The Alternative Investment Management Association (AIMA) has published a guide for alternative investment managers to help them understand and implement the enhanced ‘best execution’ obligations under the European Union’s updated Markets in Financial Instruments Directive (MiFID2), which will apply from January 2018.
AIMA’s MiFID2 Best Execution Guide outlines the MiFID2 obligation to achieve the best possible results when executing transactions.
These rules were originally introduced under MiFID1 and have now been enhanced in a number of areas. In order to meet the new requirements, firms will likely need to review their execution policies and client disclosures (such as Investment Management Agreements) to ensure they meet the higher standards under MiFID2. Fund managers also will be required to publish annual reports about their choice of trading venues and brokers.
Best execution practices will vary between firms, depending on their investment strategy and the types of financial instruments they trade. AIMA’s guide sets out the practical considerations that firms will need to take account of in order to ensure they are ready for the MiFID2 deadline and maintain ongoing compliance standards.
The guide was developed by AIMA in conjunction with a working group of members. The law firm Dechert LLP chaired the working group and is the sponsor of the guide.
AIMA’s CEO Jack Inglis said: “The new best execution obligations under MiFID2 continue to be a key focus for our members as they work towards January 2018. We hope that our comprehensive guide will support them in their implementation programmes. Our recent MiFID2 survey indicated that some of our members with an international presence are setting the MiFID2 best execution requirements as their global standard. This makes it all the more important to get it right from the start.”
Dick Frase, Partner at Dechert LLP, said: “New best execution obligations are a major part of the MiFID market reforms and will have a very significant impact on business practices. We were delighted to work with AIMA and its members on producing the MiFID2 Best Execution Guide, which takes a practical look at implementation of the requirements, and draws on good and poor practices identified by the FCA in their supervisory and thematic work in recent years.”
The Best Execution Guide is the latest in a series of MiFID2 guides published by AIMA. Earlier this year, AIMA published a MiFID2 Guide for Investment Managers and a MiFID2 Vendor List. AIMA also published a survey of investment managers’ MiFID2 preparedness in June.