The recent release of JCS software, 27.004.07, on 3rd Jan 2018 includes some important updates for MiFID II requirements. We will also be planning further updates in this area to help you in the future.
What's in this release:

Storage of Legal Entity Identifiers

This has been added to both personal and business clients, even though in reality it will only ever be used for business clients. It is likely that in a future release, the field for personal clients will be changed to be Natural Person Identifier. For UK nationals this will normally be their National Insurance Number, but for other nationalities the appropriate identifier should be used as set out in guidance from the European Securities and Markets Authority (ESMA). Available here.

New Tradable Instruments Structured Deposits

MiFID II applies certain requirements for selling or advising on structured deposits, and the FCA have created a new investment type for structured deposits, which firms must add to their FCA permissions if they are to carry out regulated activities on these products. To enable handling these products in JCS, we have added a new product type, Structured Deposit Plan. There is currently no extra reporting added around this new product, as we have not identified a requirement for that yet. However, they can be reported on and broken down in the usual way to allow general reporting of new and existing business etc should this be called upon by the FCA or your PI insurer.

Peer to Peer Loans

While we were adding Structured Deposits, we decided to also include Peer to Peer Loans as a new product type as well. This is not a direct requirement of MiFID II, however recent clarifications by the FCA, showed that Peer to Peer products should be treated as Retail Investments for RMAR purposes. If you have already recorded a number of plans of this type in JCS as another product type, please speak to us, as we may be able to help change the product type in your data for you.

Other new features: MiFID II aside, we have also added support for obtaining electronic valuations of policies on the Aegon platform, namely the ARC SIPP and the One Retirement Plan, and improved the Personnel Import functionality. The reduction of the MPAA to 4,000 and support for Property and Trading Allowances have also been added once again, now that legislation has finally been approved from the first budget of the year.

Other areas of MiFID II:

10% Reporting Rule

Our current view for the 10% reporting rule is that this responsibility sits with the DFM or Platform for managed portfolios. However, we are keeping this under review.

Additional Requirements for Suitability Reports and Ex-Ante Costs and Charges

JCS has never provided suitability reports directly. However, most firms create document templates that pull in bookmarked information about the client/policy, and then allow the adviser/paraplanner to add in any other required sections manually. This is largely taken from Provider literature, and we have been told that providers will be updating their own documents to include enough information to cover the ex-ante cost disclosure as well. If we can assist in this area at all by adding extra bookmarks, or data fields to JCS that can be bookmarked to make these templates easier to produce please let us know. We can perform industry research, but our most valuable information source is our clients. As each firm uses different suitability templates, we can offer assistance on an individual basis, with any improvements benefitting all users. Again, any feedback you have in this area would be of great value.

Additional Requirements for Periodic Ex-Post Costs and Charges Disclosure

The European Working Group last year issued a European MiFID Template (EMT) which had an aim to allow information exchange between fund managers, platforms and advisers allowing the charges information to bubble up through the supply chain. We were watching this keenly as this seemed to be the only sensible way of collecting this data. However, to our knowledge, this has failed to materialise at the adviser level, and we are not aware of any providers intending to supply charges information electronically for the time being. Instead they will be supplying a pdf or paper copy of their costs and charges. This will leave each adviser firm to rekey all of this information manually before adding their own charges and supplying this to their clients.

We do understand that some platforms will be providing firms with costs reporting, however this only works provided all adviser charges are raised through the platform. We, along with the other back office suppliers are pressing for providers to produce this information electronically as soon as possible. Due to the regular ex-post reporting not being compulsory until 3rd April 2019, the industry standards body is not starting on this until quarter 1 2018. We are watching developments in this area closely. Ad-hoc Ex-Post reporting is required for transactions starting 3rd January 2018, and for the time being this will have to be a manual process for firms as everyone gets to grips with the requirements. The 3rd April 2019 deadline comes from the requirement that the longest reporting period is year 1 (to 2nd January 2019) and reports have to be produced within 3 months.

The industry body TISA issued a document detailing the approach in December 2017 (available here), but if you have any further insight in this area, we would love to hear from you. In the meantime, we are actively pushing for standards bodies and providers to get involved with regular ex-post reporting before it is too late, and because all of the data for this reporting must come from the providers/platforms, there is very little we can do until we start seeing what they will output.