Implementation of the controversial Markets in Financial Instruments Directive was originally planned for April 30, 2006 but was subsequently extended by a year to allow financial institutions time to adapt to the widespread changes it proposes. The latest news is that good old Blighty, as the current president of the European Union, will req- uest a further delay until November 30, 2007.The FSA’s consultation paper is due in December. Will this provide more clarity on what Mifid means to UK firms or merely extend the debate and decision-making process further? I believe the delay in implementation is to be welcomed as there is much still to be resolved. One such area relates to the impact of Mifid in the IFA sector. The FSA has previously stated that IFAs should be exempt from the directive as their inclusion would increase their capital requirements disproportionately. In practice, however, the FSA will have to undergo an exercise to simplify and enhance key areas of the conduct of business rules in line with the directive, which will to some extent or another still apply to the IFA market even if an exemption is granted. The true impact of these changes remains unclear for the time being but the key areas that could be affected are beginning to emerge. What is clear is that while the underlying principles of the COB rules remain unchanged, Mifid will lead to changes in the detail surrounding best execution, advice, financial promotions, client money and training and competency, which in turn will potentially lead to changes to a firm’s systems, controls, policies and procedures. The recent examples we touch on below reinforce the continuing lack of clarity and industry uncertainty. The fundamental problem faced by professionals trying to make sense of the detail is that it is always changing. A few months back, the IFA profession took a sharp intake of breath when the Mifid rules relating to a customer’s suitability to buy financial products were clarified, requiring firms to document a client’s profession and education. The ABI expressed concerns at the discriminatory nature of this, with the ability to buy an equity-based product depending on the client having an educational background or previous experience of such investments. Two months later, the know your customer requirements regarding a client’s knowledge and expertise remain but on a “may” rather than a “must” basis. We can only wait and see how this will translate into COB. Similarly, earlier rules relating to investment advice indicated that all financial services firms should revise and reissue their terms of business to their clients, seeking their signature in return. The potential cost of this sent a shiver down many a spine, with an impact of millions of pounds being quoted by some firms. But it is now believed that the proposal will not be adopted. A further interesting aspect relating to investment advice touches on a wider and more fundamental objective of Mifid. If we read it correctly, the directive makes it easier for financial institutions to provide services throughout the European Union on the basis of home country supervision. This means that a UK customer could buy a product direct from a French company subject to the French regulatory regime. The same customer buying a similar product, but through a UK branch of a French firm, would be subject to the UK regulatory regime. Lots of issues immediately spring to mind. First, taken literally, this could result in smart investors and advisers seeking out the regulatory regimes offering the best deal and, therefore, in-depth knowledge of regulatory regimes could become fundamental in the decision-making and advice process. Second, what would be the consequences for firms tracking their customer base to ensure that the correct regulatory regime is applied? Finally, if a less onerous regulatory regime were used, what justifications for utilising it would be acceptable to the home country regulator? Some real quality guidance from our own regulator may be required here. One area which looks more certain is that of professional indemnity insurance. At present, it looks like bad news for those IFAs holding client money, as the Mifid rules propose an overall increase in PI insurance contracts. Minimum PI cover could rise materially, with potentially significant effects on some IFAs. Hopefully, the FSA paper will provide further clarification and some comfort to IFAs in this area. The costs of Mifid implementation have been estimated at billions across all member states. While much of this cost will be passed on to investors, the aim is to provide increased transparency and efficiency and, hopefully, reduced costs in the long run. The challenge will be getting the industry to buy into that idea. The true impact and timing of this chunky piece of European legislation remain uncertain but what we do know is that it is on its way. The challenge facing each firm will be in trying to assess and communicate the impact of Mifid within the business to ensure that sufficient provision is made for when it arrives. The potential costs should make financial directors sit up and take notice.