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Brexit Britain must think and act differently to thrive in a post-MiFID II world

John Mason

11 May 2017

Brexit Britain
A man and his two dogs walk past graffiti. Photographer: Rebecca Naden

The MiFID II implementation deadline — Jan 3, 2018 — falls within the bounds of ongoing uncertainty for British firms ahead of Brexit. While question marks remain as to whether Britain’s exit from the European Union will be ‘hard’, ‘soft’, something in the middle or if it will actually happen at all, what is not in doubt is that MiFID  II compliance for British companies will look the same in 2018 and beyond as it does now.

Speaking at the Thomson Reuters Financial Regulation Summit 2017, Rob Moulton, partner at Latham & Watkins, said that Brexit will have no bearing on MiFID II implementation.

Even if Britain after the General Election’s hung parliament result leaves the EU before MiFID II were invoked, the country would need to adopt a comparable standard, or an equivalence, which would mean that Britain must comply with the regulation just like every nation in the EU.

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The goalposts will not change. Timely compliance is not a recommendation, it is a requirement.

Brexit Britain

Financial services game-changer

While many see compliance as a burden, MiFID II regulation has the potential to be a game-changer for vast swathes of the financial services industry, and savvy firms will see opportunities within a changing landscape.

For example, there are already rumblings that regulation for advisers is going to hasten the trend of disintermediated advice, while the unbundling of research costs points to a polarization of the research market.

Clever businesses in these fields will not see Jan. 3 as a finishing line, looking instead to the future to work out how they can differentiate their offering post-MiFID II.

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Covering all the bases

Preparation will be key, and just as firms should be looking beyond Jan 3., they also should not be treating the deadline as a target to aim for.

Geopolitical risk specialist Rear Admiral Chris Parry, calls on firms to remember that “anything that isn’t impossible is possible”. Financial firms should be factoring into their risk management programs both the possibility of remaining part of the European Union under some form of trade agreement, and also the that Britain and the EU might uncouple completely but remain within the regulatory bounds of MiFID II.

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Within these parameters, the nature of the opportunity for firms post-Brexit may vary greatly. This is less a compliance issue than about the nature of Britain’s relationship with Europe post-Brexit within MiFID II compliance.

Those that are best prepared—i.e. those with time, that have not rushed to cross the finish line—will have the greatest capacity to step back from the noise and think about their post-Brexit, post-MiFID II company positioning and offering, and how best to adapt to change from a strategic standpoint.

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Sea change on the horizon

Make no mistake, there is a sea change coming for British firms following Brexit.

Their relationship with Europe after Brexit is uncertain, but MiFID II is going ahead regardless. Bosses must act accordingly, and identify key European influencers quickly in order to curry favour on the continent, while using MiFID II compliance as the bedrock from which to adapt business models to suit a market undergoing once-in-a-generation disruption.

As Rob Moulton puts it: “Influencing the UK regulator is still important, but, for London-based firms, influencing regulators across the EU has never been so important.”

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