Speaking at a breakfast briefing on Thursday, WMA director of regulation Ian Cornwall said the EU legislation on the implementation measures for the Markets in Financial Instruments Directive II is only expected in January 2016, which leaves precious little time to build the software systems required to implement the directive a year later.
“There is a distinct possibility that software systems will have to be built based on what we think the rules are going to be, rather than what they will be, if they are to be completed in time,” Cornwall said.
The other problem facing wealth manager IT departments, Cornwall said, is because there remains a great deal of uncertainty around what is going to be required, it is difficult to gauge how much it is going to cost and what the impact on internal resources is going to be.
According to Cornwall, there are lot of known and unknown unknowns in terms of what exactly the new systems will need to look like and, importantly, how they will be implemented which could disrupt the already tight timeline.
But, he added: “Despite the unknowns there is significant amount of work that can be shaped and started now. The need for early, well-structured programme governance and sensible management of the interactions of all parties cannot be stressed enough.”
An example of how this might be done, Cornwall said is the manner in which costs should be reported to new clients. He said, the WMA’s preferred approach would be for the national regulator to determine a standardised format, but this needs to be done in sufficient time to be of use.
“Many of these systems will take up to 18 months to develop, a standardised format would help, but it is no good if that comes one month before the January 2017 deadline,” he said.
Other areas of concern with regards to the implementation of MiFID II are how the legislation will impact both client facing staff and the clients themselves, said Cornwall, and the sooner clarity is created, the better.