Delay to ‘impossible’ Mifid II deadline leaves advisers in limbo

Experts fear the delayed deadline for implementing Mifid II means clarification of Europe-wide rules for advisers on charges disclosure and inducements are a long way off from materialising.

The European Commission announced last week the deadline for member states to comply with the legislation would be delayed due to the “exceptional” challenges firms and regulators face in preparing for the new rules.

The move, which was widely expected, pushes the implementation date back from next January to 3 January 2018.

Among other requirements, the Mifid II rules include a requirement to disclose all charges relating to a product to investors upfront, a different independence definition to the UK and tougher inducements rules.

While the planned date for regulators to “transpose” rules into domestic legislation remains set, with the FCA due to issue a Mifid II policy statement in June, experts now suggest this too could be delayed.

The announcement of a delay came just days after the boss of the European Securities and Markets Authority warned a 12-month delay to Mifid II may still not be enough time to allow the industry to prepare.

Esma chair Steven Maijoor said: “The final making of these IT systems can only really start once these technical standards are finally set, and that requires that these are endorsed by the Commission and also accepted by the Parliament and Council. If that process is lengthened too much then a year might not be sufficient.”

So what does the change to a 2018 deadline mean, and will it represent the first of many efforts to delay Mifid II further?

Pressing ahead

Unresolved issues with Mifid II, include a requirement to disclose all charges relating to a product to investors upfront, a different independence definition and tougher inducement rules.

These were expected to be clarified by the FCA, beginning with a consultation process, however, this is on hold until the European Commission publishes final technical standards.

Draft technical standards published by the Esma are yet to be endorsed by the Commission, while the Commission has also yet to publish delegated acts – the detail underpinning the retail part of the legislation.

The FCA published one consultation paper on markets issues in December, and is set to launch another on conduct issues in March.

An FCA spokesman says the regulator welcomes “a realistic implementation timetable”.

“Despite the delay firms need to continue to press ahead with their implementation work.

“Should they guess? Make it up? Or go and visit a clairvoyant? No one can move until Esma gets those delegated acts finished.”

“There’s still a lot for them to do to be ready in time for the new implementation date. For our part, we will look to finalise the resulting changes to our handbook as soon as practicable to provide firms with adequate time to complete their implementation work.”

Apfa director general Chris Hannant says the delay was inevitable, but adds advisers need detail from the European Commission “as soon as possible”.

He says: “We are still waiting on some rules. If you tack on the FCA turning those rules into rules for their handbook and their statutory consultation, you would have had precious little time for firms to do anything.

“But the delay just makes the timetable challenging rather than impossible so firms should keep up preparations.”

Wealth Management Association deputy chief executive John Barrass adds: “While the delay is very welcome that doesn’t make the burden easier for firms and so it doesn’t mean they’ll do less work. The necessary work is going to be done in a timeframe that makes it more realistic to get completed in time, but you can’t afford to slow down.

“We have still an issue on the transposition time. We don’t know when the Government will translate the new rules to the UK law.”

Zurich UK Life’s head of regulatory developments Matt Connell says for providers, the delay “make the impossible look possible again”, although he admits wariness over whether the new deadline will stick.

Connell says: “Quite a lot of those retail changes carry significant systems changes on things like notifying customers about charges on an ongoing basis and developing systems for transaction charges.

“We can’t really get to grips with that until secondary legislation has come through, and after that you need time for development and testing.

“If we are in the second half of this year and still waiting for clarity on those retail changes then the start of 2018 begins to look very challenging.”

The clairvoyant

Cicero’s Brussels-based executive director Helena Walsh says the application for a delay remains subject to approval from both EU members and the European Parliament, a process that itself could take between two and three months.

Walsh says: “While the deadline to transpose into domestic law continues to be July 2016, there is an anticipation that will be extended through amendments, and the expectation is this too could be pushed by a further six to nine months.”

Independent regulatory consultant Richard Hobbs questions whether advisers will now face their own version of Solvency II, which was delayed repeatedly from 2012 to 2016.

Hobbs says: “The whole Mifid II regime was far too ambitious, just as Solvency II was. It’s almost a re-run. It’s been over-engineered and bells and whistles are getting added all the time. It’s all good stuff, but now it takes far too long to implement.”

He also questions what advisers are supposed to do to move closer to implementation while they are waiting for further information.

“I don’t blame any advisers who just throw up their hands in frustration because I’m not surer there’s much else they can do.

“Should they guess? Make it up? Or go and visit a clairvoyant? No one can move until Esma gets those delegated acts finished.”

But Consulting Consortium associate director Chris Martin notes there may yet be a silver lining for advisers, with Mifid II now pushed far beyond the UK’s own work as part of the Financial Advice Market Review.

With implementation of the European rules now set for 2018, Martin says at least firms will not be forced to deal with the recommendations of both Mifid and FAMR at the same time.

He adds: “Hopefully we will soon know enough about the FAMR proposals, which means we can start building things without fear of having to change too much further down the line.”


The European Securities and Markets Authority has long been indicating a delay of a year is not likely to be enough to implement Mifid II properly. There a risk we could end up with something like Solvency II, with every year implementation getting pushed back further.

In the end Solvency II went back by four years, from 2012 to 2016.

Some things about the incoming rules are known and are clear, but it is the delegated acts that produce the fine grain of what the regime is going to be. Esma is having difficulty writing that stuff, and the FCA cannot consult until Esmas produce that material to consult on, so we are basically stuck.

Firms coming under Mifid II are unlikely to down tools in the meantime, but only because in many cases they have not even picked them up in the first place.

This kind of situation happens when in principle you know what you want do and to deal with, but you cannot find a way to express that in practical terms. And what you have in Europe is a Parliament producing high-level law which says they want motherhood and apple pie, but then it falls to the regulators to go out and define that for them.

But Esma is not being obstructive. The Parliament has decided on something that practical regulators do not know how to do.

MEPs and some others might disagree with me, but I feel sorry for Esma and firms who are sitting around waiting. In time, that deadline of 2018 will come to be pushed back as well.

Richard Hobbs is an independent regulatory consultant