Survey reveals majority of financial services outsourcing agreements still fail to comply with MiFID
08 August 2007
The majority of financial services organisations’ outsourcing
agreements still fail to comply with MiFID according to a survey
conducted by law firm, Field Fisher Waterhouse LLP.
The Markets in Financial Instruments Directive (MiFID) is one of
the most far-reaching EU legislative measures in the financial
services sector for many years and a range of institutions will for
the first time be regulated in detail in relation to their
outsourcing arrangements. For those firms already regulated, the
outsourcing rules have been substantially rewritten. This survey
reveals that the majority of organisations are not ready for the 1
November deadline to comply.
In March, Field Fisher Waterhouse launched www.mifidcheck.com, a free survey
for financial sector organisations keen to check whether their
outsourcing
arrangements were compliant with MiFID. The results to date
demonstrate that there are a wide spectrum of areas for concern
within outsourcing
agreements.
The main issues contributing to failure to comply with MiFID
are:
- 40% do not have an up-to-date exit management plan in place
with their service provider
- 36% do not have their regulatory team review its contracts
- A third do not have a service level agreement in place with
every service provider
- 32% do not regularly test service provider’s disaster
recovery
- Where a service provider fails to meet regulatory standards,
31% do not have step-in rights or the right to terminate their
agreement
- More than 30% of agreements do not require the service provider
to regularly test back up facilities.
Other areas for concern are accessibility to information,
disclosure of service failures and co-operation with the Financial
Services Authority (FSA).
Field Fisher Waterhouse technology partner Simon Briskman said:
“Many companies have a long way to go between now and 1 November.
In order to achieve the deadline, firms need to engage their
suppliers in negotiations now.
“Many companies have assumed that the outsourcing rules under MiFID
are no more than an extension of the current rules and reflect good
practice. To some extent this is true and our survey suggests that
good practice is often not met in financial services
outsourcing.”
For further press information please contact:
Louise Eckersley, PR Executive on +44 (0)20 7861 4120
Scarlett Yianni, PR Assistant on +44 (0)20 7861 4795
Notes to editors:
Methodology
- Field Fisher Waterhouse set up www.mifidcheck.com, a free
survey for financial sector organisations to check whether their
outsourcing arrangements were compliant with MiFID.
- The objectives of the research were to understand what problems
companies faced, and identify the areas of MiFID that companies
currently were not compliant with.
- Responses were made anonymously.
- The research is based on a representative sample over May. The
firm analysed 60 completed surveys over this month.
- The firm only analysed responses from companies who confirmed
they are regulated by MiFID.
- The website was set up in March, and is ongoing.
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