About a-team Marketing Services
The knowledge platform for the financial technology industry
The knowledge platform for the financial technology industry

A-Team Insight Blogs

New Data Validation Steps Required Under CESR’s Proposed MiFID Client Categorisation Regime Changes

Subscribe to our newsletter

As part of the ongoing review of MiFID, the Committee of European Securities Regulators (CESR) has published a new consultation paper on the subject of client categorisation that indicates a more structured approach to maintaining and monitoring entity data will be required within European financial institutions. The proposed requirements, which are aimed at strengthening investor protection, introduce new criteria for consideration when categorising clients under MiFID for reporting purposes, which will mean data managers will need to add new steps into the workflow for customer data.

Firms need to add in new data validation steps to ensure that the updated categories are applied to their customer data sets. For example, the consultation paper indicates that CESR is planning to narrow the range of regulated entities that can qualify to be treated as clients who are considered to be professionals. This means firms will have to set up data checking around the three new criteria: whether the entity is regulated or authorised in a jurisdiction with an equivalent regulatory regime to the EU; whether it is conducting business on behalf of underlying clients or not; and the size of the entity. And this is just one of the changes.

Others include geographic distinctions such as whether the entity resides in a member state that has fully implemented the MiFID directive or the Capital Requirements Directive (CRD).

The aim is to move from a broad brush approach to client categorisation to providing much more clarity about the data items that must be assessed during this process. CESR indicates that tests around a potential client’s knowledge and experience may also be introduced, which would add in a new set of data to the process. It also highlights the current challenges around very complex products and for standards that apply when business is done with eligible counterparties, and asks for feedback about how the industry feels these should be approached.

Many of the other changes are related to the wording of MiFID and although they may seem cosmetic, they could have significant implications on data categorisation. Industry participants should therefore bear these in mind when making any impact assessments of the proposals.

The is therefore asking for feedback about whether the industry is behind these recommended changes and in order to assess the impact of the changes on firms, including their data management teams. Firms have until 9 August to respond to the 11 related questions in the consultation paper.

Subscribe to our newsletter

Related content

WEBINAR

Recorded Webinar: How to ensure employees meet fit and proper requirements under global accountability regimes

Fitness and proprietary requirements for employees of financial institutions are not an option, but a regulatory obligation that calls on employers to regularly assess employees’ honesty, integrity and reputation, competence and capability, and financial soundness. In the UK, these requirements are a core element of the Senior Managers and Certification Regime (SMCR). They are also...

BLOG

Regulatory Reporting – 14 to Watch in 2024 – (EU/APAC)

Growth in the global capital markets is being driven largely by the increasing interconnectedness of global economies. This allows for more cross-border trading activity and the creation of new asset classes and investment strategies. New markets are being created, and access to existing markets is expanding. Regulatory reporting functions are facing intense pressure as they...

EVENT

RegTech Summit New York

Now in its 8th year, the RegTech Summit in New York will bring together the regtech ecosystem to explore how the North American capital markets financial industry can leverage technology to drive innovation, cut costs and support regulatory change.

GUIDE

Regulatory Data Handbook 2024 – Twelfth Edition

Welcome to the twelfth edition of A-Team Group’s Regulatory Data Handbook, a unique and useful guide to capital markets regulation, regulatory change and the data and data management requirements of compliance. The handbook covers regulation in Europe, the UK, US and Asia-Pacific. This edition of the handbook includes a detailed review of acts, plans and...