The MiFID 2 framework's entry into application on 3 January has not resulted in any major difficulties, at least for now. AMAFI continues to work on various aspects, while widening its scope to look at a broader spectrum of issues.
Paying for research
AMAFI and AFG have updated the standard agreement on the provision of research services published in early November 2017 (AMAFI / 17-89). A new annex has been added that offers a matrix of criteria to analyse the nature of research services acquired. The aim is to help users of the standard agreement identify services as MiFID 2 research or minor non-monetary benefits.
One of the risks with the new framework, as AMAFI and many others have repeatedly stressed, is that it could undermine the capacity for mid cap investment research within a market ecosystem whose business model is known to have weaknesses. This might make it harder for affected companies to raise the market financing they need to grow. For this reason, discussions were launched with a view to identifying potential solutions that could be considered with other stakeholders.
On 17 January, the AMF published a revised version of its Guide on the new rules governing the funding of research by investment services providers under MiFID 2. As part of the update, the AMF amended its position on whether the documentation published for a primary transaction may be considered as a minor non-monetary benefit (Section 3 question 7). After initially refusing to treat such documentation as a minor non-monetary benefit, the AMF now says that it is possible provided that the documentation is made available to all prospective investors. This positive change followed a request by AMAFI, which had alerted the AMF to the economic importance of this issue.
A third version of the AMAFI Guide to implementing product governance obligations was published in mid-December (AMAFI / 17-87). The revised version adds two new annexes that clarify how to implement the obligations with regard to plain vanilla products (i.e. ordinary equities and bonds) and derivative financial instruments respectively. The annexes set out AMAFI's proposals for standard target markets, which were discussed with the AMF. The new version of the Guide is also available in English.
Following the publication in late November of the AMAFI Guide to implementing cost disclosure obligations (AMAFI / 17-76), the group that is looking into this area will resume its work in early February with a view to exploring a number of questions in greater depth, particularly in relation to the provision of disclosures required ex-post.
AMAFI is completing the process begun in June 2017 of updating its memo on key points to watch in relations with customers, which was published when MiFID 1 came into application. Like the previous version, the updated memo provides guidance on the new framework introduced with MiFID 2, which will be especially valuable given the material changes in the area of customer relations. The document, which is divided into ten themes, reports on the discussions conducted by a dedicated working group on the basis of MiFID 2 legislation applicable under French law, including regulations with direct effect as well as directives transposed into the Monetary and Financial Code and the AMF General Regulation. These discussions were the subject of a consultation involving several AMAFI committees and groups.