The effectiveness of MiFID provisions for professional clients: a critical review
| DOI | https://doi.org/10.1108/JFRC-07-2018-0103 |
| Date | 02 May 2019 |
| Pages | 1-15 |
| Published date | 02 May 2019 |
| Author | Tom Loonen,Randy Pattiselanno |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial compliance/regulation |
The effectiveness of MiFID
provisions for professional
clients: a critical review
Tom Loonen
Postgraduate Investment Management, School of Business and Economics,
VU Business School, Amsterdam, The Netherlands, and
Randy Pattiselanno
University of Amsterdam Academy for Banking and Insurance, Amsterdam,
The Netherlands
Abstract
Purpose –This paper aims to identify the duty of care that applies to ‘professionally classified clients’
based on the recently implemented Markets in Financial Instruments Directive II (MiFID II) as well as the
previous Markets in Financial Instruments Directive I (MiFID I). The authors place critical notes on the
effectivenessof some MiFID provisions.
Design/methodology/approach –The authors have reviewedthe Delegated Acts of MiFID I and II, as
well as Q&A’s of the European Regulator, ESMA and jurisprudence. The authors aim to add value by
facilitatinga discussion on the effectiveness of applicable MiFID provisions.
Findings –This review of the legal provisions provides researchers and practitioners in the investment
sectors with a clear overview of the legal provisions detailing how these provisionsshould be met and how
improvementsto the provisions can be achieved.
Practical implications –This paper specifies what the provisions forprofessional classified clients are
and facilitatesa discussion on the effectiveness of these provisions.
Originality/value –Addressing the legal provisions which are applicable to ‘professional classified
clients’thatderive from MiFID I and II and includes a critical analysis which offers an original perspective.
Keywords Effectiveness, Duty of care, Professional, MiFID II, Banking regulation, Investor
Paper type Technical paper
Introduction
The implementation of both European investment directive Markets in the Financial
Instruments Directive I and II (MiFID) has affected a large number of investment services.
To strengthen investor confidence and to raise investor protection, extensive transaction
reporting, product approval provisions and investor protection provisions[1] are been
implemented. With regardto investor protection, legislation is particularlyfocused on ‘retail
clients’(also referred to as ‘non professional clients’), as the duty of care required for these
clients is considered the most extensive.Although MiFID II does not contain a large number
of relevant new investor protection obligations for professional classified clients, under
MiFID I, the obligations remain comprehensive and attempt to improve the position of the
professional investor.
What are these provisions under MiFID and are these provisions effective? These two
questions shall be answered in this paper. In the first section, we shall provide a definition of
the professional client and the client classification options within MiFID. The second section
Effectiveness
of MiFID
provisions
1
Received8 July 2018
Revised23 October 2018
Accepted28 October 2018
Journalof Financial Regulation
andCompliance
Vol.28 No. 1, 2020
pp. 1-15
© Emerald Publishing Limited
1358-1988
DOI 10.1108/JFRC-07-2018-0103
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