European regulators are racing ahead with new regulation before checking existing rules have been implemented and are effective, warns Wealth Management Association deputy chief executive John Barrass.
In its response to the European Commission’s call for evidence on EU regulation in financial services, the WMA says that “older regulation” still leaves many gaps and unsolved issues, which will still persist despite new rules coming into force.
Barrass says: “We are very opposed to new legislation being laid upon old legislation that has not been implemented properly. You don’t need new legislation in the event of old legislation not being properly enforced.
“We are very keen to see that process being pushed harder and new legislation examined,” he says.
Barrass says when Mifid I was implemented in 2007 only three member states – the UK, Ireland and Sweden – implemented it on time. He says when the regulation was reviewed three years later there were still some member states that had not implemented the measures of Mifid I.
He says: “What we need to see is implementation across the board and then we can actually start arguing about whether we need any differential rules. At the moment you don’t have that.”
In its response to the EU paper, the WMA says there is still no evidence to suggest whether the appropriateness test introduced in 2007 by Mifid I has enhanced investor protection, especially on the definition of complex instruments.
The trade body has also called for the Commission to reconsider the definition of complex instruments under Mifid II, as it currently includes investment trusts, which is “perverse”.
The WMA also states: “Making all non-Ucits funds complex will throw sand into the investment trust and ETF markets, and into on-exchange dealing in equity-structured funds. This decision did not take into account the diversity of ways in which funds are constructed and traded.
“This will completely unnecessarily thin out and substantially diminish the market in these useful and productive consumer products that have been available in an untroubled manner since the 1930s.”
Barrass’ comments come as the European Commission decided to extend the deadline by 12 months for member states to implement Mifid II to 3 January 2018.
Barrass says the delay in the European regulation makes it more “realistic” for firms to be prepared and assess its impact.
He says: “We have said for sometime that the delay of Mifid II would happen once we realised the amount of work necessary to implement systems. The time scale for this was too short especially on the level II language of the regulation, which is yet to be published.”
Barrass says the delay is “very welcome” by WMA member firms but that questions remain.
“We have still an issue on the transposition time as we don’t know when the government will translate the new rules to the UK law.”