Compliance Culture

Practical insights for compliance and ethics professionals and commentary on the intersection of compliance and culture.

Round-up on compliance issues with PSD2 implementation

The Payment Services Directive 2 (PSD2) became effective in the European Union as of January 13, 2018.  These revised rules replace the first Payment Services Directive, which was previously in place from December 25, 2007.

The purpose of PSD2 is to provide stronger consumer protections when making electronic payments, especially in online purchases, promote fintech innovations in online and mobile payments as well as open banking applications, and improve the efficacy and safety of cross-border payments within the EU.

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Round-up on compliance issues with GDPR implementation

GDPR – the General Data Protection Regulation – is intended to establish a stronger, unified system of protection of personal data for individuals and businesses within the European Union. GDPR was adopted directly by the European Parliament, the Council of the European Union, and the European Commission on April 27, 2016. Following a two-year transition period, GDPR will become directly binding and enforceable as of May 25, 2018.

GDPR is an improvement upon the 1995 Data Protection Directive, intended to enhance control by individuals over their own personal data and accountability for organizations in how they collect, handle, and maintain it. The Data Protection Directive was implemented by individual law in each of the EU nations and therefore created a patchwork of standards and practices varying between the member states.   GDPR therefore is intended to simplify and integrate requirements in a more cohesive and competent supervisory model.

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MiFID II conduct principles and markets integrity

MiFID II – the second Markets in Financial Instruments Directive – became law across the European Union on January 3, 2018.  It’s intended to overhaul the entire supervisory framework for financial sector organizations who are in the EU, have clients in the EU, or wish to have access to or establish equivalency for the markets there.  Its predecessor law, MiFID I, became law in 2004 and was judged to have not stood the test of time in the aftermath of the global financial crisis.  Therefore the seven year drafting process – from 2010 to 2007 – that culminates in MiFID II implementation this year is aimed to set a higher regulatory standard for investment banks, broker-dealers, and other institutional market participants and their employees.

Much of the attention about MiFID II implementation has focused on the burden to organizations from financial costs, human capital and efforts, and changes in commercial strategy that will be required for firms to work toward compliance with the new laws.  The laws are thousands of pages long and touch nearly every area of the financial services markets.  Some of the major areas of focus in MiFID II are investment research, transaction reporting, and brokerage compensation arrangements.  However, the far reach of banking and securities markets activities into the economy means that laws intended to govern this sector have a broad and dramatic scope as well.

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