JERSEY: Feedback on MiFID II Consultation Published

Thursday December 15 2016

The Jersey Financial Services Commission (JFSC) has issued stakeholder feedback to its Consultation Paper No.3 2016 (the Consultation Paper) as to whether Jersey should seek MiFID II equivalence, and discusses several differences between Jersey’s and the EU’s financial services regimes.

12 respondents either disagreed with the proposal to seek MiFID II equivalence, or expressed considerable concerns about doing so. 9 respondents were in favour of Jersey seeking MiFID II equivalence and 6 respondents had no strong opinion either way, seeing both costs and benefits of pursuing equivalence.

The main arguments in favour of MiFID II equivalence were:

• to provide clarity for cross-border business through the application of common standards;
• that MiFID II was being applied by the parent company and consequently would yield economies of scale for the Jersey operation;
• that incorporating MiFID II definitions would have a long term benefit in making it easier to keep up with EU regulatory developments; and
• that the application of MiFID II definitions would level the playing field in the understanding of the fundamental definitions underpinning the regulatory requirements.

Among the reasons for opposing equivalence were:

• the potentially damaging cost of MiFID’s regulatory burden on the funds and funds service sectors and trust company business;
• the significant work required to understand the changes and implement them through the development of new systems and controls; and
• the unnecessary cost of introducing an EU regime on a firm whose clients are outside the EU

The JFSC’s MiFID II equivalence consultation took place during the latter part of the Brexit referendum campaign and closed after the referendum result. Many respondents felt that the referendum result significantly reduced the benefits of equivalence, citing the fact that Jersey’s EU client base, less the UK, represented a small minority of overall clients using the services of Jersey’s financial services providers.

The future shape of the relationship between the UK and the EU, and the timeframe for achieving any new relationship, is currently unclear. The JFSC is currently monitoring developments in this area and any impact (positive or negative) this could have on the Jersey financial services industry (the Industry) or regulatory settings.

Click on the above link to view the Feedback Paper.