As the leading data exchange serving the European regulatory market, we have an overview that few others can enjoy. We get to see the perspective of both those who provide data under MiFID II and those who need the data. These two groups can also generally be neatly broken down (at least regarding product governance stipulations, the part of MiFID II that dictates target market and costs & charges information) into those who aren’t regulated and those who are.
The question then arises as to whether that second distinction gets you anywhere – in an increasingly interdependent world, with the finance industry crisscrossed with supply chains, we don’t think so. In this new world order, it’s often those who aren’t directly regulated who have the most work to do.
Solvency II was a perfect example of the main regulatory burden (regarding collating and distributing fund look-through information) not falling on the target – the insurers – but instead on those in the supply chain – the asset managers. How did they respond initially? In 2015 we had some comments from investment managers at a Solvency II event in London which were along the lines of “why on earth should we put huge time and effort into regulation that isn’t even aimed at us?”
Luckily this viewpoint now seems to have dissipated, and the only wayward comments we sometimes get with MiFID II are those fund or life companies who claim they aren’t covered by any new rules. What they mean in fact is that they aren’t themselves directly governed by specific regulations. And then it’s a big “so what?”
Because the bottom line is that it doesn’t help to think in terms of firms that are regulated and those that aren’t. The more informative approach is to consider whether you’re affected by regulation or not. Those companies throughout the supply chain that will have to provide data to their distributor clients relating to the funds they sell are quite obviously affected by regulation. They need to scope out the requirements to meet those indirect regulatory challenges, and then they need to implement a strategy to make the system work.
In short, if your clients are affected by MiFID II, or indeed PRIIPs or Solvency II, then it’s more than likely that you are too. It’s that simple.