Implementation of MiFID
Legislative Adjustment: New
Rules and Regulations Introduced
by the New Directive
Matjaž Albreht
Assistant Director
The Slovene Securities Market Agency
Split, 14. – 15. June 2007
Disclosure
Any views expressed in this presentation do not necessarily
reflect views of the Slovene Securities Market Agency.
Agenda

About MiFID

Financial Instruments Market Act (FIMA) in Slovenia

Status of adopting FIMA: timetable

Novelties introduced by FIMA

Impact of MiFID on the EU accession countries
VISION
Markets in Financial Instruments (MiFID) would
play an important role in the wider European
economic reform agenda given the contribution
that deep and liquid capital markets can make
to encouraging investment, innovation, growth
and employment.
Financial Instruments Market Act
Markets in Financial Instruments Directive will be
implemented in Financial Instruments Market Act (FIMA) in
Slovenia, which will represent new legal environment for
Slovene capital market and will replace the present
Securities Market Act.
New Legal Framework in the
Slovene Capital Market: FIMA

It will replace the present Securities Market Act
(adopted in 1999).

It is fully harmonized with the following main Directives:
1.
Market Abuse Directive – MAD (2003/6/EC)
2.
Prospectus Directive (2003/71/EC)
3.
Markets in Financial Instruments Directive– MiFID
(2004/39/EC)
4.
Transparency Directive (2004/109)
... and other directives: 89/117, 97/9, 98/26, 2001/34,
2003/124, 2003/125, 2004/72, 2006/48, 2006/49;
and regulations: 2273/2003, 809/2004, 1287/2006.
Process of adopting FIMA
MiFID entered
in force
30.04.2006
TIMELINE 31.01.2007
MiFID should be
transposed by
Member States
FIMA should be
in reading in
Parliament
01.07.2007
FIMA should
enter into force
15.08.2007
TIMELINE
01.08.2007
01.11.2007
FIMA should be
published in Official
Gazette of RS
MiFID measures
should be applied
by industry
All executive acts
should enter into
force
Transposition delayed
Ministry of Finance
&
Ministry of Public
Administration
FIMA
Nov.2006
draft sent in
government
procedure
Jan.2007
draft has been
withdrawn
May 2007
draft sent in
government
procedure
Structure of FIMA
FIMA
590. Articles
Banking Act
416. Articles
BA by-laws
logical application
FIMA by-laws
app. 40 new ones
Novelties introduced by FIMA
 Type of investment firm determined by authorised capital
 Defining “Small Investment Firm”
 Systematic internalisers
 Borrowing/lending customers financial instruments/ funds
 Outsourcing
 Tied Agent
Types of Investment firms
The scope of services listed in the Article 8 of FIMA that an
investment firm can perform is determined by its amount of
the authorised capital:
1. Min. value of authorised capital 730.000 EUR =
Investment firm can perform all services and activities listed in
Article 8 of FIMA.
2. Min. value of authorised capital 125.000 EUR =
Investment firm can provide all services and activities, except:

dealing on its own account;

underwriting of financial instruments and/or placing
of financial instruments on a firm commitment basis.
Types of Investment firms - continuation
3. Min. value of authorised capital 50.000 EUR =
Investment firm can provide all services and activities, except:

dealing on its own account;

underwriting of financial instruments and/or placing of
financial instruments on a firm commitment basis;

safekeeping and administration of financial instruments
for the account of clients, including custodianship and
related services such as cash/collateral management.
“Small Investment firm”
... is an investment firm that can perform only the
following investment services and activities:

transmission of orders in relation to transferable securities
or units of collective investment undertakings to persons
from Article 32. FIMA (providers of investment services
and activities);

investment advise;
And whose

yearly income could not exceed 750.000 EUR.
SIF: special rules
 Provisions of FIMA do not apply to:
value of authorised capital;
performing services and activities outside the territory of RS;
obligation to disclose supervised information;
risk management;
rules of operations on performing investment services and
activities;
 system of guarantees with regard to investors’ claims.





 It can perform only investment advising and trading of
insurance products.
 It should have protection of it’s liability for damage in
relation to it’s customers.
MTF & Systematic Internaliser
 MTF is a multilateral system, operated by an investment
firm or a market operator which brings together multiple
third party buying and selling interests in financial
instruments in the system in a way that results in a
contract in accordance with special rules for MTF.
 Systematic internaliser is an investment firm which on an
organised, frequent and systematic basis deals on its own
account by executing client orders outside a regulated
market or an MTF.
Borrowing/lending customers
financial instruments/funds
Investment firm should not be allowed to use customers
financial instruments or funds, held by them on behalf of a
client, for their own account or the account of another client
of the firm, unless:

the client gives prior express consent to the use of his/her
instruments or funds on specified terms, signed by the client;

consensus could be general or particular for use of client’s
instruments or funds in a single transaction.
DUE CARE OF INVESTMENT FIRM WITH CUSTOMER’S ASSETS
Outsourcing
 If investment firms outsource critical or important
operational functions or any investment services or
activities to a third party, they have to adopt all
reasonable measures to avoid unnecessary additional
operational risks.
 It is not permitted that investment firms outsource
performing important operational functions in the way
that would make the quality of internal control system’s
performing impossible or extensively difficult as well as
that would make compliance with relevant law difficult.
Tied Agent
... is natural or legal person who under the full and
unconditional responsibility of only one investment firm
on whose behalf it acts:

promotes investment and/or ancillary services to clients
or prospective clients;

receives and transmits instructions or orders from the
client in respect of investment services or financial
instruments;

sales financial instruments;

provides advice to clients or prospective clients in respect
of those financial instruments or services.
MiFID’s impact for the EU
accessing countries
 Opportunity for domestic investment firms to act cross
national borders using single passport.
 Competition between exchanges and other trading
platforms will significant reduce transaction costs.
 Lower costs and cross-border trading will increase
liquidity of domestic market.
 Suggestion: learn on experiences and mistakes of EU
Member States.
TREM
 Investment firms which execute transactions in any financial
instruments admitted to trading on a regulated market
should report details of such transactions to the competent
authority as quick as possible and no later than at the close
of the following working day. This obligation should be
applied whether or not such a transactions were carried out
on a regulated market.
 The competent authority should establish the necessary
arrangements in order to ensure that the competent
authority of the most relevant market in terms of liquidity for
those financial instruments also receives this information.
Principles for transaction reporting
Duties of investment firms:

Report transactions to home competent authority ASAP

All transactions: On the exchange + off the exchange

Special case: Branches
Duties of competent authorities:

Set up a national transaction reporting system

Exchange TRs between certain competent authorities

Principle: „Most relevant market in terms of liquidity“
Deadlines for competent authorities
Questions?