By Neil Keane
Climbing Mount Everest is not particularly difficult, according to experienced mountaineers. The hard part, they say, is getting down safely. At five and a half miles high, there’s only 33% of the oxygen available at sea level, fogging the brain and slowing response times.
Before reaching the relative safety of Everest Base Camp, summiteers face the threat of extreme cold, altitude sickness, avalanche and the dangers of the Khumbu Icefall, where light dustings of overnight snow often camouflage crevasses hundreds of metres deep.
And much like those crevasses, one of MiFID II’s biggest delivery challenge – disclosure requirements – seems to be hiding in plain sight.
In some cases the need to make disclosures to clients (or the public) is being treated as an afterthought or falling through the cracks altogether, implementation experts say. For example, the Best Execution requirement for venues and firms to make RTS 27 and 28 reports freely available to the public on their websites is being overlooked.
This could be because of the cross-workstream nature of the requirements, or that it happens in an environment where roles and responsibilities are not well defined. Disclosure requirements can also reside in a sort of Regulatory Bermuda Triangle flanked by IT, Business and Compliance, with no department taking ownership. Elsewhere, business analysts under a tight remit may believe disclosure requirements are the responsibility of others in the delivery team.
The need to prepare for ad hoc requests is also proving a significant challenge.
When an itemised breakdown of costs and charges is requested by a client, firms are expected to enable the client to access the information online via hyperlinks. This means that data regarding one-off and ongoing charges, transaction costs and ancillary charges needs to be readily available.
Similarly, firms must provide appropriate information to clients on order execution policies, with prescriptive rules for retail clients. Such policies should also be customised depending on the type of financial instrument traded and the service provided, suggesting firms will need a mapping process within the policy linking to the various different mandates.
With the emphasis on “readiness” going deep into the fourth quarter, how is the above challenge to be handled?
The answer may be to create a dedicated disclosures workstream, with a control centre run by a senior manager. Such a position would have sight across the whole MiFID programme with a separate set of delivery responsibilities, such as reviewing and managing the customer journey.