On 27 November 2024, the UK Financial Conduct Authority published a consultation paper on the MiFID Organisational Regulation (Commission Delegated Regulation (EU) 2017/565).

The consultation paper outlines proposals to transfer the firm-facing requirements of the MiFID Organisational Regulation into FCA Handbook rules when HM Treasury begins a repeal of the Regulation. The FCA intends to restate the existing requirements as rules and guidance with no or minimal changes. Provisions that the FCA does not replace in regulatory rules will either be re-stated or repealed by HM Treasury, when the Handbook rules are ready to come into force. HM Treasury will publish a draft Statutory Instrument to propose these changes.

The FCA anticipates further harmonisation and rationalisation of its rules over time and has included a discussion chapter on future reform to make the rules better suited to UK authorised firms and their clients.

The FCA suggests:

• Rationalising duplicative conduct and organisational rules derived from various EU directives and removing the distinctions in rules between types of firms if there is no substantive difference in obligations.

For example, simplifying SYSC 10 conflicts rules, best execution rules in COBS 11.2, COBS11.2A and COBS 11.2B and personal account dealing rules in COBS 11.7 and COBS 11.7A.

• Replacing ineffective distinctions between different types of firms by tailoring or calibrating rules to better suit different sectors or to better enable technological development and innovation.

For example, removing firms that act on behalf of underlying clients from the list of entities that can be treated as per se eligible counterparties.

• Introducing flexibility on how firms can meet existing obligations, taking a more outcomes-based approach where this may allow firms to better meet the needs of clients, including retail and wholesale.

For example, rationalising information and disclosure rules.

For example, adding flexibility to the opt up process by (i) updating and/ or adding alternative quantitative test criteria; (ii) aligning the rules for MiFID business with the current standard for non-MiFID business, for example through providing additional Handbook guidance on factors firms should consider in making their assessment of the client or making a minimum investment portfolio threshold a prerequisite to opting up; and (iii) strengthening the process for ensuring consumers understand the implications of requesting to opt up, including with respect to the regulatory protections they would forego, for example by introducing a cooling off period to ensure a client has adequate time to assess the implications of their request to opt up or periodic confirmation that a client wants to continue to be treated as a professional in relation to relevant products and services.

• Considering whether certain rules do not meet their intended objective, either because they have never been effective (generally or when applied in particular context) or because they have become redundant due to market or technological development.

For example, removing distinctions in FCA Handbook rules for MiFID and non-MiFID firms if there is no material difference in the obligations.

• Rationalising the body of Level 3 and other materials firms may rely on to interpret FCA Handbook rules.

The consultation paper closes on 28 February 2025. The discussion chapter is open for comment until 28 March 2025.

If you have any questions regarding the consultation, please contact Aniqah Rao.