13 August 2007 | Antony Barton
Most financial services organisations' outsourcing agreements are in danger of breaking the law.
A survey by law firm Field Fisher Waterhouse (FFW) shows most organisations are unprepared for the Markets in Financial Instruments Directive (MiFID), which has a 1 November compliance deadline.
MiFID means a range of institutions will be regulated for the first time in relation to their outsourcing arrangements. The rules for outsourcing have also changed dramatically for those already regulated. For example, firms will be required to publish the price, volume and time of all trades in listed shares, even if executed outside of a regulated market.
The FFW survey shows:
• 40 per cent do not have an up-to-date exit management plan in place with their service provider.
• 36 per cent do not have their regulatory team review its contracts.
• A third do not have a service level agreement in place with every service provider.
• Where a service provider fails to meet regulatory standards, 31 per cent do not have step-in rights or the right to terminate the agreement.
Other findings raise concerns about accessibility to information and co-operation with the Financial Services Authority.
Simon Briskman, FFW technology partner, said: "Many companies have a long way to go between now and 1 November. In order to achieve the deadline, firms need to engage their suppliers in negotiations now."