Categorising clients: the MiFID model

In August the FSA published its paper on “Implementing MiFID’s Client Categorisation requirements”. This is not a formal consultation but is intended to give a preview of the FSA’s current thinking on implementing the Markets in Financial Instruments Directive requirements in this area. It reflects the industry’s request for guidance ahead of the FSA’s formal proposals which will be part of the ‘NewCOB’ consultation in October. Richard Stones of Lovells looks at some of the key issues in the light of the paper .

Richard Stones is a partner in the Financial Institutions Group at Lovells. He may be contacted on tel: +44 (0) 20 7296 2609; email: richard. stones@lovells.com

Who is a “Client”?

Under the existing FSA regime “client” is very widely defined, broadly as anyone with or for whom a firm conducts a regulated activity. This, together with the extension of the COB regime to all dealings as principal, means that a dealer or trader’s counterparties will always be “clients” even though they may be treated as market counterparties, and so do not benefit from the full investor protection regime.