • ... is an investment firm that can perform only
    the following investment services and activities
  • transmission of orders in relation to
    transferable securities or units of collective
    investment undertakings to persons from Article
    32. FIMA (providers of investment services and
    activities)
  • investment advise
  • And whose
  • yearly income could not exceed 750.000 EUR.

14
SIF special rules
  • Provisions of FIMA do not apply to
  • value of authorised capital
  • performing services and activities outside the
    territory of RS
  • obligation to disclose supervised information
  • risk management
  • rules of operations on performing investment
    services and activities
  • system of guarantees with regard to investors
    claims.
  • It can perform only investment advising and
    trading of insurance products.
  • It should have protection of its liability for
    damage in relation to its customers.

15
MTF Systematic Internaliser
  • MTF is a multilateral system, operated by an
    investment firm or a market operator which brings
    together multiple third party buying and selling
    interests in financial instruments in the system
    in a way that results in a contract in accordance
    with special rules for MTF.
  • Systematic internaliser is an investment firm
    which on an organised, frequent and systematic
    basis deals on its own account by executing
    client orders outside a regulated market or an
    MTF.

16
Borrowing/lending customers financial
instruments/funds
  • Investment firm should not be allowed to use
    customers financial instruments or funds, held by
    them on behalf of a client, for their own account
    or the account of another client of the firm,
    unless
  • the client gives prior express consent to the use
    of his/her instruments or funds on specified
    terms, signed by the client
  • consensus could be general or particular for use
    of clients instruments or funds in a single
    transaction.
  • DUE CARE OF INVESTMENT FIRM WITH CUSTOMERS
    ASSETS

17
Outsourcing
  • If investment firms outsource critical or
    important operational functions or any investment
    services or activities to a third party, they
    have to adopt all reasonable measures to avoid
    unnecessary additional operational risks.
  • It is not permitted that investment firms
    outsource performing important operational
    functions in the way that would make the quality
    of internal control systems performing
    impossible or extensively difficult as well as
    that would make compliance with relevant law
    difficult.

18
Tied Agent
  • ... is natural or legal person who under the
    full and unconditional responsibility of only one
    investment firm on whose behalf it acts
  • promotes investment and/or ancillary services to
    clients or prospective clients
  • receives and transmits instructions or orders
    from the client in respect of investment services
    or financial instruments
  • sales financial instruments
  • provides advice to clients or prospective clients
    in respect of those financial instruments or
    services.

19
MiFIDs impact for the EU accessing countries
  • Opportunity for domestic investment firms to act
    cross national borders using single passport.
  • Competition between exchanges and other trading
    platforms will significant reduce transaction
    costs.
  • Lower costs and cross-border trading will
    increase liquidity of domestic market.
  • Suggestion learn on experiences and mistakes of
    EU Member States.

20
TREM
  • Investment firms which execute transactions in
    any financial instruments admitted to trading on
    a regulated market should report details of such
    transactions to the competent authority as quick
    as possible and no later than at the close of the
    following working day. This obligation should be
    applied whether or not such a transactions were
    carried out on a regulated market.
  • The competent authority should establish the
    necessary arrangements in order to ensure that
    the competent authority of the most relevant
    market in terms of liquidity for those financial
    instruments also receives this information.

21
Principles for transaction reporting
  • Duties of investment firms
  • Report transactions to home competent authority
    ASAP
  • All transactions On the exchange off the
    exchange
  • Special case Branches
  • Duties of competent authorities
  • Set up a national transaction reporting system
  • Exchange TRs between certain competent
    authorities
  • Principle Most relevant market in terms of
    liquidity

22
Deadlines for competent authorities
23
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