New regulatory considerations for outsourcing in financial sector

There are 2 important additional regulatory regimes that must now be considered when advising on outsourcings in the financial sector; not only on new outsourcings, but for existing outsourced arrangements.  

The Markets in Financial Instruments Directive (“MIFID”) must be implemented by all applicable companies with effect from 1st November 2007. It imposes detailed obligations on “common platform firms” (as defined in accordace with FSA rules) as to the measures that the organisations must take to manage the risks of outsourcing “critical or important functions” and investment services and activities.

While the regulatory requirements previously imposed by the FSA regime relating to outsourcing are not significantly different from the new requirements under the Directive – e.g. MIFID in many ways is a codification of, and simply evolves, the current FSA rules – there are some new considerations.

The Capital Requirements Directive is a further consideration. Don’t forget also that overseas regulatory requirements, such as SarbOx, may also have an impact on an outsourcing deal.

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