MiFID II

I've heard a lot of discussion, and moaning, from my friends & contacts in the City over recent months, concerning the apparently onerous regulatory changes being introduced by the EU's MiFID II (Markets In Financial Instruments Directive). This is a European Directive, but before Brexiteers get over-excited, apparently UK regulators had major input into its drafting.

The intention behind Mifid II seems to have been to make investment markets more transparent, and for consumer protection. However, from what's happened so far, like a lot of regulations, the actual impact seems to be the opposite of what was intended.

Probably like most of you, I've recently had letters from my various brokers, asking me to sign bits of paper. I didn't really pay a great deal of attention, as admin bores me. However, my main broker just said that the new rules would restrict my access to research notes, so the easiest thing would be if I requested to be registered as a professional client. This means giving up some protections, but I went ahead with it anyway.

 

Segregation of Funds

My main broker (Spreadex) segregates all client funds already, whether they are retail or professional clients. Plus, my view is that if fraud were to occur with any broker, then the rules over segregation of funds would probably be flouted by determined fraudsters. So it's questionable whether this supposed protection for retail clients would actually be adhered to in a broker meltdown type scenario. I've always thought that the best way to protect against fraud or some unforeseen broker collapse, is to spread your money around several financially strong brokers.

 

Companies House

Plus, I always check the published accounts of brokers, which you can do free, for any UK company,  at companies house website here - well worth bookmarking that page - I use it a lot. Spreadex has a strong balance sheet relative to its size, so I'm happy to leave most of my family's money with them. Larger spread bet companies IG Group (LON:IGG) and CMC Markets (LON:CMCX) also have strong balance sheets.

Companies House website is also useful in everyday life, e.g. when paying deposits to builders or other contractors. It's worth checking Companies House website,…

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