FCA Consultation on Incorporating MiFID Rules into the FCA Handbook

Lucht Probst Associates (LPA) is informing the market of the latest regulatory developments following the Financial Conduct Authority’s (FCA) publication of a consultation paper on the integration of firm-facing requirements from the MiFID Org Reg into the FCA Handbook. The initiative aims to ensure regulatory continuity while maintaining the existing substantive requirements for firms.

Background of the Consultation

The FCA’s consultation follows the UK Treasury’s policy paper outlining its next steps in reforming the UK’s MiFID framework, which was announced alongside the Mansion House speech. The MiFID Org Reg sets out conduct rules and organisational requirements to uphold market integrity and investor protection. The UK version of these rules currently applies directly to UK MiFID investment firms.

In 2018, parts of the MiFID Org Reg were incorporated into the FCA Handbook to provide firms with a consolidated view of the relevant MiFID requirements. Additionally, some MiFID provisions were extended to non-MiFID firms, including ‘Article 3 firms’ under the optional exemption, ensuring that they adhere to similar conduct and systems requirements.

Key Proposals

The FCA proposes to replace firm-facing requirements from the MiFID Org Reg with Handbook rules as the Treasury initiates the repeal of the legislation. Where provisions are not incorporated into regulatory rules, they will either be restated or repealed by the Treasury, aligning with the implementation of the new Handbook rules. The Treasury will publish a draft Statutory Instrument to facilitate these changes.

While the FCA aims to retain the substance of existing requirements, it invites feedback on potential reforms to better align conduct and organisational rules with the needs of UK-authorised firms and their clients. Chapter 4 of the consultation explores possible rationalisation and improvement of MiFID II-derived rules, including the framework for client categorisation.

Impacted Market Participants

A broad range of market participants will be affected by the proposed changes, including:

• MiFID investment firms, including credit institutions and collective portfolio management investment firms
• MiFID Article 3 firms (optional exemption firms)
• Third-country firms
• Undertakings for Collective Investment in Transferable Securities (UCITS) managers
• Operators of Residual Collective Investment Schemes (CIS) and small authorised UK Alternative Investment Fund Managers (AIFMs)
• Occupational Pension Scheme (OPS) firms
• Recognised investment exchanges (RIEs)

Next Steps

The FCA is seeking industry feedback by 28 February 2025 for the proposals in Chapter 3 and by 28 March 2025 for the discussion points in Chapter 4. Stakeholders are encouraged to respond via the FCA’s consultation portal. LPA will continue monitoring these regulatory developments and their implications for market participants. If you require further guidance on the FCA’s consultation or its potential impact on your business, please contact our regulatory experts.