Quick Guide to MiFID II Impact for Local Authorities and LGPSs
What is the Problem?
You will no longer be able to carry out Business as Usual within your Treasury and Pensions operations unless you take action.
From 3rd January 2018, Local Authorities and Local Government Pension Schemes (Authorities) will no longer be considered as “Professional Clients” by the Financial Institutions which they interact with in the markets, within their Treasury Management and Pension Fund activities.
Some funds, products, instruments and even some entire entities may no longer be available to your entities unless you “Elect Up” with each of your Financial Institutions.
What are my Options?
You can choose not to Elect Up, and become a per-se Retail Client with Financial Institutions. This will narrow the available products, brokers and asset managers that you will be able to engage with and may cost you more in fees.
If you decide that continuing to be a Professional Client is appropriate (or necessary) for your entity, you must be able to satisfy some quantitative tests, and each Financial Institution will independently determine whether the Authority meet the qualitative test of being appropriately knowledgeable, expert and experienced. Financial Institutions also need to satisfy themselves that the Authority can make its own investment decisions and understands the risks involved.
How do I go about Electing Up?
You need to request to each Financial Institution that they consider you to be a Professional Client, providing support of the fact that you would pass the quantitative and qualitative tests outlines above. You will need to monitor the responses and confirm, when prompted, that you agree to losing some protections by Electing Up from a Retail Client. You will need to monitor your positions against the tests and have a responsibility to inform each Financial Institution if anything changes that may impact on your status.
Is there an easy way?
Yes. CIPFA have developed a free-of-charge platform for Authorities to manage their Electing Up requests with Financial Institutions. Relevant data will be captured in the Platform, authorised at a relevant level within the Authority, and sent in bulk to your choice of Financial Institutions that have registered for the Platform. Financial Institutions will consider the requests and communicate their response accordingly, for suitably authorised Officers to confirm acceptance. The Dashboard will allow easy monitoring of the status of each relationship and maintain a full audit trail of the communications. Data can be easily updated by the team, reflecting new skills, qualifications, or changes in relevant staff, and communicated accordingly.