MiFID II – Your questions answered

For intermediaries only

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Here’s a summary of the most frequently asked questions we’ve received.

Transaction reporting, Legal Identity Identifiers and Natural Person Unique Identifier

A transaction report is a data set submitted by us which contains information relating to a transaction. Each transaction report includes information about the financial instrument traded, the firm undertaking the trade, the trade counter party, the person on whose behalf the firm has dealt (where applicable) and the date/time of the trade. This is reported back to the Financial Conduct Authority (FCA).

No, this won’t change. We’ll continue to carry out transaction reporting for financial instruments traded as before.

Yes, Aegon continues to be responsible for best execution. Best execution is an important part of the Markets in Financial Instruments Directive II (MiFID II). The obligation to achieve best execution is in Article 27 of the MiFID II Directive, which states that an investment firm must take all sufficient steps to obtain the best possible result for its client when executing a client order.

We’ve produced a new Order execution policy summary(Opens new window) and updated our full Order execution policy(Opens new window) in line with the MiFID II regulations. You can find them in our document library.

If you trade with us in insured funds, collectives you don’t need to do anything.

However, from the 3 January we won’t be able to process any trades for listed securities including equities, investment trusts or exchange-traded funds unless we have certain unique identifiers. These identifiers apply for the buyer/seller and the person who makes the investment decision – Decision Makers – on an investment transaction. 

Please note that although European Securities Markets Authority (ESMA) has delayed this requirement by 6 months, we’ll still require the LEI to continue to trade.

If you transact with us on behalf of your clients (discretionary mandate) on these listed securities and you’re responsible for making the investment decision on their behalf, we’ll have written to you to provide an active LEI. This could be your firm, branch, or network adviser’s LEI.

We’ve also asked you to provide additional information relating to those clients who buy and sell these types of securities. This could include:

  • their Natural Persons Unique Identifier (NPUI) if they’re a private individual, which will involve capturing their nationality (including where dual nationality exists) and the unique identifier specific to their country, such as national insurance number or passport number;
  • their LEI if they aren’t a private individual (may apply to some companies or trusts);
  • if the client is on a discretionary or advisory mandate, and
  • whether they have a Power of Attorney or Power of Representation making investing decisions on their behalf.

If you don’t currently transact with us in listed securities but intend to in the future, we’ll gather the identifiers during our on boarding process.

If a client who is a legal entity or structure, including a company charity or trust, they’ll need to make arrangements to obtain an LEI code if they want a firm to continue to act on their instructions or make a decision to trade in listed securities on their behalf.

Further details on LEI’s can be found at www.fca.org.uk/markets/mifid-ii/legal-entity-identifier-lei-update(Opens new window) and in the FCA's Legal Identify Identifier: what you need to do leaflet(Opens new window).

Costs and charges disclosure

We’ll continue to provide current illustrations for all our products. Where MiFID II investments are chosen, we’ll provide a MiFID charges summary. This summary will show the aggregated product costs for example the fund manager costs, that a customer will incur investing in a MiFID investment. It will also include a summary of the service costs they’ll incur in holding those investments in their product with us, for example our charges and any adviser/intermediary charges facilitated through the product. 

The product and service costs will also be broken down into the respective itemised costs as required by MiFID, for example aggregated one-off costs and ongoing costs and will be displayed in £s and % as required.

Please note we won't issue a charges summary for SIPP illustrations and therefore advisers may see differences in the investment charges information between GIA/ISA and SIPP. We’re continuing to monitor how competitors and the industry has interpreted the regulations and will continue to discuss this with the regulator.

From 2018 we’ll issue statements quarterly to customers, where appropriate. On a yearly basis we will also include information on costs and charges incurred during the year, the impact of those charges on the investment return and transactions for that period.

Investment into, and rebalances of Model portfolios will remain an advised transaction so you’ll need to provide costs and charges disclosure to your clients.

Complex investments and appropriateness tests

Non-advised clients won’t be able to trade in complex investments. Existing customers with a holding in a restricted fund won’t be affected, however they won’t be able to top-up or switch into those investments in the future. We won’t be making complex investments available to non-advised clients. 

Advised clients aren’t affected by this, the usual suitability requirements will apply.

Fund managers will identify if the characteristics of their investments requires evidence of a higher level of understanding of the associated risks for non-advised customers, through an ‘appropriateness test’. This test assesses their level of knowledge and experience of investing and whether the investment is appropriate.

Of the 6,000+ instruments on the platform, fund managers have indicated that only 300 of these aren’t suitable for Retail Investors. You might want to consider communicating with any non-advised clients who hold complex investments to discuss their options.

We won’t be offering an appropriate test as we are an intermediated B2B provider. For customers who haven’t been given financial advice about investing in complex funds, an appropriateness test will be required. This test assesses their level of knowledge and experience of investing and whether the fund is appropriate. This means that non-advised clients won’t be able to trade complex funds, and whereas existing customers won’t be affected, they won’t be able to top-up or switch into those funds in the future.

Client reporting

We'll notify you by email if your client's portfolio value falls by 10% and provide details of the client's impacted to allow you to contact them.

Product governance and target market

Under MiFID II there’ll be a common view of what target market means for fund managers. But in essence it’s a description of the types of people and their characteristics who are targeted for each financial instrument. Distributors will also need to define their target market. 

When fund managers define their target market, they’ll also need to set out the types of clients who are outside of the target market. Distributors will also need to do this and we’ll provide further updates as this work progresses.

We’ll report aggregated sales in the funds held on platform back to the manufacturer (Fund Manager). This will include the new MiFID II required attributes – however, if you believe you’re selling a fund(s) outside of target market then you should report this to us or directly back to the manufacturer.