Regulator finally recognising MIFID2 problem for LGPS funds ACCORDING TO JEFF HOUSTON OF THE LGA
The FCA may finally be addressing the problem MIFID2 raises for LGPS funds. According to the draft proposals, LGPS pension funds would be classified as retail clients from 1st January 2018 unless they were able to 'opt up' to professional status. The problem was that the 'opt-up' criteria were very difficult for most LGPS funds to meet. In consequence they would have to be treated as retail clients, only able to invest in a restricted universe of investments and at higher cost. Linchpin and others replied to the FCA's consultation pointing out that this was completely at odds with the intentions behind pooling. As MIFID2 is a European Directive, it is unlikely that our representations would have much effect, so we responded to the FCA suggesting they look again at the opt-up criteria.
At yesterday's LAPF Strategic Investment Forum Jeff Houston of the LGA said that the FCA have finally seen that there is a problem and are therefore looking at changing the opt-up criteria or giving LGPS funds an exemption. It is too early to declare victory or whether they have taken up the specific suggestion which Linchpin made, but it does appear that someone somewhere has finally seen some sense.
To read Linchpin's response to the FCA consultation on the subject of MIFID2 see here.