SECTION 1: Market outlook
1.1 Please clarify which products or markets your
jurisdiction hosts that are affected by Mifid II.
Mifid II implementation in Portugal will apply generally to
the provision of investment services to retail and professional
clients. With Mifid II, the concept of a financial instrument
is broadened to expressly include emission allowances. In turn,
certain exemptions and safe harbours – such as the one
relating to negotiation on own account – are narrowed.
Particular to the implementation in Portugal, in accordance
with the current draft of the bill implementing Mifid, is the
extension of certain Mifid II requirements to the marketing of
retail banking products, and specifically of structured
deposits, which are therefore subject to enhanced rules of
conduct and procedural requirements.
SECTION 2 (a) – EU Member States:
2.1 Outline the possible key differences in (a)
gold-plating; and (b) exercise of national discretion, where
provided for in Mifid II in your jurisdiction.
The current draft of the bill implementing Mifid II in
Portugal does not generally contain gold-plating. However, as a
result of the bank resolutions that have taken place in
Portugal, and the political focus and media impact that they
have had, there are currently discussions in Parliament that
might result in amendments to the bill that include
gold-plating. These are expected to impose additional
constraints in relation to self-placement of financial
instruments and additional transparency requirements.
2.2 What is the biggest concern in respect of these
variations and possible types of divergences?
At the moment, the extent of the gold-plating is not
evident. These additional requirements might, in the abstract,
place additional constraints on Portuguese entities. However,
these might not be very detrimental in comparison, considering
that other jurisdictions are also imposing additional
2.3 What are the most important extraterritorial issues
regarding Mifid II in your jurisdiction?
The new requirements in respect of research are expected to
have a significant impact in terms of cross-border
SECTION 3: Research
3.1 Please summarise the challenges Mifid II will pose in
your jurisdiction with regards to research.
Local players that have research activities have been
preparing for the Mifid II challenges. However, other financial
intermediaries that do not produce research but are recipients
of research are probably not aware of the new requirements. The
firms will have to set up strict internal procedures to ensure
that their employees return or destroy research that has not
been paid for.
3.2 Is pricing research compatible with market practices
and existing legal frameworks?
The market is not completely ready for these requirements.
Firms will have to consider whether it makes sense to continue
producing research which will entail putting into place client
facing operations for research activities.
3.3 Is there clarity on how to resolve challenges in
unbundling research and complying with Mifid II in this
The biggest challenge in unbundling research is actually
identifying research and making a clear distinction from
marketing communications and other types of communications. We
feel that it will take a significant amount of time until there
is clarity on this front.
SECTION 4: Trading/market structure
4.1 Which areas of trading / type of instruments will be
most impacted by Mifid II in your jurisdiction and how might
they be impacted?
The application of trade transparency rules to non-equity
instruments (notably bonds) will have a significant impact
across European markets in general and on the Portuguese market
in particular. Although trade transparency rules for bonds have
been diluted in the final versions of the European Commission's
delegated regulations. This will be particularly welcomed by
the financial intermediaries most involved in bond trading and
some buy-side firms. Nevertheless, Mifid II and Mifir have
underlined the importance of (and demand for) greater trade
transparency in a trade environment that is increasingly based
on electronic trading platforms. Market participants will have
to adapt to a new trading environment, as was the case with the
US when bond trade transparency was introduced with the Trade
Reporting and Compliance Engine (TRACE).
4.2 What will be the key challenges with regards to
transaction reporting and pre-trade transparency?
The harmonisation of transaction reporting and to a certain
extent of pre-trade transparency requirements, is crucial to
ensure efficient supervision and better market data, which will
eventually lead to more efficient securities markets in Europe.
However, the reporting and pre-trade transparency requirements
are greatly expanded under Mifid II/Mifir and this will require
significant adjustments and investments by market participants,
as especially at this initial stage. The content of transaction
reporting, in particular, will require a vast amount of new
information and it will be a challenge not only for market
participants to implement procedures and systems to comply with
those enhanced requirements, but also for supervisors to ensure
high-quality market data consolidation at a European level.
4.3 What are the main considerations that trading venues
and exchanges will have to make?
