Markets in Financial Instruments Directive II (MiFID II)

MiFID II is a European regulation which builds on the original regulation (MiFID I) that sought to make investing more transparent and to standardise regulatory disclosures required for particular markets. What that meant was all financial companies were required to be clearer about costs and charges, and explain them in a standard way.

MiFID II is the combination of the conclusions of the MiFID I review, and the EU implementation of the G20 commitments in response to the financial crisis in 2007/8.

The European Commission set out four objectives for MiFID II:

To strengthen investor protection.

To reduce the risks of a disorderly market.

To reduce systemic risks.

To increase the efficiency of financial markets and reduce unnecessary costs for participants.

MiFID II came into effect on 3 January 2018, changing the way we operate in the UK and Europe. It also impacts any clients around the world that invest in our UK and European domiciled products.

There are four main areas of change associated with MiFID II for Columbia Threadneedle Investments and our customers:

Research costs.

Costs and charges

Target market.

Policies and procedures.

More information on the four main areas can be found below.

Research costs

MiFID II stipulates that any fees charged for external investment research applied to a fund have to be disclosed and reported to investors as a single charge, not bundled with other fees.

As an active manager, our investment process uses extensive in-house research supplemented with specialist external research. This enables us to selectively access broader knowledge to generate performance across our strategies.

Since January 2018, external research costs that we incur on your behalf have been, and will continue to be, paid for by Columbia Threadneedle.

Costs and charges

MiFID II has standardised the reporting of Costs and Charges for each fund, this is done by requesting that all Asset Managers use the same template to report costs and charges – the European MiFID Template (EMT).

Columbia Threadneedle use the industry standard EMT to report costs and charges to ensure transparency for our investors, financial advisers and distributors. We do not publish the EMT on our website, but have enhanced the costs and charges information we disclose.

Charges can vary from fund to fund and between share classes. Further information about specific charges can be found in the relevant Fund Prospectus and on the Funds and Prices page of our website where you can search for your fund by name/ISIN.

Target market

We are required to identify and disclose the potential target market (who the fund is intended for) for each fund. The information that we will provide to investors includes:

Which type or types of investors the fund is compatible with based on their needs, characteristics and objectives.
Details of any group or groups of investors the fund is not compatible with based on their needs, characteristics and objectives.

Policies and procedures

MiFID II required firms to update their policies and procedures to reflect the new regulatory requirements. This included the following policies:

Conflicts of Interest.
Complaints.
Fund and Product Governance.
Record Keeping.