Do you want to learn more about the MiFID directive? Are you curious about what it entails, its purpose, or how it affects you? Credafin, the personal loan specialist, tells you more.
MiFID: Definition
MiFID stands for Markets in Financial Instruments Directive.
MiFID was established in 2007. Initiated by the European Union, this directive primarily aims to, as explained by the FSMA:
“regulate investment services in the field of financial instruments provided by investment firms and the operation of traditional stock exchanges and other trading platforms.”
MiFID, In Plain Terms
In other words, the main mission of MiFID is to “harmonize investor protection across Europe.”
MiFID requires financial companies to adhere to three principles:
- Act in the client’s best interest;
- Provide information as clearly as possible;
- Take into account each individual case.
Thus, MiFID works in the consumer’s interest, allowing to counter fraudulent or dishonest practices.
In practice, it obliges financial institutions to verify consumers’ understanding of the products (stocks, bonds, investment funds, etc.) they wish to subscribe to and limits proposals based on this knowledge. They are also obligated to verify the suitability between the desired product and the pursued goal. By complying with the MiFID directive, financial institutions must also be transparent.
MiFID II
MiFID II, the second version of MiFID, came into effect on January 3, 2018. It strengthens the foundations established in the previous directive, fills in gaps, and is more demanding than MiFID I.
In summary, we can say that MiFID II should enable consumers to engage with better knowledge and, therefore, better protection of their investments.
To learn more: www.febelfin.be.
