EG 19.34 Markets in Financial Instruments Regulations 2017

EG 19.34.1RP

1The MiFI Regulations in part implement MiFID. The FCA has investigative and enforcement powers in relation to both criminal and non-criminal breaches of the MiFI Regulations (including requirements imposed on persons subject to the MiFI Regulations by MiFIR and any directly applicable EU regulation made under MiFIR or MiFID). The MiFI Regulations impose requirements on:

  1. (1)

    persons holding positions in relevant contracts for commodity derivatives trading on trading venues and for economically equivalent OTC contracts, whether or not the persons are authorised; and

  2. (2)

    exempt investment firms providing services in algorithmic trading, direct electronic access or acting as a general clearing member or in relation to the synchronisation of business clocks.

The MiFI Regulations also give the FCA the powers to investigate and enforce breaches of article 28 of MiFIR and any directly applicable EU regulation made under MiFIR.

EG 19.34.2RP

1The FCA’s approach to enforcing under the MiFI Regulations, whether the person is authorised or not, will mirror our general approach to enforcing the Act, as set out in EG 2. We will seek to exercise our enforcement powers in a manner that is transparent, proportionate, responsive to the issue and consistent with our publicly stated policies. We will also seek to ensure fair treatment when exercising our enforcement powers. Finally, we will aim to change the behaviour of the person who is the subject of our action, to deter future non-compliance by others, to eliminate any financial gain or benefit from non-compliance and, where appropriate, to remedy the harm caused by the non-compliance.

EG 19.34.3RP

1The regulatory powers which the MiFI Regulations provide to the FCA include:

  1. (1)

    the power to require information and appoint investigators;

  2. (2)

    powers of entry and inspection;

  3. (3)

    the power to publicly censure;

  4. (4)

    the power to impose financial penalties;

  5. (5)

    the power to apply for an injunction or restitution order;

  6. (6)

    the power to require restitution;

  7. (7)

    the power to impose limitation, restriction or requirement; and

  8. (8)

    the power to prosecute relevant offences.

EG 19.34.4RP

1In addition, the MiFI Regulations provide the power to require the removal of persons from the management board of an investment firm, a credit institution or a recognised investment exchange. This is a supervisory power, rather than a disciplinary one, and it may be exercised whenever the FCA deems it necessary for the purpose of any of our functions under MiFID or MiFIR.

EG 19.34.5RP

1The MiFI Regulations, for the most part, mirror the FCA’s investigative, sanctioning and regulatory powers under the Act. The FCA has decided to adopt procedures and policies in relation to the use of those powers akin to those we have under the Act. Key features of the FCA’s approach are described below.

The conduct of investigations under the MiFI Regulations

EG 19.34.6RP

1The MiFI Regulations apply much of Part 11 of the Act. The effect of this is to apply the same procedures under the Act for appointing investigators and requiring information when investigating breaches of the MiFI Regulations.

EG 19.34.7RP

1The FCA will notify the subject of the investigation that we have appointed investigators to carry out an investigation under the MiFI Regulations and the reasons for the appointment, unless notification is likely to prejudice the investigation or otherwise result in it being frustrated. The FCA expects to carry out a scoping visit early on in the enforcement process in most cases. The FCA’s policy in non-criminal investigations under the MiFI Regulations is to use powers to compel the provision of information in the same way as we would in the course of an investigation under the Act.

Decision making under the MiFI Regulations

EG 19.34.8RP

1The decision making procedures for those decisions under the MiFI Regulations requiring the giving of a warning notice, decision notice or a supervisory notice are dealt with in DEPP.

EG 19.34.9RP

1The MiFI Regulations do not require the FCA to have published procedures for commencing criminal prosecutions. However, in these situations the FCA expects that we will normally follow our decision making procedures for the equivalent decisions under the Act, as set out in EG 12.

EG 19.34.10RP

1The MiFI Regulations do not require the FCA to have published procedures to apply to the court for an injunction or restitution order. However, the FCA will normally follow our decision making procedures for the equivalent decisions under the Act, as set out in EG 10 and EG 11.

EG 19.34.11RP

1The MiFI Regulations require the FCA to give third party rights as set out in section 393 of the Act and to give access to certain material as set out in section 394 of the Act.

EG 19.34.12RP

1Certain FCA decisions (for example a requirement to reduce the size of a position, publication of a statement and the imposition of a penalty) may be referred to the Tribunal by an aggrieved party.

Imposition of penalties under the MiFI Regulations

EG 19.34.13RP

1When determining whether to take action to impose a penalty or to issue a public censure under the MiFI Regulations the FCA’s policy includes having regard to the relevant factors in DEPP 6.2 and DEPP 6.4. The FCA’s policy in relation to determining the level of a financial penalty includes having regard, where relevant, to DEPP 6.5 to DEPP 6.5D.

EG 19.34.14RP

1As with cases under the Act, the FCA may settle or mediate appropriate cases involving non-criminal breaches of the MiFI Regulations to assist us to exercise our functions under the MiFI Regulations in the most efficient and economic way. See DEPP 5, DEPP 6.7 and EG 5 for further information on the settlement process and the settlement discount scheme.

EG 19.34.15RP

1The FCA will apply the approach to publicity that is outlined in EG 6, read in light of the applicable publicity provisions in section 391D of the Act.

Removal of persons from management boards under the MiFI Regulations

EG 19.34.16RP

1The power under Part 5 of the MiFI Regulations to remove a person from a management board may be used in respect of an investment firm, a credit institution or a recognised investment exchange.

EG 19.34.17RP

1This power may be used where the FCA considers that the removal is necessary for the purpose of exercising functions under MiFID or MiFIR. Examples of where this power may be used include, but are not limited to, ensuring that all members of the management body:

  1. (1)

    are of sufficiently good repute;

  2. (2)

    possess sufficient knowledge, skills and experience to perform their duties;

  3. (3)

    commit sufficient time to perform their functions;

  4. (4)

    do not hold too many directorships;

  5. (5)

    act with honesty, integrity and independence of mind; and

  6. (6)

    have no conflicts of interest.

EG 19.34.18RP

1The FCA will have regard to all relevant circumstances, on a case-by-case basis, taking into account the specific circumstances of the investment firm, credit institution or recognised investment exchange and the member of the management board. The FCA will exercise this power fairly and proportionately.

EG 19.34.19RP

1It should be noted that, while the FCA will have regard to the range of regulatory tools at its disposal, we are not required to exhaust all other options before imposing the requirement to remove a person from the management board.

EG 19.34.20RP

1The FCA will take into account all relevant circumstances when considering whether to require the removal to occur immediately or on a specified date.

Statement of policy in section 169(7) (as implemented by the MiFI Regulations)

EG 19.34.21RP

1The MiFI Regulations apply section 169 of the Act which requires the FCA to publish a statement of policy on the conduct of certain interviews in response to requests from overseas regulators. For the purposes of the MiFI Regulations the FCA will follow the procedures described in DEPP 7.