News and Views MiFID II Special Edition 2016

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Global Trustee and Fiduciary Services News and Views | MiFID II Special Edition 2016 49
requirements that they must comply with.
Currently, the common platform requirements
in SYSC 4-10 are applied to Article 3 firms as a
mixture of rules and guidance. To ensure that
Article 3 firms are subject to “at least analogous
requirements” the FCA proposes to apply:
• Provisions in SYSC 4 to SYSC 9 implementing
MiFID II by way of rules or guidance depending
on whether they apply to MiFID firms as rules
or guidance.12
• Articles 21 to 25, 30 to 32 and 72 of the MiFID
implementing regulation as if such requirements
applied to Article 3 firms as rules or guidance.13
• In both cases, the relevant obligations apply to
Article 3 firms’ regulated activities and other
activities identified in SYSC 1 Annex 1 2.8AR
(whether or not subject to MiFID).
Other non-common platform requirements
apply to Article 3 firms in accordance with the
application provisions of the relevant chapter.
FCA description of implications for firms in CP16/19
The application of “at least analogous”
requirements will have a limited impact in the
UK where Article 3 firms are already subject
to very similar regulations to firms regulated
under MiFID.
Common platform firms
Common platform requirements are currently
in SYSC 4 — 10 covering the key aspects of the
organisational requirements in MiFID and the
CRD: general organisational requirements,
employees, compliance, risk control, outsourcing,
record-keeping and conflicts of interest.
The FCA intends to keep the common platform
framework as it implements MiFID II, including
the requirement to retain records for five years.
While retaining the familiar structure of the
“common platform”, the FCA proposes to:
• Transpose the relevant MiFID II provisions
to SYSC.
• Signpost in the application provisions to
individual SYSC chapters the relevant
provisions in the MiFID II implementing
regulation that supplement the rules
implementing the MiFID requirements (rather
than copying them into the corresponding
Handbook chapters).
• Create a new rule that extends the application
of a number of articles of the MiFID II
implementing regulation to all of a UK MiFID
investment firm’s designated investment
business, whether or not subject to MiFID.
FCA description of implications for firms in CP16/19
Provisions in MiFID II, making up the common
platform requirements, are substantially similar
to those in MiFID. New provisions have been
included in the MiFID II Delegated Regulation on
the role of the compliance function, which build
on the “Guidelines on certain aspects of the
MiFID compliance function requirements” that
ESMA published in 2012.14 There have also been
changes to the record-keeping requirements.
The FCA is retaining the application of certain
common platform requirements in the form of
rules and guidance in relation to other types of
firms such as Article 3 firms and third country
firms (these provisions are explained in more
detail within this chapter in CP16/19).
Conflicts of interest
MiFID II does not fundamentally change the
existing conflicts-of-interest provisions, but
it does strengthen certain key requirements:
• It clarifies that firms must have effective
organisational arrangements, not only
to manage, but also to prevent, conflicts
of interest.
• It strengthens the content and quality of
disclosure when these arrangements fail and
introduces new requirements on firms to
assess, and periodically review, their conflicts
of interest policy.
• And it requires senior management to receive
on a frequent basis, and at least annually,
written reports on the situations contained in
the conflicts of interest record.
FCA description of implications for firms in CP16/19
Changes to general conflicts-of-interest
provisions in MiFID II will require firms to update
their existing organisational and administrative
arrangements, in particular their approach to
disclosure. However, the FCA does not expect
these changes to necessitate a material change
in firms’ systems and controls.
Management bodies
This section of CP16/19 covers the implementation
of Article 9 of MiFID II in relation to management
bodies. Article 9 aims to enhance effective
oversight and control over the activities of
investment firms and requires the management
body to assume clear responsibilities across
the business cycle of the firm, including setting