New financial rules expat investors need to know

Wherever expats are in the EU, they need to know about the changing face of investments caused by the Markets in Financial Instruments Directive.

The Markets in Financial Instruments Directive (MifidII) is the result of a huge rethink of relationships between investors, finance professionals and the markets themselves. It’s the second such directive to be issued, and touches on every aspect of banks’, brokers’ and asset managers’ investment activities. The new rules came into force January 3, and are slated to make the process of investment far more user-friendly.

MifidII’s demands include a strong increase in transparency for consumers and regulators as well as the promotion of more competition in the field of financial services. Fund managers will be forced to divulge extra information about their fees, and investors will get more information about the pricing of derivatives and bonds as well as the actual execution of trades. Importantly, market regulators will be provided with better data, this preventing sudden anomalies and flash crashes.

Although the new rules are basically European legislation, Asia and US-based fund managers and banks buying and selling to consumers in Europe will be forced to comply. According to Bloomberg, once the bugs are fixed, the system in Europe will be far more suited to modern-day investing and will surpass that in the USA for its transparency and sophistication. However, it’s too soon to speculate about Mifid II’s impact on European markets and the City of London.

Investors will now need to complete a questionnaire each time they make a trade, whether or not the deal goes ahead. One crucial change covers the possibility of UK financial firms still being able to sell their services freely across Europe without a separate trade deal, providing the firms adopt the rules post-Brexit. Expat investors in Europe may well take time to adjust to the changes, but will benefit from the protection the direction gives.