MiFID II

In a letter to the Alternative Investment Management Association (AIMA) made available to AIMA members on Monday, August 7, the Financial Conduct Authority (FCA) responded to a request from AIMA seeking interpretation and guidance on MiFID II requirements related to the delegation of certain management functions to non-EU firms, including US subadvisors. The provisions at issue (specifically, Article 31 (outsourcing) of the MiFID II delegated regulation and Article 24 (inducements) of the MiFID II Directive) are of particular importance because they represent one of the most likely avenues of MiFID’s extraterritorial effect on firms that are not directly subject to MiFID. While the FCA’s letter is clear that MiFID-licensed firms may not absolve themselves of their responsibilities under MiFID II through delegation, it does present the possibility that MiFID-licensed firms and their non-EU delegates may achieve compliance through alternative arrangements that ensure that the substantive requirements of MiFID II are met.