Issue - meetings

27.1     The Committee considered a report on Markets in Financial Instruments Directive (MiFID II).

27.2     The Committee RESOLVED to:

1.    Note the potential impact on investment strategy of becoming a retail client with effect from 3rd January 2018;

2.    agree to the immediate commencement of applications for elected professional client status with all relevant institutions in order to ensure it can continue to implement an effective investment strategy;

3.    acknowledge and agree to forgo the protections available to retail clients attached as Appendix 1; and

4.    agree to approve delegated responsibility to the Chief Finance Officer in consultation with the Chair for the purposes of completing the applications and achieving elective professional status for the Fund with effect from 3 January 2018.

1.1.        The Board considered a report providing an update on the Markets in Financial Instruments Directive (MiFID II).

1.2.        The Board welcomed the Financial Conduct Authority (FCA) allowing Local Government Pension Schemes (LGPS) to ‘opt up’ to elective professional status.

1.3.        The Board RESOLVED to:

1) note the report; and

2) recommend to the Pension Committee that officers are authorised, in consultation with the Chair, to progress the necessary actions aimed at achieving elective professional status for the Fund with effect from 3 January 2018.

9.1       The Board considered an update on the Markets in Financial Instruments Directive (MiFID II).

9.2       OO confirmed that LGPSs were still awaiting the outcome of the FCA ruling as to whether or not Local Government Pension Schemes (LGPSs) would be permitted to ‘opt up’ to ‘professional client’ status. He warned that if the FCA did not permit ‘opting up’ then it would require considerable change to how LGPS invest. The Local Government Association (LGA) is in the process of lobbying the FCA to reconsider its stance on the categorisation of LGPSs.

9.3       The Chair said that the MIFID II directives had been issued by the European Union but left to member nations to interpret and apply them nationally. He said it appeared the FCA was proposing to adopt them rigidly and without understanding nuances, as, given their size and powers to hire and fire investment managers, LGPSs were evidently professional clients. He cautioned that if the FCA did not appreciate this, and did not allow opting up, it would have a significant impact on pensioners. The Board agreed that the current proposal for LGPSs to be re-classified as retail clients was not in the interest of scheme members.

9.4       The Board RESOLVED to:

1)         note the report; and

2)         request a future update on MIFID II.