MiFID handbook text signals countdown to implementation

Firms and markets regulated by the FSA will have nine months to gear up for MiFID implementation, on 1 November 2007, following its publication of final handbook text to transpose the directive last month. The FSA, in PS07/2, acknowledges industry concerns about super-equivalence and its expectations under principles-based regulation. Some practitioners have suggested that a “general override” enabling the regulator to adjust the application of the Principles for Businesses in cases of conflict with European requirements, would result in uncertainty. The FSA disagrees but has amended its guidance on how the override will work in PRIN 4 (Principles: MiFID Business). It states, for example, at PRIN 4.1.2 G: “Under PRIN 3.3.1R, the territorial application of a number of Principles to a UK MiFID investment firm is extended to the extent that another applicable rule which is relevant to an activity has a wider territorial scope. Under PRIN 3.1.1R, the territorial application of a number of Principles to an EEA MiFID investment firm, is narrowed to the extent that responsibility for the matter in question is reserved to the firm’s Home State regulator. These modifications are relevant to Principles 1, 2, 3, 6, 7, 8, 9 and 10.” At PRIN 4.1.3 G, it says, “Principles 4, 5 and 11 will have the same scope of territorial application for MiFID business as for other business.”