One third UK firms ‘underprepared’ for MiFID II despite tough penalties warning

With less than 30 days to go, more than a third of UK financial organisations are “unprepared” for the European Union-led MiFID II changes– despite the threat of tough financial consequences, according to a new report.

The upcoming MiFID II legislation comes into force on 3 January 2018, and according to a special survey undertaken by managed cloud service provider Timico, 39% of UK financial organisations are unaware whether their organisation is compliant or not.

A quarter confirmed that they are not yet compliant with recording technology and 29% are still going through the compliance process – despite the fact that companies can be fined up to 5 million euros or 10% of annual turnover for non-compliance.

Timco also said that its new research, that spoke to more than 500 financial firms in the UK, found that just 8% of companies said that employees were fully aware of the legal implications of MiFID II and had received training on the processes required to be compliant.

The FCA’s directive on the Markets in Financial Instruments Directive (MiFID II) EU legislation regulates firms who provide services to clients linked to ‘financial instruments’ (shares, bonds, units in collective investment schemes and derivatives), and the venues where those instruments are traded.

Recital 57 of the Directive states that “…firms will be obliged to record all communications that are intended to result in a transaction. Regardless of the original source, whether on a mobile phone, legacy call recording system, cloud based solution or a newly installed recording system, recordings must be stored for at least five years.

Staff in the dark 

The study also found that 14% of staff were unaware of what processes are required to be compliant, 37% are in the process of initiating a training programme and a worrying 41% did not know if staff were aware of the legal requirements of MifiD II or had received any training on the legislation. Despite the UK set to leave the EU following the Brexit vote, UK firms must comply with the directive or face the huge fines.

Kevin Linsell, chief technology officer at Timico, said: “With just under a month to go and Christmas holidays in between, it’s clear that many businesses are massively unprepared for MiFID II, despite having had the last 12 months to prepare for the impending legislation.

“It’s imperative that companies get ready and fast, with robust, compliant recording technology in place and employees fully trained and up to speed on the new requirements if companies are going to avoid potentially incurring huge financial penalties.”

Lack of mobile compliance understanding

Timco added that, of those polled, over a third (35%) were unaware if there was a BYOD (bring your own device) compliance strategy in place in preparation for the looming MiFID II deadline, while 12% stated that there was no policy in place to adhere to the new requirements. 42% of businesses said that they do not have a mobile compliant platform in place to record calls.

“The fact that nearly half of UK financial organisations that we have surveyed currently have no mobile compliance platform in place is highly concerning,” added Linsell.

“We know from our own financial clients that a large section of the workforce conduct business on mobiles, as teams are constantly travelling between markets and working remotely. It is essential companies get compliant systems in place for not only mobiles, but across all communication platforms to ensure they meet the January deadline.”

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ABOUT THE AUTHOR
Gary Robinson
Head of Video and Ezines at Open Door Media Publishing. Deputy Editor, International Investment. An experienced journalist and filmmaker with more than 20 years' financial services experience, both as journalist and originally as a fully qualified IFA, Gary works across both International Investment and InvestmentEurope titles. Previous video production credits include projects on BBC, C4 and SKY.

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