The EU's Markets in Financial Instruments Directive (MiFID) will come into operation in Ireland on 1 November. MiFID overhauls previous legislation in the European market for financial services by effectively laying down a blueprint for a pan-European Economic Area rulebook. It contains detailed provisions relating to the organisation, conduct of business and other rules to which investment firms will be subject. Due to the wide-ranging and detailed nature of its requirements, MiFID has led to significant revision of the Irish regulatory framework. As a result, investment firms have to revise their compliance documentation, procedures and systems and check their current regulatory permissions. The wide-reaching scope and the obligations imposed by the directive will be of particular interest to the issuers of securities, stockbrokers, investment managers and other financial services providers.

MiFID sets out detailed requirements relating to the internal organisation, systems and controls in regulated investment firms. It also sets out express requirements for independent functions and arrangements for compliance, internal audit, risk management, delegation of investment management and other services, managing conflicts of interest, safeguarding client investments and client money and record keeping.

The extent to which these requirements will impact firm's existing compliance arrangements will vary and, accordingly, regulated investment firms will need to review their existing procedures to ensure the required level of controls are maintained in the light of the new rules.

There are a number of requirements relating to the organisation of outsourcing arrangements that investment firms will need to comply with. Firms must take reasonable steps to avoid undue operational risk in outsourcing arrangements. Internal controls must be maintained to allow the firm to access information and effectively supervise without material restriction. To this end, investment firms must review outsourcing arrangements to ensure that they comply with the new rules and ensure that the suppliers of the outsourced services will not place the firm at risk of being in breach of their obligations under the directive.

Any operational risks should be identified and addressed in the firm's risk management plan and, if it is deemed necessary, outsourcing agreements should be renegotiated, where appropriate.

The directive imposes stricter requirements in respect of clients' assets and money. Investment firms should review existing arrangements with a view to implementing these new requirements for handling client assets and funds and for depositing them with third parties.

Investment firms will also be required to classify their clients as an eligible counterparty, professional client or retail client. The categorisation of a client will determine the rules that apply to firms dealing with those clients. Accordingly, firms should identify and reassess their client base in light of these categories. Regulatory permissions should be checked and reviewed to ensure that the firm is permitted to deal with the categories of client it now deals with.

LK Shields Solicitors is actively involved with advising clients on matters arising under MiFID. Our Banking & Financial Services team can help you to prepare for the new regime by assisting you to:

• Assess the impact of the directive on your business
  
  
• Guide you through a review of your activities and assess the extent to which your firm is caught
  
  
• Draft and review client documentation
  
  
• Draft and review marketing documentation
  
  
• Draft and review procedures and policies required
  
  
• Advise on passporting issues
  
  
• Advise on business structures for firms wishing to remain outside the scope of the legislation

For further information please contact David Williams or visit our Guide to MiFID.