MiFID II

The Markets in Financial Instruments Directive (MiFID) first came into effect in November 2007 and was the foundation of the Financial Conduct Authority's (FCA) Conduct of Business (COBS) rules. MiFID consists of the Markets in Financial Instruments Directive and the Markets in Financial Instruments Regulation (MiFIR).

MiFID II is the cornerstone of European Capital Markets regulation and considers developments in the trading environment, advances in technology and the need for greater transparency for investors and regulators. The regulations were officially adopted in June 2014 but did not come into effect until January 2018.

MiFID II is one of the most significant pieces of legislation in recent years. The regulation touches all areas of the business for asset managers, investment banks, and trading venues and is considered to be one of the most challenging and costly regulatory initiatives to date.

As a regulation, MiFIR is directly applicable to firms and will effectively sit alongside FCA rules as its own mini rulebook - the FCA has no power to transpose the regulation’s requirements.

The European Fund and Asset Management Association (EFAMA) has endorsed and published the European MiFID Template (EMT), a MiFID information exchange template jointly designed by product manufacturers, such as asset managers, and distributors.

The template provides a functional description of the minimum set of data (defining a product’s target market, distribution strategy and disclosing its costs and charges) from product manufacturers, such as asset managers, to distributors to help them fulfil the new regulatory requirements. These new requirements came into effect when financial products were distributed after 3 January 2018.

EFAMA have also endorsed the use of the European PRIIPS (Packaged Retail and Insurance-based Investment Products) Template (EPT) as a standardised methodology for distributing PRIIPS information between investment firms and insurance entities.

The template provides a functional description of the minimum set of data (e.g. risk and performance calculations, cost and charges information etc.).

Both the EMT and EPT are in a pipe delimited .csv format since they need to be machine readable.

The file format is in accordance with FinDatEx guidelines, as a CSV file is required. The XLS format also published on the website is for your convenience. Since the implementation of MiFID II / PRIIPs we have issued an EMT and an EPT file from which you can identify those ISINs of particular interest.

Please do not hesitate to contact CostsandChargesReporting@aberdeenplc.com should you have any questions or have comments regarding these EMT/EPT files.

endorsed and published the European ESG Template (EET). The EET is an industry form that provides fund distributors and insurers with information on the sustainability characteristics of funds, including information required under EU regulation. The EET enables distributors to provide advice in line with their clients’ sustainability preferences, for the purpose of fulfilling ESG-related regulatory requirements contained in the SFDR, relevant provisions of the Taxonomy Regulation, and the relevant delegated acts complementing MiFID II and IDD.

With effect from 3 January 2018, in response to a request from the governance body of a relevant pension scheme, firms must provide:

• information about transaction costs calculated according to the ‘slippage cost’ methodology
• information about administration charges
• appropriate contextual information

Where firms do not have the relevant information, they must seek it from other firms, and those other firms, where they are Financial Conduct Authority (FCA) authorised, must provide the information.

DCPT & FVPT

A joint ABI/IA working group has developed the DC Workplace Pensions Template (DCPT) and the Fair Value mid-Price Template (FVPT) for the purpose of providing insurers with transaction costs data in accordance with COBS 19.8.4R. DCPT V1.0 was issued in December 2017 and FVPT V1.0 was issued in May 2018.

Beginning with the January 2021 data, we are sending a single combined Aberdeen file with the DCPT for the AAM and SLI fund ranges. This streamline follows the merger between AAM and SLI in August 2017.

No change is required on your part, you will be able to continue to filter for your required data as you do now, simply from a larger file. We reassure you that this combined DCPT will process as our previous DCPT files have; however, should you have any issues do not hesitate to contact us.

Negative transactions costs have been overwritten to zero in DCPT field 02010 to ensure compliance with FCA rules around treatment of anti-dilution mechanisms (COBS 19.8). The actual calculated transaction cost can be seen in DCPT field 02020. Guidance relating to this approach was released in the UK DC Workplace Pensions Template V1.1, issued in April 2020.

Best execution means achieving the best possible result for customers when executing their orders.

MiFID II aims at achieving extensive transparency over investment firms' order execution methods. Moreover, investment firms like Aberdeen are required to install thorough reporting and monitoring mechanisms in order to evaluate whether the execution quality achieved corresponds to the quality promised in the Order Execution Policy (OEP).

At Aberdeen we have worked to produce a single OEP that applies to Aberdeen and the two heritage entities of Aberdeen Asset Management and Standard Life Investments.

The product approval process is integrated into Aberdeen’s Product Life Cycle which governs all new fund launches and their on-going review and monitoring.

Aberdeen’s Product Life Cycle is centred around client needs and requirements. At the product concept and feasibility stage client analysis, in particular target market identification, forms a key part of instigating the product design and overall launch proposal to be approved by the relevant internal and external Boards/committees prior to launch.

On-going product monitoring and reviews are conducted by Aberdeen’s Product team.

Product Manufacturers must oversee the activity of their appointed Distributors to ensure that financial instruments are reaching the clients for whose needs, characteristics and objectives they are considered compatible (i.e. the target market). In turn Distributors are required to provide due diligence information and data to assist in this.

Aberdeen has designed the below “Categories Table” confirming which counterparty types we view as distributing our funds, and the level of oversight and data exchange we require under our Product Governance Process:

*only where there is a direct distribution agreement in place with Aberdeen

What does this mean for you as our distributor?

We ask our distributors to:

• Complete an annual distributor due diligence questionnaire via the ume platform & answer any follow up queries
• Provide regular Distributor KPIs (see “Aberdeen FAQ: Distributor KPIs”)
• Take part in a Site Visit / Knowledge Share meeting if deemed necessary (e.g. for key strategic relationships or where a knowledge share is required in line with regulatory themes)

Distributor KPIs

Until a standard industry approach to Distributor KPIs is agreed, the Aberdeen Investments Vector firms will request 5 KPIs from counterparties we deem to be “Distributors” under our Product Governance Process as follows:

Whilst our strong preference is to encourage Distributors to engage with us via our chosen distributor due diligence partner ume, creating efficiencies and consistency of approach for all parties, we can accept KPIs via email where required in line with the Distributor’s process. It is expected that a standard industry template will be agreed during 2023/2024. Until such time, Aberdeen has created a simple excel template (5 data points only, approx. 10 minutes to complete if the data is available to you). The template is available from the Distributor Governance & Oversight Team (details below). Alternatively, we can accept the Distributor’s preferred format. Once completed please send to distributorkpis@aberdeenplc.com

Please see a PDF copy of our Distributor Categories and KPI information.

Share Class Registration

Please note Aberdeen funds and their respective sub-Funds and share classes must be made available to clients of our Distributors in accordance with the applicable regulations permitting non-public offers (for example private placements or reverse solicitation).  

The authorisation status of each sub-Fund and share class of Aberdeen’s Luxembourg SICAV fund range is available at:

http://www.abrdn.com/en/luxembourg/distributors/fund-centre/lux-fund-authorisations.

Also, the distribution restrictions list for Aberdeen’s Luxembourg SICAV fund range is available at Distribution restrictions (aberdeenplc.com).

For Aberdeen’s UK domiciled Fund ranges, these are generally only available for sale in the UK. The Distributor should always check with the relevant management company if there are any queries of the permitted jurisdictions for distribution.

Contact us

The Aberdeen Distributor Governance & Oversight Team is ready to assist you with any queries. You can also reach out to your dedicated Aberdeen Client Relationship Manager.