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MIFID - Coggle Diagram
MIFID
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LEI number
MiFID II also introduced the requirement for all counterparts to financial transactions undertaken in the EU to register for a LEI number
LEI is a 20 character, alpha-numeric code based on standards devleoped by the International organisation for Standardisation
Its purpose is to connect key reference information to enable clear and unique identification of counterparts participating in financial transactions
Each LEI contains business card information on the related entity, its name, address and contact info as well as info on its ownership structure
A global LEI directory exists which aims to improve transparency in financial transactions in the global marketplace
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Reasons for implementations were to improve the competitiveness of EU financial markets by creating a single EU market and introduce a level playing field for investment services and activities while also ensuring investor protection for those trading in financial instruments
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It takes into account the types of services whether it is is full financial advice or execution only and the classification of clients according to their sophistication and knowledge in relation to investment trading with the highest level of protection granted to retail clients who are deemed to be the least sophisticated investor category
The MiFID Rules also cover conduct of business requirements such as suitability assessment of the product for clients and attitudes of the client to risk, together with governance requirements for the business itself such as management of conflicts of interest
MiFID has provided a more stable and integrated EU financial marker, however the global financial crisis in 2008 led to the identification of some weaknesses in MiFID and as part of the evolution of technology there have been new mechanisms for trading come into being which were not caught by MiFID, by revising it this will ensure that the legislation keeps pace with technological and financial developments
The access of third country firms to the EU markets was not consistent under MiFID, each member state could introduce its own third country regime provided that national provisions did not mean third countries were given more favourable treatment than those within the EU
Once the Commission has issued an equivalence decision with respect to a specific third country, ESMA will then need to establish memoranda of understanding or another form of co-operation agreement with the regulator of that third country - it will then be up to the firm within that third country to apply to ESMA to become registered
Once registration is granted by ESMA, the third country firm will be able to provide services to professional clients and eligible counterparts in the EU - this s not the case for retail clients who were not covered by MiFID or MiFID II. The provision of services by third country firms to retail clients will still be subject to the rules of the applicable member state
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