In our previous updates about MiFID II (Background and Transaction Reporting) we outlined that a number of regulated services provided to our corporate clients, their employees and investors are required to be adapted to meet enhanced reporting requirements. In this, our latest update, we look at the new levels of information that will have to be provided to investors and its impacts.
Investor Information background
Although MiFID I placed high level obligations on firms to provide adequate reports to investors on the service provided, including information on the fees charged, these have been enhanced under MiFID II.
Here we look at the highlights of MiFID II Investor Information changes required to be in place by 3 January 2018.
MiFID II requires holding statements containing information about the status, value and liquidity of the assets to be made available to investors on a quarterly basis, as opposed to annually as is currently the case. Investors will also have the right to request statements on a more frequent basis should they wish, for which the charges must be reasonable.
Fees and charges
Under MiFID II investors must be provided with information on the fees incurred and any charges levied at both the point of investment and sale through an annual statement of charges. In addition there is a requirement to:
- Inform investors of any fees to be paid in a foreign currency, including applicable conversion rates and related charges;
- Provide information about the fees that each firm will charge for the provision of their service where more than one firm is involved in a transaction.
Firms must have an agreement in place with a retail customer in respect of any safeguarding and administration services they provide, including the provision of a custody service.
The agreement, in setting out the "essential rights and obligations" of the parties, should include a description of the:
- Nature and extent of any investment advice to be provided;
- Main features of any custody services, including the role and responsibility of the firm and the rights and entitlements of the customer in relation to corporate actions.
How will the new Investor Information required under MiFID II affect shareholders and employees?
Product and service changes are detailed below.
Corporate Sponsored Nominee (CSN), Dividend Reinvestment (DRIP) and Global Nominee (GN) participants:
- Additional information will be provided about the fees and charges associated with purchases and sales;
- Terms and conditions for CSN, GN, dealing and DRIP services will be updated;
- Even though the value of DRIP cash residues will be less than the price of a share at the time of the last purchase event, the frequency of statements to both investors through a CSN and GN as well as participants in a DRIP will increase to quarterly.
In order to improve the customer experience and to mitigate the need for issuing all statements in paper form, Equiniti is developing its own unique digital service that meets the new requirements.
Employee share plan participants:
- Tax advantaged SAYE (Sharesave), International Sharesave plans and discretionary share plans
- Additional information will be provided about the fees and charges associated with purchases and sales; and
- Dealing terms and conditions will be updated.
- Tax advantaged Share Incentive Plans (SIP)
- There will be no changes as Equiniti Share Plan Trustees Limited (ESPTL) holds SIP assets in an unregulated trust. The frequency of statements will continue to be governed by the timings stated in the Trust Deed and Rules. Up to date plan information is already available through the employee’s online account which can be accessed at any time.
What happens next?
The scope of MiFID II makes this a key compliance priority for the industry and our own project and development work stream will continue through to implementation. Your relationship team can discuss with you specific impacts of MiFID II on the products and services provided by Equiniti to you, your shareholders and your employees.
Our next article will take a more detailed look at controls and governance, including changes to best execution policies, data retention requirements, and internal governance and policies designed to protect investors.
For further information on this subject, please speak with your Equiniti relationship manager.