LGPS Administrators under MiFID II

MiFID II comes into force in the UK on 3 January 2018. From that date, new rules will apply to UK FCA regulated firms looking to treat Local Government Pension Scheme Administrators as professional clients. The FCA has developed a new process for firms to ‘opt-up’ LGPS Administrators to ‘professional’ status.
The new rules are relevant to the classification of LGPS Administrators who are treated as a firm's regulatory client and where they invest in a fund managed by a UK FCA regulated entity. Under the new rules, local authorities (which include LGPS administrators) must by default be classified as ‘retail clients’. The only way to treat them as ‘professional clients’ is to complete the opt-up process.
The opt-up process requires a ‘quantitative’ and a ‘qualitative’ assessment. The Local Government Association has worked with asset management industry bodies, including the BVCA, to develop a template set of opt-up documentation which deals with the ‘qualitative test’ side of this process. Copies of the template documentation are available from the LGA website at: http://www.lgpsboard.org/index.php/schemedata/mifidii. The LGA website also sets out a process flow and timetable.
We expect that each LGPS Administrator who wishes to be opted up will complete a copy of the template documentation and send this out to their managers. Managers will then need to determine whether they wish to opt-up their clients and, if so, assess LGPS Administrators and carry out the opt-up process in accordance with the rules. Whilst MiFID II does not come into force until January 2018, the FCA allows firms to carry out the opt-up process under the new rules now.
More detail on this issue will be included in a forthcoming BVCA Technical Bulletin. If you require more information in the meantime, please contact the BVCA Policy Team.
Notes to editor
- The British Private Equity & Venture Capital Association (BVCA) is the industry body for the UK private equity and venture capital industry. The BVCA has over 650 member firms, representing the vast majority of UK-based private equity and venture capital firms and their advisers.