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GAM and MiFID II

The Markets in Financial Instruments Directive (“MiFID II”) came into force on 3 January 2018 and introduced a number of changes to the way financial services are provided to clients by MiFID firms. Key focuses of MiFID II included:

  • increasing investor protection
  • increasing product and market transparency
  • enhancing corporate governance.

This is a dedicated area where GAM Investments will host all of our updates relating to MiFID II.

How does GAM ensure compliance with MiFID II?

GAM worked on a group-wide MiFID II project, covering impact analysis and implementation of MiFID II for all impacted GAM entities, business areas and client segments.

Under MiFID II, any MiFID firm providing discretionary portfolio management and independent investment advice is prohibited from receiving and retaining any third-party payments (inducements). MiFID firms providing non-independent advice and execution-only services are able to retain retrocession payments, subject to any stricter requirements within their own national law.

This sought to ensure that all MiFID firms which are impacted by these regulations are able to access a share class which allows them continuous compliance with applicable MiFID II laws and for the respective MiFID service they are providing.

As a consequence, we analysed our share class offering across all GAM Funds and made a clean share class available to all MiFID firms, who were unable to retain inducements.

Client information – target market definition, cost transparency & PRIIPs

MiFID II introduced new obligations on MiFID firms acting as product manufacturers and distributors. This took the form of enhanced investor protection by requiring those firms to take responsibility for ensuring that the manner in which products and related services are designed and offered to clients is consistent with the interest of clients during all stages in the life-cycle of products or services.

In particular, firms that manufacture financial products are required to specify, as part of the product approval process, a target market of end clients for whose needs, characteristics and objectives the product is intended, as well as a distribution strategy which is consistent with the identified target market.

Distributors are also required to understand the features of the investment products they offer or recommend and, using the information obtained from manufacturers and their own client database, identify a target market of clients to whom products and services are intended to be provided. In order to support reviews by MiFID manufacturers, distributors must provide them with information on sales and, where appropriate, any other relevant information that may be the outcome of the distributor’s own periodic review.

The obligation of the product manufacturer and the distributor to identify the actual target market is not a substitute for additional assessments of suitability or appropriateness, which should be conducted in addition to such an assessment. The defined target market for all GAM Funds will be made available to any MiFID firm, acting as distributor for GAM Funds.

MiFID II also required that all costs and associated charges related to investment/ancillary services and financial instruments are disclosed to clients. This encompasses a wider range of costs than were previously required by MiFID I. We have made available the aggregated costs for GAM Funds to any MiFID firm, acting as a distributor for GAM Funds, in order to allow them to meet their respective obligations towards end clients under MiFID II.

For both target market information and costs and charges, we have implemented an industry solution which includes such data in a standardised format (EMT file). In addition, for investors affected by the PRIIPs regulation GAM provides the relevant PRIIPs data in a standardised format (EPT, CEPT file) upon request.

Complex products

GAM has classified all its products into complex and non-complex products, as required by MiFID II, and has made such information available to our clients.

Best execution

MiFID firms are required to take all sufficient steps to obtain the best possible result for their clients when executing orders, which includes taking into account price, costs, speed, likelihood of execution, settlement size or any other consideration relevant to the execution of the order. Nevertheless, where there is a specific instruction from the client, MiFID firms should execute the order in line with the specific instruction. Additionally, MiFID firms are required to summarise and make public the top five execution venues for each class of financial instruments on an annual basis. The latest reports by entity can be accessed by following the links below:

GAM London Ltd.

GAM International Management Ltd.

Cantab Capital Partners LLP

Payments for research

GAM has decided to absorb all research costs from January 2018.

Market transparency

MiFID II introduced a range of measures and reporting obligations to increase the market transparency. As part of such measures, GAM is committed to fulfilling its requirement that MiFID firms executing transactions in financial instruments are required to report complete and accurate details of such transactions to the competent authority as quickly as possible and no later than the close of the following working day.

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