Policymakers in Brussels are weighing up development of an 'Omnibus' technical directive that would tie together related parts of the Markets in Financial Instruments Directive (MiFID) II, European Market Infrastructure Regulation (EMIR) and Alternative Investment Fund Managers Directive (AIFMD).
As the directives stand, there are areas in which their rules overlap, and in some cases conflict. Of particular importance are the different regulations' approaches to third country rules, which govern the treatment of non-EU firms when operating within the bloc. An Omnibus directive would be tasked with instituting a harmonised framework, using standard legal definitions, that is applicable in the same way across the relevant regulations.
The intention would be to eliminate conflicting requirements of the different directives and thus ensure consistency of approach. In addition, by tackling areas of overlap the Omnibus directive could minimise legislative replication.
In theory this would:
- Lighten the rulemaking workload weighing on European supervisory bodies – an important consideration given their lack of resources
- Create a more harmonised and consistent set of rules for industry participants to follow, alleviating some of their implementation and compliance burden.
Third country rules have been a particular bone of contention throughout the framing of the AIFMD, and it is a problem that has yet to be solved. Combining the third country issues for AIFMD, EMIR and MiFID will only increase the scale and complexity of that problem. Handing off the issue to an Omnibus directive merely postpones its resolution to another day. And since the third country rules are a central feature of each of the regulations, the respective directives cannot be finalised until there is a satisfactory conclusion to the issue.
The risk then is that this Omnibus proposal will result in the same problems seen with Solvency II, which has been delayed by a year as legislators wrestle with its accompanying Omnibus directive.
Linking AIFMD, EMIR and MiFID, which are at different stages of the legislative process, risks causing extensive delays in the passage of them all. And any delay or break in the legislative process will create huge uncertainty and risk for any non-EU institutions engaged in the fund management, investment banking and derivatives arenas in Europe.