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Information about MiFID

The Markets in Financial Instruments Directive (MiFID) harmonises the rules related to the provision of investment services in the European Union and the European Economic Area. In the UK, MiFID came into effect on 1 November 2007, when it replaced the Investment Services Directive (ISD).

MiFID applies to both natural persons as well as companies and its scope of application involves all financial instruments and services, with some exceptions such as FX spot and, in the UK, forward trades.

The Directive specifically has the following objectives.

Increase investor protection
This objective is met through several measures. A baseline of investor protection is set for each client by placing the client into one of the following client groups: “Retail”, “Professional” or “Eligible Counterparty”.

The scope of the protection offered is dependent on the client classification. Instruments, products and services must also be deemed suitable when a company providing investment services proactively makes a personal recommendation to the client. In instances where Retail Clients request services in complex products – predominately services related to derivative transactions - the service or the instrument must also be deemed appropriate to the client.

Increase competition among companies operating in the financial service market in Europe
To meet this objective, MiFID enables investment service providers to offer their services throughout the European Union and the EEA, operating under their home state license. Western Union International Bank GmbH (WUIB), which is based in Austria, has taken advantage of this provision to offer its services to UK customers.

Increase cooperation among supervising financial services authorities
To meet this objective, the Directive has increased requirements on record keeping so as to ensure that companies providing investment service, supervising authorities and clients all have the means to continuously monitor the integrity and quality of provided services. For that reason the amount of information included on all contract notes and confirmations has been extended. Daily transaction reports will also be sent to supervising authorities to, on a pan-European scale, monitor that markets are functioning properly.

In summary, it is the objective of MiFID, to ensure free competition and transparency in European financial markets, to strengthen the protection of investors and to guarantee the provision of comprehensive information.