It is happening people – so how will Brexit affect MiFID and Digital Marketing, in the financial services sector.
MiFID forms a central element of the EU’s ambitious Financial Services Action Plan – and has been seen as a success in many quarters. The sheer breadth and depth of its impact is unlike any change to financial services regulation that the UK has ever seen post-2007. With Brexit, it seems unlikely that this type of regulation and requirement will change. In fact, MiFID was actually born out of the old FSA.
With Brexit now looming and potentially no change to MiFID, it may be prudent to review the regulation. The Implementing Directive makes it clear that generic advice is not caught as investment advice, although it does make the provision that if such advice is presented as suitable for a particular client, firms will need to bear in mind the requirements relating to fair, clear and not misleading marketing communications, and a general requirement to act in accordance with the best interest of clients.
Interestingly, marketing communication (written or digital) is subject only to Home State rules which means that with Brexit there may be sufficient leeway to make changes that have been lobbied strongly in some quarters of the UK asset management and hedge fund community. MiFID defines a “marketing communication” as “any form of information issued to the public that advertises, makes a recommendation or is capable of acting as a solicitation regarding investment services, and/or financial instruments”. With this in mind, it brings email and social media marketing into the foray like never before, should the UK decide to extend the reach and reduce the regulation for direct marketing. This could also be seen as an advantage over EU-based financial institutions that will need to adhere to stricter regulation.
MiFID only applies to written communications. The existing UK regime applies to both written communications (non-real time financial promotions) and oral promotions (real-time). One argument might be that, as MiFID is maximal in nature, the post-Brexit regime cannot introduce any restriction upon real-time financial promotions. It was always unlikely that they would take this view, and by all accounts the FCA intends to retain its existing financial promotion restrictions relating to real-time promotions by arguing that as MiFID does not cover the point at all, post-Brexit regime is free to introduce its own rules in this area and continue with the status-quo.
Historically, the EU seems to think that there is no reason why a financial product ought not to be promoted to any investor, provided that there is a sensible burden in demonstrating the suitability and appropriateness of the investment placed upon the investment firm. The post-Brexit regime may reduce this burden, once again creating an environment that favours UK-based financial institutions.
However the post-Brexit regime ends up tackling these difficult issues, there is clarity on one matter. MiFID’s key requirement in relation to marketing communications is that they be “fair, clear and not misleading” – a requirement that is not going to change.