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Regulation

Advisers, SMSFs ignorant about MiFID II

Many advised and unadvised SMSFs as well as adviser groups remain in the dark on the requirements around the incoming Markets in Financial Instruments Directive (MiFID II) regulatory regime, including being unaware of what a legal entity identifier (LEI) is.

APIR Systems chief executive Chris Donohoe told selfmanagedsuper that under the MiFIDII, SMSFs may not even be aware they would be dealing with a European counterparty, where the new regulations would apply from 3 January 2018.

“They’re using a local representative of that party who has these blanket rules,” he said.

“They don’t care whether it’s a branch of that operating out here. They’re still affected by the global compliance regime for that organisation.”

Donohoe said that because the new regulatory regime was for their European counterparty and was not a requirement under Australian regulatory rules, it was falling under the radar of advisers and investors in Australia until they needed to invest in Europe.

“Therefore if you want to deal with them, unbeknownst to the adviser and the investor here, are running into them and they don’t know what they mean,” Donohoe said.

While there were no penalties for failing to obtain a LEI, this is a trade enabler, which would mean investors would not be able to trade with their European counterparty.

Donohoe said obtaining a LEI was a simple process that would take about five days.

SMSFs, advisers and investors would need to provide pieces of documentation from the Australian Securities and Investments Commission, an Australian business number and the like to obtain the 20-character alphanumeric number.

General manager, client development Andrew Dyster said institutions such as corporate banks and fund managers have been aware of the LEI requirement for a fair while and they had LEIs issued already but this now applied to the likes of SMSFs as well.

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