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Markets in Financial Instruments Directive (or MiFID)
The Markets in Financial Instruments Directive (or MiFID) is a directive approved by the European Parliament and the European Council, which obliges the providers of investment services to assess the suitability of services to clients more thoroughly.
The EU legal act known as MiFID thoroughly regulates the content and scope of providing investment services, as well as issues relating to the licences of investment firms and the organizers of the regulated securities market and aspects associated with supervision.
- With the aim of protecting the investor the directive stipulates different client categories to be applied in providing investment services. Categorization of clients entails an obligation on the service provider to determine the scope of the client’s knowledge of and experience in securities market issues.
- Service providers are also obliged to give considerably more information to clients about different investment services, types of securities as well as the relating fees and expenses.
- The new rules also stipulate that in the event the client gives the service provider the instruction to execute a transaction with his/her assets (e.g. to purchase or sell securities), the service provider is required to achieve best execution for the client.
- MiFID facilitates integration of the securities markets of EU member states, improves investor protection and increases transparency of investment services.
- MiFID aims to raise the efficiency of the securities market and improve the investment opportunities of clients.
- MiFID thoroughly regulates the content and scope of investment services, the principles of issuance and withdrawal of licences to investment firms and market organizers, control over acquisition and alienation of majority stake in these legal persons as well as their activities in other EU member states.
- MiFID also sets out requirements governing the organization of the service provider as well as standards and detailed rules of providing investment services, which eliminate impediments to cooperation between supervision authorities and facilitate convergence of the quality of supervision in the EU member states.