czech implementation of mifid (investor protection) conference conference on implementation of mifid...
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CZECH CZECH IMPLEMENTATION IMPLEMENTATION
OF MOF MIIFIDFID
((Investor Investor ProtectionProtection)) ConferenceConference on Implementation of
MiFID Split – 15 June 2007
Jan ŠovarJan Šovar
Ministry of FinanceMinistry of Finance
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DISCLAIMERDISCLAIMER
The Ministry of Finance of the Czech The Ministry of Finance of the Czech Republic, as a matter of policy, Republic, as a matter of policy, disclaims responsibility for any private disclaims responsibility for any private publication or statements by any of its publication or statements by any of its employees. employees.
The views expressed herein are those of The views expressed herein are those of the author and do not necessarily the author and do not necessarily reflect the views of the Ministry or of reflect the views of the Ministry or of the author’s colleagues on the staff of the author’s colleagues on the staff of the Ministry.the Ministry.
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AgendaAgenda
Transposition statusTransposition status Process of the transpositionProcess of the transposition
Client classification (eligible counterparties)Client classification (eligible counterparties) Best executionBest execution Transaction reportingTransaction reporting Passporting Home - HostPassporting Home - Host Minimum standard for the mandate and Minimum standard for the mandate and
powerspowers
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Transposition statusTransposition status
Czech RepublicCzech Republic 31 January 2007 – deadline for 31 January 2007 – deadline for
MiFID transposition was not metMiFID transposition was not met no Article 4 notifications madeno Article 4 notifications made
1 November 2007: application 1 November 2007: application date for firms and Member Statesdate for firms and Member States A questionnaire-based survey of the A questionnaire-based survey of the
COMCOM
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Process of the Process of the transposition transposition
03/200603/2006 Project Group at the MinistryProject Group at the Ministry
Work program 2006-2007Work program 2006-2007 03-12/200603-12/2006
Analyses of discrepancies and Analyses of discrepancies and deficiencies deficiencies
Consultative working groupsConsultative working groups Draft and release of consultation Draft and release of consultation
papers (CP)papers (CP)
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Process of the Process of the transposition transposition
Publications of Consultation PapersPublications of Consultation Papers CP on Conduct of Business Rules CP on Conduct of Business Rules
(09/2006)(09/2006) CP on Market Infrastructure (11/2006)CP on Market Infrastructure (11/2006) CP on Scope and Definitions (11/2006)CP on Scope and Definitions (11/2006) CP on Organisational Requirements CP on Organisational Requirements
(12/2006)(12/2006)
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Process of the Process of the transposition transposition
11stst drafting of the legislation drafting of the legislation(12/2006 -03/2007)(12/2006 -03/2007) CWGs – round tablesCWGs – round tables Intra-Ministry ConsultationIntra-Ministry Consultation
22ndnd drafting of the legislation (re- drafting of the legislation (re-draft)draft)(04-05/2007)(04-05/2007) Extra-Ministry ConsultationExtra-Ministry Consultation Some conceptual riftsSome conceptual rifts
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Process of the Process of the transposition transposition
Submission to the Government Submission to the Government (06/2007)(06/2007)
Endorsement of the Government Endorsement of the Government (summer/autumn)(summer/autumn)
Parliament (House of Deputies, Senate)Parliament (House of Deputies, Senate)
Simultaneous work of CNB on the Simultaneous work of CNB on the secondary legislation (2007)secondary legislation (2007)
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How do we protect investors?How do we protect investors? Eligible counterparties – no nanny approachEligible counterparties – no nanny approach Investor need to receive sufficient information to Investor need to receive sufficient information to
make informed decisionsmake informed decisions Retail client agreementsRetail client agreements
But information is not enough. Firms should But information is not enough. Firms should always act in the best interest of their clientsalways act in the best interest of their clients Strict limits on inducementsStrict limits on inducements Management of conflicts of interestManagement of conflicts of interest KYC rulesKYC rules Best executionBest execution Safeguarding of client assetsSafeguarding of client assets
Differentiation between retail and professional Differentiation between retail and professional clientclient
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Choice of client classificationChoice of client classification
Source:Source:
http://http://ecec..europaeuropa..eueu//internalinternal__marketmarket//securitiessecurities//docsdocs//isdisd//dirdir-2004-39--2004-39-implementimplement//dirdir--backgroundnobackgroundnotete__enen..pdfpdf
Background Background note note
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Best executionBest execution
take all reasonable steps to obtain the best possible result for its client when executing an order, taking into account a number of specified factors and any other consideration relevant to the execution of the order;
establish and implement effective arrangements for complying with the above requirement, including the creation of an order execution policy;
provide appropriate information about the policy to its clients and obtain their consent to it; and
monitor the effectiveness of its order execution arrangements and policy.
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Best executionBest execution
Commission’s view – best Commission’s view – best execution will only apply in dealer execution will only apply in dealer markets where the firm is action markets where the firm is action on client’s behalf when executing on client’s behalf when executing an orderan order
CESR feedback on best execution – CESR feedback on best execution – CPCP
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Transaction reportingTransaction reporting
Maintain or tune upMaintain or tune up the current the current transaction reporting regimetransaction reporting regime
Shape of CESR Level 3 guidelinesShape of CESR Level 3 guidelines To which authority do branches make To which authority do branches make
their transaction reports?their transaction reports? Firm’s option, all transaction can be Firm’s option, all transaction can be
reported to the host authority onlyreported to the host authority only Scope of the reporting obligationScope of the reporting obligation
Interim solution, regulators are allowed to Interim solution, regulators are allowed to collect reports of the client facing as well as collect reports of the client facing as well as market facing market facing
CESR will launch a review after 12 monthsCESR will launch a review after 12 months
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Passporting: Home & HostPassporting: Home & Host
Who’s responsible for oversight of Who’s responsible for oversight of investment business done by a investment business done by a branch with clients outside the host branch with clients outside the host jurisdiction?jurisdiction? Not to leave gaps in consumer protectionNot to leave gaps in consumer protection Interpretation of Art 32 (7) of the MiFIDInterpretation of Art 32 (7) of the MiFID
Essential the CNB is able adequately Essential the CNB is able adequately to oversee branch’s activities within to oversee branch’s activities within the Czech territorythe Czech territory
CESR CP on the Passport under MiFIDCESR CP on the Passport under MiFID
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Minimum standards for the Minimum standards for the mandate and powersmandate and powers
Setting minimum standards for the mandate and powers that national competent authorities must have at their disposal and establishing effective mechanisms for real-time cooperation in investigating and prosecuting breaches of the rules.
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Future efforts (?)Future efforts (?)
To enhance the level of represention of retail investors’ voice in Europe
To streamline current ombudsman schemes and compensation schemes across member-states
To develop adequeate qualification of investors and correlation to categories of products
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ThankThank you you for your attention for your attention ! !