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Extended MiFID license: a compliance tool to rescue

23 Février 2018 Par Odile Renner
Compliance tool CAROL
Compliance tool CAROL Crédit Photo : Arendt Regulatory & Consulting

Luxembourg today (at the end of January 2018) boasts 319 Mancos, of which 68 are Chapter 15 UCITS Mancos, 108 are AIFMs, 95 have both statuses (so-called dual Mancos) and 48 are a combination of simple and dual Mancos which have chosen to adopt in addition a MiFID license, as foreseen by Article 101 (3) of the UCITS law of 2010 and Article 5 (4) of the Law of 2013 on AIFMs. For the latter more than any other management companies, the MiFID monster is here again to scare the compliance staff.

So the nightmare of the compliance officer now looks like this: the “classic” dual Manco with extended MiFID top-up license, which manages AIFs and UCITS, manages on a discretionary basis segregated mandates for professional or retail clients and potentially also provides investment advice to these same clients. This Manco will probably also have used its AIFM extended license to provide RTO services, the latter being mandatory in certain EU countries in order to sell investment products. Collective and individual portfolio management, these two blocks of services will require the Manco to apply different set of rules to activities which are not so far from one another. The fact that they have the MiFID license will impose upon them MiFID 2 rules which are either brand new or reinforced, such as disclosure of information to investors, inducements, the question of dependent/independent advice, product governance, best execution, record-keeping, suitability and appropriateness, client order handling… the topics are numerous and far-reaching.

The texts regulating financial services in general and asset management in particular have been piling up over the last 10 years with little effort made to create harmony among them. MiFID 1, UCITS 4, AIFMD and then MiFID 2, these texts all converge in their intentions and, increasingly, in their interpretation by European regulators, but there are still significant differences when it comes to detailed rules. These rules have been implemented in Luxembourg either directly (for example, AIFMD level 2) or through the normal legislative process, supplemented by CSSF regulations and circulars. This results in a number of common themes and topics, which are shared across all these regulations, despite some subtle variations and nuances when it comes to the requirement itself.

Under these circumstances, the task of the compliance officer can be an arduous one. Arendt Regulatory & Consulting offers an online compliance tool known as CAROL (for Compliance And Regulatory Oversight online) to help compliance officers stay abreast of regulatory developments and provide an overview of all requirements applicable to the type of company they are working for as well as planning their compliance monitoring controls. More than ever before, working in silos on an Excel spreadsheet is hazardous and extremely complicated for Compliance Officers who wish to keep up-to-date with the ever-changing regulatory environment.