Client reporting tools

MiFID II, PRIIPS & the future ESG have substantially increased the reporting and information burdens faced by firms. Regulators believe that increased transparency shall address information asymmetries between investment firms and their clients. The enhance information is expected to provide clients with the necessary tools allowing them to scrutinise, monitor, and where necessary challenge the performance and practices of their services providers.

MiFID II

The real challenge of MiFID II requirements is to find the adequate balance between disclosing what is required, and disclosing everything under the assumption that if everything is disclosed, then compliance will be achieved by default. For instance, many firms choose to disclose their entire Order Execution policies or Conflict of Interest Policies, while the actual regulatory requirement is to provide clients with “Information on” or “Summaries” of those policies.

Accordingly, many firms have struggled to understand what information they shall provide in relation to costs and charges, with some many conflicting information and analysis written on the subject matter.

To ensure compliance, Firms should consider to come back to the source, i.e. the text of the Directive/Regulations and supplement it with the elements provided within the ESMA Q&As or FCA thematic reviews (“What good looks like” or “Example of good practices”).

PRIIPS

Packaged retail investment and insurance products (PRIIPs) are at the core of the retail investment market. They cover a range of investment products which, taken together, make up a market in Europe worth up to €10 trillion. However, the documentation provided to investors until now was often complex, and many clients struggled to make informed decision when investing. Additionally, the different formats used by firms made comparisons difficult. The PRIIPS regulation intends to standardise the reporting,  ensuring that clients are able not only to understand the benefits, but also the risks of individual products.

While those requirements can be viewed as additional burdens for firms, it is important to note that they were developed alongside MiFID II/MiFIR, and the numerous requirements are of a similar nature. For instance the costs & charges RTSs refer to PRIIPS methodology to calculate the aggregated costs & charges to be disclosed.

Firms may benefit greatly by looking at various reporting requirements to implement a holistic approach, and analysing the similarities to create processes that will leverage on each other and not duplicate the gathering, manipulation and processing of data. It will not only facilitate the monitoring but also ensure that the information provided to customers is consistent. This is also part of the requirements to simplify the oversight.

Please contact us for more information on how we can help you in achieving compliance with the different reporting requirements you may be subject to.