The leading knowledge platform for the financial technology industry
The leading 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

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.

Related content

WEBINAR

Upcoming Webinar: Improving data integrity to address regulatory requirements

Date: 6 May 2021 Time: 10:00am ET / 3:00pm London / 4:00pm CET Duration: 50 minutes Financial institutions today face a global regulatory landscape characterised by rigorous and varied reporting requirements across their businesses. Reporting challenges include completing more data fields across more lines of business with greater frequency, adding complexity and cost. At the...

BLOG

Q&A: The Future of Regulatory Reporting

Tom Wieczorek, MD of Global Product Management at UnaVista, part of the London Stock Exchange Group, gives us his unique insights into the key challenges and opportunities within today’s rapidly evolving regulatory reporting environment – and what firms should be doing to stay ahead. What are the key functional challenges for those seeking to implement...

EVENT

Data Management Summit Virtual

The Data Management Summit Virtual will bring together the global data management community to share lessons learned, best practice guidance and latest innovations to emerge from the recent crisis. Join us online to hear from leading data practitioners and innovators from the UK, US and Europe who will share insights into how they are pushing the boundaries with data to deliver value with flexible but resilient data driven strategies.

GUIDE

RegTech Suppliers Guide 2020/2021

Welcome to the second edition of A-Team Group’s RegTech Suppliers Guide, an essential aid for financial institutions sourcing innovative solutions to improve their regulatory response, and a showcase for encumbent and new RegTech vendors with offerings designed to match market demand. Available free of charge and based on an industry-wide survey, the guide provides a...