Global Trustee and Fiduciary Services News and Views Issue 48

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Markets and Securities Services | Netherlands 52
the target market, nor on the costs and charges
that an intermediary or distributor must provide
under the MiFID II rules.
By way of background, the new requirements
— applicable to the manufacturer and to the
distributor — mean that there is a clear obligation
placed on the manufacturer to ensure that
distributors clearly understand the nature of
the product and how it should be sold to the
appropriate customer. One way of doing this is for
the manufacturer to provide appropriate training
to those involved in the distribution chain.
Product distributors must also regularly review
the products they market to assess whether they
remain consistent with the needs of the identified
target market and whether the distribution
strategy remains appropriate.
Is it still possible to sell your funds on an
execution-only basis?
The existing list of financial instruments where
no appropriateness analysis is required will
be amended, as shown in the points captured
below, narrowing, in effect, the scope of
execution-only business.
To determine whether the fund is non-complex two
additional criteria, in addition to the current four
criteria, as laid down in the MiFID Implementing
Directive, needs to be taken into account, namely:
• That the instrument does not incorporate
a clause, condition or trigger that could
fundamentally alter the nature or risk of the
investment or pay out profile (i.e. investments
that incorporate a right to convert the
instrument into a different investment).
• And that the instrument does not include any
explicit or implicit exit charges that have the
effect of making the investment illiquid.
Units in a structured UCITS and shares that
embed a derivative will automatically be
considered complex, as will certain debt and
money market instruments and structured
deposits. Furthermore, shares or units in AIFs
are automatically considered to be complex.
Do the cost disclosure rules apply?
MiFID II increases the amount of information
that needs to be disclosed to investors. For fund
managers, it is important to note such new
obligations will affect them directly if they provide
investment services to their clients. However, even if
fund manager’s do not provide investment services,
they will be indirectly impacted as producers of
financial instruments. This is caused by the fact that
they will be required to provide sufficient information
to the investment firms subject to MiFID II with which
they have a business relationship in order for such
firms to comply with the more detailed rules on cost
disclosure. For instance, the KIID for UCITS does
not contain all the information required by MiFID II,
particularly with regard to the cost of transactions.
Conclusion
We experience that not all investment firms
(and fund managers) have started their MiFID II
implementation project properly. Even though
for some investment firms (and fund managers)
the amended rules seem minor, the devil is in the
detail! We would strongly recommend to not waste
any more time as the implementation deadline is
approaching and we don’t expect any extension
on the 3 January 2018 deadline.
Floortje Nagelkerke
Partner
Financial Services, Amsterdam
Norton Rose Fulbright LLP
1 Please see
2 Please see
kamerstukken/2016/10/25/wetsvoorstel-wet-implementatie-
richtlijn-markten-voor-financiele-instrumenten. Link
3 Please see
Shares admitted to trading on a regulated
market, an equivalent third-country market
or a multilateral trading facility, where these
are shares in companies (except shares in
non-UCITS collective investment undertakings
and shares that embed a derivative).
Bonds and other forms of securitised debt
admitted to trading on a regulated market, an
equivalent third-country market or a multilateral
trading facility, and money-market instruments
(except those that embed a derivative or
incorporate a structure that makes it difficult
for the client to understand the risk involved).
Shares or units in UCITS
(except structured UCITS).
Structured deposits (except those that
incorporate a structure that makes it difficult
for the client to understand the risk of return
or the cost of exiting the product before term).
And other non-complex financial instruments.
What can be sold on an execution-only basis?