Trading venues and exchanges are particularly well-placed to
take advantage of the new Mifid II/Mifir requirements, as they
can harness infrastructure and market data to provide new
services to market participants at lower costs due to economies
of scale. At the same time, Mifid II will bring (even) greater
competition to the organised trading environment, with new
alternative trading structures (particularly systematic
internalisers) for equity and non-equity instruments that could
put pressure on established players.
SECTION 5: Investor protection
5.1 Explain the impact of heightened investor protection
obligations in your jurisdiction.
Investor protection is one of the main drivers and
objectives of Mifid II and it will introduce important changes
that can increase the protection of investors in securities
markets. This will be of particular importance in the case of
Portugal in light of the aftershocks of the financial and
economic crisis for the Portuguese financial market and
investors. In particular, product governance and inducement
requirements will require an effort to that by banks and
investment firms. This will have potential impact on commercial
strategy. In addition, the new information requirements under
the Packaged Retail and Insurance-based Investment Products
(PRIIPs) Regulation will also be a challenge for firms to
comply with. Although the Portuguese market is already familiar
with a Key Information Document (KID) for complex financial
products (which has been required in Portugal since 2008), the
PRIIPs KID will have a different structure and content that
will require internal organisational efforts to ensure timely
5.2 Which area of focus within investor protection is of
most concern/importance to your jurisdiction?
Product governance requirements, along with new product
intervention powers of supervisors, will be a crucial step to
reduce mis-selling of financial products to retail investors,
as well as a more stringent approach to execution-only. The new
rules on inducements can also contribute to new
quality-enhancing services which can benefit investors.
Furthermore, new information requirements when firms provide
investment advice to clients, including providing a written
suitability report, will bring greater protection in advisory
services. However, supervision will be crucial so that these
changes and heightened standards are efficiently adopted and
complied with by financial institutions.
SECTION 6: Outlook 2017
6.1 What are the overall risks or opportunities that Mifid
II might bring to your market? Will Mifid II impact the
competitiveness of your market?
Adapting to the new regulatory framework will require a
significant effort on the part of Portuguese investment firms,
which are fewer in number and smaller than in other European
jurisdictions. This will require a cost-effective approach to
the implementation process, so as to ensure that investment
activities remain profitable. In any case, after a flood of
scandals involving large and small banks and investment firms,
Mifid II should be seen as yet another opportunity to reinforce
trust in the market and financial institutions.
6.2 What are the next steps – what should market
participants be doing now to best prepare themselves?
While the implementing law is still in draft form, and
expected to be released only late in the year, a substantial
part of the framework that will apply in Portugal from January
2018 onwards is already known and stabilised. Therefore, market
participants are already in a position to conduct the necessary
impact assessments, decide on the changes required to
commercial strategies, and set-up and amend internal policies
and contractual and information documentation so as to reflect
Mifid II's brave new world.
T: +(351) 21 319 73 00
André Figueiredo is a partner and head of the
capital markets team. He has over 12 years' experience
and a significant and diverse track record advising on
large-scale, complex capital markets and corporate
finance transactions, both in the equity segment (IPOs,
rights issues, block sales) and in the debt segment
(including sovereign debt, structured debt and
securitisation). Figueiredo focuses extensively on
financial regulatory matters, assisting financial
institutions, asset managers and listed companies on a
wide range of matters such as Mifid II, Emir and MAR.
Figueiredo teaches securities and financial law and is
a regular speaker at industry and academic conferences.
He was awarded the prestigious Iberian Lawyer "40 under
40 Award" in 2015.
T: +(351) 21 319 73 00
Bruno Ferreira is a partner in PLMJ's banking and
finance practice. He has over 14 years' experience in
advising clients from the finance, banking and capital
market sectors. He has worked on large and complex
deals assisting companies and credit institutions, in
finance transactions, capital markets transactions and
in providing assistance on financial regulatory
matters. He also has extensive experience in working on
distressed assets transactions. Before joining PLMJ, he
spent 14 years at Garrigues Portugal. In addition to
his work as a lawyer, Ferreira is the author of several
articles and has published and contributed to several
books on banking, corporate and securities law.
Ferreira also has an LLM in banking law from the
Faculty of Law of the University of Lisbon.