FCA launches review into reforming capital markets

The regulator is investigating potential reforms to the UK Markets in Financial Instruments Directive

The Financial Conduct Authority (FCA) has announced it has launched a review into reforming the country’s capital markets.

Specifically, the regulator will be examining potential changes to the conduct and organisational rules to the UK Markets in Financial Instruments Directive (MiFID), in regards to research practice and best execution reporting.

The consultation, which opened 28 April 2021, will affect investment firms and market operators in the UK, and will close on 23 June 2021.

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In reaction to the FCA’s review, David Corker, a partner at PwC, said: “The FCA has launched its review of the UK’s MiFID II framework. Working alongside HM Treasury, the FCA is considering reforms to capital markets, focusing on maintaining the highest regulatory standards in a changing market.

“There is rightly a focus on key aspects of the investor protection framework and we welcome the changes – as will the industry, particularly the permanent removal of best execution reporting – which has been widely seen as overly costly for firms but with little benefit to end-investors.”

He added: “But the proposals are also another example of UK and EU divergence. The FCA has gone further to address the compliance burden on best execution, while setting a lower exemption threshold for SME research. The difference in approach may create additional operational and compliance challenges for firms with a presence in both the UK and EU.

“This marks the start of wider work by HM Treasury and the FCA to reform capital markets regulation in a post-Brexit world. We expect to see changes to costs and charges disclosure for wholesale clients and the transparency regime, among other areas, shortly.”

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