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Aeriandi Study Highlights UK Financial Institutions are Unprepared for MiFID II Legislation and Unaware of Extent of Penalties

March 2017 by Aeriandi

A study of IT managers and decision makers and Risk & Compliance managers within UK financial services businesses, reveals a lack of
preparation and understanding of the requirements of MiFID II legislation due to
come into force in January 2018.

The study, carried out in January 2017 for Aeriandi,
shows managers and decision makers within these institutions have little
understanding of the severity of potential penalties and are struggling to apply the
legislation to their businesses.

Key findings

 Almost three quarters (73%) of Risk & Compliance managers in
Financial Sector admit they’re not aware of penalties of up to 5 million euros or
10 per cent of annual turnover vs only 58 per cent of IT managers and decision
makers

 17 per cent of Risk & Compliance managers are unaware a company could
receive a cease and desist order for non-compliance

 Almost a quarter of those surveyed (22%) say that, although they feel
they understand the MiFID II legislation, they are not sure how it applies to their
organisation

 Over a quarter (29%) do not yet have the technology or the infrastructure
needed in place for compliance

 Only 10 per cent are currently communicating with partners and suppliers
about their preparations for compliance with MiFID II

The study highlights a concerning gap between general awareness and understanding of
the legislation and an understanding of the practical detail, knowledge and planning
that is needed to prepare for compliance.

Understanding of the legislation peaks in firms with 50,001 – 100,000 employees,
with 88 per cent saying they are totally confident in their understanding of the
legislation. It then falls sharply to 67 per cent in organisations with 100,001 –
150,000 employees, and again to 65 per cent in companies with 150,001+ employees.

When comparing the responses of IT professionals and those responsible for managing
Risk & Compliance within a business, IT teams have a better overall
understanding of the consequences of non-compliance. 62 per cent of Risk &
Compliance managers admitted to not knowing a company can be fined up to 5 million
euros or 10 per cent of annual turnover, compared to only 42 per cent of IT managers
and decision maker’s.

It would appear however that a countdown to compliance has begun and organisations
are now starting to invest time and money in preparations. 30 per cent of
respondents say that budget has been allocated this year to help with preparations,
and over a third (36%) report that policy and procedure have now been developed.

Matt Bryars, co-founder and CEO at Aeriandi, commented: “There appears to be a
real lack of detailed knowledge around MiFID II in UK financial services
organisations. With less than a year to go until penalties for non-compliance will
kick in, you’d hope that those responsible for delivering compliance – the IT
and risk & compliance teams – would have this nailed. However, for many,
preparations are still at a very early stage.

“Organisations must understand the key areas of impact on their business and start
to plan for change. For example, call recording requirements under MiFID II will
become mandatory for all areas of financial advice. So anyone making a call in which
they recommend products or aim to make a transaction will have to record that call
– and then keep that recording secure for five years. Ultimately compliance and IT
teams will have their work cut out for them They’ll need to carry out a detailed
risk analysis, mapping out the required processes and procedures required under
MiFID II, and then determine task by task if their existing solutions will be
adequate or if the organisation finds it needs to procure and roll out a new set of
tools and supporting processes."

About the Study

This study was carried out by research company Opinion Matters on behalf of Aeriandi
in January 2017. It was conducted amongst a sample of 250 professionals working in
the UK’s Financial Sector in companies which process payment transactions over the
phone and have 1000+ employees. The sample was split equally between Managers with
Risk/Compliance in their job titles and IT Decision Makers/IT Managers


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