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MiFID II and 'Complex' products

What impact will MiFID II have on me?

The MiFID II regulation has a strong focus on consumer protection and ensuring that customers are sold the right products for their needs. This means that before enabling you to buy an investment, MiFID II requires the distributer to undertake actions regarding identifying a target market for the investment.

One area of focus for MiFID II is to try and prevent overly ‘complex’ products being sold to investors for whom they are unsuitable.

 

What is a ‘complex’ product?

Currently securities such as Covered Warrants, Derivatives and Structured Products are considered to be ‘complex’ products and are products best suited to more experienced investors. This is due to the leveraged nature of these products, where a small change in price has a large impact on the value of the product. This means that profits and losses are heightened.

 

What’s changing?

It’s already a regulatory condition that any execution-only broker selling ‘complex’ products to investors must test their ‘knowledge and understanding' first, but MiFID II will increase the number and range of products to which this applies. This means that you may be asked to complete a questionnaire (known as an Appropriateness Test) when purchasing certain products that you may have purchased before without completing the Appropriateness Test.

You’ll be asked for information about:

  • your understanding of the product you are wishing to purchase
  • your knowledge and experience of investing

You will be asked to complete the questionnaire when you first purchase a ‘complex’ product.

 

Does this apply to me?

If you don’t invest in ‘complex’ products, then this does not apply to you.

 

What happens next?

In order to comply with other requirements of MiFID II, we will need to collect some additional information from you.

Find out more

If you haven't already, it is vital that you provide this information as you can no longer trade on our platform. This includes standing instructions such as Regular Investments or Dividend Reinvestments.

 

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I've still got questions!

Our experts are on hand to help at our UK based Customer Experience Centre on 0345 0700 720

 

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*Source: LIBF & 7IM, 2018.