July 19, 2011
MAP S.Platis Raises Key Questions With EU Regulators Leading to FX Industry Insights
LIMASSOL, Cyprus, July 19, 2011 /PRNewswire/ --
One of the major areas of concern for European Forex brokerage firms is
ensuring strict compliance with regulatory authority requirements and in
particular the EU Markets in Financial Instruments Directive (MiFID) over
the provision of 'Advice' or 'Research Recommendations'. Whilst an
investment firm attempts to provide its clients with the best possible
investment opportunities, there are boundaries to observe inproviding
information relating to an underlying product of a financial instrument;
especially if these could fall under the definition of Investment Advice or
Investment Research. As part of the continuing efforts of the leading
financial services consultancy firm, MAP S.Platis, to develop the industry's
perspective and understanding of the relevant regulatory framework, the
firm's compliance teams initialised a discussion between the European
Authorities which resulted in public answers and insights on this subject.
consultancy to the European Union Investment industry in the field of
registration, licensing and comprehensive support of European Union
Investment Firms (including FX Brokerages and Market Makers), Banking and
Payment Institutions and Funds. MAP S.Platis was in fact the driving force
behind the very first FX Investment Firms licensed directly under MiFID in
the European Union, whilst today the firm boasts a market share of over 65%
of all Investment Firm registrations and operations in Cyprus under the
European MiFID Directive, as Cyprus Investment Firms.
The Markets in Financial Instruments Directive 2004/39/EC (known as
"MiFID") is the European Union regulatory apparatus harmonising regulation
for investment services across the 30 member states of the European Economic
Area (EEA). The main objective of the Directive is to increase competition
and promote consumer protection in investment services within the EEA.
As part of the continuing efforts of MAP S.Platis to develop, support
and assist the industry's point of view of the relevant regulatory
framework, the firm's compliance teams initialised a discussion between the
European Authorities which resulted in public answers and insights on the
subject of the provision of 'advice' or 'research recommendations' relevant
for FX brokers and market makers.
The provision of 'advice' or 'research recommendations' on underlying
investment products, such as currencies, gold etc, of MiFID financial
instruments (for example Contracts for Differences, CFDs) has long troubled
European FX Brokerage Firms. More specifically, there has been increased
speculation around the question of whether the provision of opinions or
views on the direction of such underlying products falls under the MiFID
definitions of 'Investment Advice' or 'Investment Research'.
Dr. Stelios Platis, managing director of MAP S.Platis, explains, "With
regards to investment advice, personal recommendations provided to a client
in respect of one or more transactions relating to products which are not
classified under MiFID as financial instruments, for example currency pairs,
could seem at first sight to fall outside the definition of investment
advice under MiFID and, therefore, not be subject to the MiFID requirements
relating to investment advice."
However, according to the European Authorities, the fact that the
financial instruments offered by the investment firm (for example CFDs) are
perfectly correlated with the underlying product for which recommendations
are provided creates a strong connection between the two. Thus,
recommendations relating to the underlying products can be considered as
"preparatory to the provision of investment advice" and, in this respect,
according to the European Authorities, they should be considered as "an
integral part of the service provided".
"Therefore, making a distinction between advice regarding the underlying
product of a financial instrument and the financial instrument itself is
likely to be considered as artificial by the European Regulators and
contrary to the said obligation of European Investment Firms as well as to
the general obligation to act honestly, fairly and professionally in
accordance with the best interests of its client. So, assuming all other
relevant conditions are met, such advice should be considered as falling
under the definition of investment advice," continues Platis.
Another area which was covered during these deliberations was investment
research. According to the European Authorities, again at first sight,
research material or information recommending or suggesting an investment
strategy (explicitly or implicitly) concerning one or several products which
are not themselves classified as financial instruments (e.g. currency pairs)
would seem to fall outside the definition of investment research under
However, Dr. Platis stresses the dangers of simplifying this approach by
reference to the stance of the European Regulators on the matter. "Research
relating to perfectly correlated underlying products to MiFID financial
instruments will most likely fall under the definition of investment
research under MiFID if, given the context and substance of the research, it
implicitly suggests an investment strategy in relation to the actual MiFID
financial instruments" he adds.
"Notwithstanding the above" he cautions "even in cases where research or
advice relating to the underlying of a financial instrument may not
eventually be considered by the European Regulators as investment research
or investment advice under MiFID, it still remains information provided to a
client or a potential client. Thus, it will still need to comply with the
relevant MiFID requirement to be 'fair, clear and not misleading' as well as
all associated conditions with which information must comply in order meet
Despite this very useful insight, the discussion itself reveals the
dynamic and complex regulatory framework in which European Investment Firms
must operate. This is something that Dr. Platis emphasises in his concluding
"Issues like this go to show why European Investment Firms need to
remain on top of all regulatory issues and maintain comprehensive and
continuous compliance support; especially in the increasingly complex
regulatory nature of the retail Forex industry."
About MAP S.Platis
MAP S.Platis is today the leading consultancy firm in the field of
registration, licensing and comprehensive support of European Union Banking
and Payment Institutions, Investment Firms, Market Makers and Brokerage
Houses, as well as of investment and financial structures, such Financial
Corporate Groups / Conglomerates, Hedge Funds, UCITS and International
Collective Investment Schemes. MAP S.Platis maintainstoday in Cyprusan
outstanding market share of promoting and consulting of over 65% of all
CyprusInvestment Firm registrations and operations under the European MiFID
Directive. Through its contribution in the sector, MAP S.Platis sets the
standard in the industry of European Union financial services consultancy.
The specialist Financial Services Advisory Teams of MAP S.Platis,
through their unrivalled and comprehensive support, remain the sector's
strongest promoter in front of the regulators in the EU jurisdictions MAP
S.Platis are active. Apart from the registration and licensing services, the
expert Financial Services Advisory Teams of MAP S.Platis provide, amongst
others, MiFID compliance support (on-line or onsite support), capital
adequacy support, risk management support, anti-money laundering support
services, operational risk support, internal audit services, and employee
For additional information or specialised tailored consultation on the
MiFID requirements, please contact the MAP S.Platis Financial Services
Advisory Team at: email@example.com.
For more information about the services and products of MAP S.Platis
Disclaimer: This release does not purport to be a definitive and/or a
comprehensive guide, but is instead a non-exhaustive, non-comprehensive set
of views of the matters concerning the above subject.
Further to the above, the interpretations, opinions, statements and
other subjective elements cannot be regarded, under any circumstances, as
the opinions and/or interpretations of any pertinent regulatory body in the
EU or outside the EU. In this respect, this news release does not intend to
construe formally the meaning of any relevant and competent Authorities'
rule/ definition/ requirement/ obligation, nor it should it be considered as
being able to do so.
In this respect, MAP S.Platis shall accept no responsibility for any
Investment Advice and/or Investment Research undertaken or provided by the
reader, following readingthis news release.
SOURCE MAP S.Platis