Regulatory Overview

MiFID II

MiFID II is a legislative framework created by the European Union (EU) to regulate financial markets in the EU and improve investor protection. MiFID II extends the scope of MiFID requirements to additional financial instruments. Equities, commodities, debt instruments, futures and options, exchange-traded funds and currencies all fall within the scope of the directive. If a product is available in an EU country, it falls under MiFID II – even if, say, the trader who wants to buy it is located outside the EU.

MiFID II not only covers virtually all aspects of financial investment and trading, but also applies to virtually all financial professionals in the EU. Bankers, traders, fund managers, stock exchange staff and brokers – and their firms – must all comply. This also applies to institutional and retail investors.

Common MiFID II implications include client categorisation requirements (e.g. professional client definition), client order handling requirements, pre-trade and post-trade transparency requirements as well as best execution frameworks.

Related use cases (examples): Client Meeting Guidelines, Pre-Trade Compliance, Fund Distribution

Finanzdienstleistungsgesetz (FIDLEG)

The Finanzdienstleistungsgesetz FIDLEG (Swiss Financial Services Act FinSA) is a legal framework aimed at (but not limited to) investor protection mainly at the point of sale similar to EU’s MIFID/MIFID II directives, but also includes parts of EU’s PRIIPs and prospectus directive regulation. FIDLEG provides for a stringent set of rules for financial service providers providing financial services in Switzerland or to clients in Switzerland. FIDLEG applies to financial services provided to clients domiciled in Switzerland as well as to financial services provided in or out of Switzerland e.g. to foreign domiciled clients.

Related use cases (examples): Cross-Border Training, Website Checks, Pre-Trade Compliance

Financial Advisers Act (FAA)

The Financial Advisers Act (FAA) governs the regulation of financial advisers in Singapore, including their representatives and supervisors.

Related use cases (examples): Cross-Border Fund Distribution, Investment Suitability, Client Meeting Preparation

AIFMD

AIFMD – Alternative Investment Fund Managers Directive is a EU regulation that applies to alternative investments. The directive sets standards for marketing around raising private capital, remuneration policies, risk monitoring and reporting, as well as overall accountability.

Related use cases (examples): Cross-Border Fund Distribution, Investment Suitability, Client Meeting Preparation

UCITS

Undertakings for the Collective Investment in Transferable Securities (UCITS) is a EU regulatory framework that creates a harmonized regime throughout Europe for the management and sale of mutual funds. UCITS funds can be registered in Europe and sold to investors worldwide using unified regulatory and investor protection requirements. UCITS fund providers who meet the standards are exempt from national regulation in individual European countries.

Related use cases (examples): Cross-Border Fund Distribution, Investment Suitability, Client Meeting Preparation

PRIIPS

The Packaged Retail Investment Products and Policyholders Regulation (PRIIPs Regulation) entered into force in 2018. It aims to increase transparency and comparability of investment products by issuing a standardized document with summary information – the PRIIPs Key Information Document (KID).

The provision of the KID is intended to make it easier for retail investors to understand and compare the key features, risks, benefits and costs of different products that fall within the scope of PRIIPs. This is a free pre-contractual stand-alone document that must be provided to the investor prior to entering into a transaction.

The regulation applies to PRIIPs products and services purchased by a retail investor resident in the EEA, regardless of nationality. It is applicable worldwide, regardless of where a PRIIP is purchased, as long as it is purchased by a retail investor resident in the EEA.

Related use cases (examples): Marketing Materials Check, Client Meeting Preparation, Investment Suitability

Swiss Anti-Money Laundering Act

The Swiss Anti-Money Laundering Act applies to financial intermediaries and governs the combating of money laundering and terrorist financing. It ensures the exercise of due diligence in the conduct of financial transactions.

Related use case: UBO Identification & Verification

UK Money Laundering Regulations 2017 (MLR 2017)

The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017) came into force in June 2017.

The MLR 2017 sets out the additional obligations of private sector firms working in areas of higher money laundering risk. They aim to stop criminals using professional services to launder money by requiring professionals to take a risk-based approach. Firms must put measures in place to identify their clients and monitor how they use their services.

Related use case: UBO Identification & Verification

EU Anti-Money Laundering Directives (EU AMLD)

EU anti-money laundering directives are issued periodically by the European Parliament and implemented by member states as part of their national legislation. The European anti-money laundering directives (EU AMLD) are designed to prevent money laundering and terrorist financing and to create a uniform regulatory environment in the EU.

Related use case: UBO Identification & Verification

GWG Geldwäschegesetz

The German Money Laundering Act (GWG Geldwäschegesetz) is intended to prevent illegal money flows from entering the economic cycle. The basis for the GWG Geldwäschegesetz are the EU Money Laundering Directives (EU AMLD). The act applies to credit institutions, financial services providers, certain insurance companies, lawyers, tax consultants, real estate agents, as well as goods dealers. Regulated entities must appoint a qualified money laundering officer and a deputy who are responsible for ensuring compliance with money laundering regulations.

Related use case: UBO Identification & Verification

Senior Managers and Certification Regime (SMCR)

The Senior Managers and Certification Regime (SMCR) is a regulatory framework created by the Financial Conduct Authority (FCA) to strengthen accountability within banks and FCA-regulated firms. The SMCR, which came into effect in 2019, has the overarching goal of reducing consumer harm and strengthening market integrity. This is achieved by raising standards of conduct for all those working in the financial services sector and making senior managers in firms more responsible and accountable for their conduct, actions and competence. The regulation shifts responsibility for activities within a company to senior executives and includes non-executive directors.

Related use cases (examples): Cross-Border Fund Distribution, Investment Suitability, Client Meeting Preparation

Dodd Frank Act

The Dodd Frank Wall Street Reform and Consumer Protection Act was introduced in the United States in the aftermath of the 2008 financial crisis. The framework consists of several components: monitoring the financial stability across major financial firms and insurance companies while providing for their liquidation or restructuring. The reforms apply to financial institutions, insurance companies, mortgage lenders and brokers, derivatives and credit rating agencies operating in the U.S. but exempts smaller lenders from harsh controls.

Related use cases (examples): Client Meeting Guidelines, Pre-Trade Compliance, Fund Distribution

Einkommensteuergesetz (ESTG)

The Einkommensteuergesetz ESTG (income tax act) regulates the taxation of income of natural persons in Germany, including income from capital assets. The ESTG thus plays an important role in the tax suitability of investments as well as the after-tax performance of portfolios and investments.

Related use cases (examples): Investment Suitability, Tax-Efficient Investment Advice