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MiFID II 

Regulators 

01 December 2011

Impact Green traffic light Low impact but depending on the exercise of the powers in practice

Other areas to consider

Sanctions

Current MiFID rules

No current equivalent rules

FSA rules

FINMAR

Proposed changes
Draft directive

Recitals (83)-(85)
Articles 71(2)(i), 72 and 83
Draft Regulation Recital (24), Articles 31 – 33

Regulators’ powers

In response to various calls  to subject complex products to stricter regulatory scrutiny, the Commission wants to enhance its own and national regulators’ powers so the draft Directive contains the following powers:

  • ESMA may temporarily ban or restrict products, practices or operations that threaten investor protection, the orderly functioning and integrity of the markets or the stability of whole or part of the financial system. ESMA can also take action to ban a product/activity outright subject to the satisfaction of a number of conditions, including where the national regulator has not taken adequate measures to address a threat to the orderly functioning and integrity of the financial markets. ESMA is to perform a facilitation and coordination role in relation to actions taken by national regulators in relation to this power.
  • National regulators are to have the power to demand information (including all relevant documentation) from any person regarding the size and purpose of a position or exposure entered into via a derivative, and any assets or liabilities in the underlying market and to reduce the size of any position.
  • National regulators may also limit the ability of any person to enter into a commodity derivative (including by introducing non-discriminatory limits), to ensure the integrity and orderly functioning of the markets.
  • National regulators have the power to temporarily ban or restrict trading or distribution of a product or the provision of an activity which gives rise to significant investor protection concerns or poses a serious threat to the orderly functioning and integrity of financial markets or the stability of the financial system.
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