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SIX Financial Information Develops Utility for Compliance with Investor Protection Rules

SIX Financial Information is developing a document management utility designed to help financial institutions comply with investor protection rules issued by the European Securities and Markets Authority (ESMA) and due to take effect on January 1st 2017. The rules are also an element of Markets in Financial Instruments Directive II (MiFID II), a European regulation that is expected to come into force in January 2018.

The ESMA investor protection rules require manufacturers and distributors of Packaged Retail and Insurance based Investment Products (PRIIPs), including investment banks, wealth management firms and portfolio managers, to produce standardised Key Information Documents (KIDs) that describe each product in plain language and make the documents available to private individuals resident in the European Economic Area before a PRIIP is bought.

SIX’s solution to compliance with the rules is a multi-tenanted utility that allows documents to be created once and used many times. The utility is built on underlying technology from Ariva, a specialist in structured product documents, and uses law firm Ashurst to provide legal content that must be included in KIDs and provided in many languages to meet to meet the requirements of the rules.

Using the SIX utility, PRIIP manufacturers will be able to create documents in near real time and make sure they are kept up to date using reference and market data from SIX. The PRIIP KIDs can then be fed into a bank’s core banking software or trading platform, while product distributors can use the utility to browse KIDs from any issuer and deliver them to retail investors on demand. To date, a large number of issuers of documents have shown interest in using the distribution platform within the utility. The documents are permissioned for distributor access by the utility and can be downloaded as PDFs or viewed via an electronic link to the utility.

Phillip Lynch, head of markets, products and strategy at SIX Financial Information, explains: “Our aim is to take the pressure off clients by reducing the cost and complexity of meeting the rules. We remove uncertainty about how to put new processes in place and allow clients to take advantage of a scalable, utility approach to investor protection.”

The SIX service is in demonstration mode and is expected to start signing up customers on a licence basis in the second half of this year as the regulatory deadline approaches. Lynch says there is a lot of client interest in the service, which can provide compliance with not only ESMA’s upcoming investor protection rules, but also MiFID II investor protection requirements and regulations around Undertakings for Collective Investment in Transferable Securities (UCITS) that will make them PRIIPs requiring KIDs in 2020.

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