(The Actuary) -- Five key implications of the incoming MiFID II framework have been identified for pension scheme trustees ahead of its launch early next year.
Although the regulation is not expected to impact trustees directly, it is thought that new rules for brokers and asset managers may affect UK pension schemes’ current contractual relationships.
The EU legislation is designed to offer greater protection for investors while injecting more transparency into all asset classes, taking effect on 3 January 2018.
Sacker & Partners LLP have identified several steps trustees should be taking now, which include:
1) Obtain an LEI number – this can be done at the London Stock Exchange, and is necessary for scheme managers to execute trades on behalf of the scheme
2) Discuss charging structures – as a result of an unbundling of charges, managers should consider updating charging structures and determine how research will be paid for in the future
3) Conflicts and best execution – MiFID II requires managers to review and update their policies on best practice and conflicts of interest while taking factors other than price into account
4) Understand reporting requirements – discussions with managers should include asking how new reporting requirements will be covered in any future agreement
5) Test market infrastructure – schemes should be asking managers how the changes to the market infrastructure could impact the mandate of their scheme.
Sacker & Partners LLP partner, Sebastian Reger, said: “MiFID II will significantly change the way financial markets operate, and we expect the full impact of these changes to emerge gradually over time.
“The most important message for trustees is to get familiar with the changes. Even though schemes won't be directly affected, this is all about being alert to the indirect positive and negative consequences.
“While some of the changes offer an opportunity to push for greater reporting transparency from asset managers, it will be up to each individual pension scheme to decide how far they want to take it.”