MiFID II: Key Considerations for US Asset Managers
In the wake of the financial crisis of 2008, the European Commission published a proposal to recast the European Union’s Markets in Financial Instruments Directive (MiFID), which has been in force since November 1, 2007. The proposal, which consists of two linked pieces of legislation – a revised MiFID and the Markets in Financial Instruments Regulation (MiFIR), is collectively referred to as MiFID II. MiFID II is one of the most ambitious and contentious legislative reform proposals to come out of Europe in decades. It is a wide ranging piece of legislation that, depending on the business model of a US asset manager, could affect a wide range of functions, including trading, product development, client services, human resources, and IT infrastructure. This article examines the key regulatory considerations for US asset managers resulting from MiFID II based on the most common ways that US asset managers interact with Europe, including: (i) operating a portfolio management subsidiary in Europe; (ii) operating a marketing subsidiary in Europe to offer products and services to European investors and clients; (iii) managing assets on a cross-border basis from the United States directly for European clients; (iv) providing sub-advisory services from the United States to a MiFID investment manager or European fund; and (v) simply trading in European fixed income and equity markets.