According to the Directive 2014/65/EU of 15 May 2014 on markets in financial instruments (“MiFID II”), Member States must transpose the directive in national law by July 3rd 2017 and apply those laws and regulations from January 3rd 2018. We have written on MiFID II and the delegated directive and regulations supplementing MiFID II in earlier newsletters.
In July of this year, the Draft Law 7157 transposing MiFID II (the “Draft Law”) and the related Draft Grand Ducal Regulation (the “Draft GDR”), have come before the Luxembourg parliament.
The Draft Law
Pursuant to the provisions of the Draft Law, in its current form, there is no gold-plating of the MiFID II provisions. Furthermore, Luxembourg does not intend to exercise national discretion in most of the cases expressly provided for in MiFID II, such as Articles 3 (optional exemptions), 16 (organisational requirements), 29 (tied agents) and 70 (powers of competent authorities). In a limited number of instances, the Draft Law concretises a more general obligation under MiFID II. For example, the obligation to require market operators to communicate the list of members of participants to the competent authority “on a regular basis” (Article 53(7) MiFID II) is concretised by the obligation to communicate the list to the Luxembourg supervisory authority of the financial sector (the Commission de Surveillance du Secteur Financier - CSSF) on a semi-annual basis.
The Draft GDR
The Draft GDR with regard to safeguarding of financial instruments and funds belonging to clients, product governance obligations and the rules applicable to the provision or reception of fees, commissions or any monetary or non-monetary benefits, is divided into three chapters:
- Chapter 1 transposes Commission Delegated Directive (EU) 2017/593 of 7 April 2016 supplementing MiFID II with regard to safeguarding of financial instruments and funds belonging to clients, product governance obligations and the rules applicable to the provision or reception of fees, commissions or any monetary or non-monetary benefits (the “Delegated Directive”);
- Chapter 2 modifies the Grand Ducal Regulation of 13 July 2007 with respect to the maintenance of an official listing for financial instruments; and
- Chapter 3 repeals the Grand Ducal Regulation of 13 July 2007 with respect to organisational requirements and rules of conduct in the financial sector.
In its current form, Chapter 1 of the Draft GDR closely follows the text of the Delegated Directive.
On September 26th 2017, the European Commission sent two letters of formal notice to Luxembourg about a “non-transposition”, or the non-implementation of MiFID II at a national level. At present, the Luxembourg parliament has yet to adopt the Draft Law and the Draft GDR. This adoption will provide the Luxembourg financial sector with the regulatory clarity necessary to adapt their organisational processes to the MiFID II rules before the deadline of January 3rd 2018.