Financial Conduct Authority (FCA) UK Regulation Sample Exam

Which of the following UK firms are directly subject to the requirements of MiFID when undertaking designated investment business?

1. Insurance providers

2. Stockbrokers

3. Real estate agencies

4. Tax advisors

The correct answer is: Stockbrokers

The selected answer identifies stockbrokers as firms directly subject to the requirements of the Markets in Financial Instruments Directive (MiFID) when engaging in designated investment business. MiFID, which aims to enhance transparency, improve investor protection, and promote competition in financial services within the EU, imposes regulatory obligations primarily on investment firms that provide services related to financial instruments. Stockbrokers fall under this category as they are involved in executing trades on behalf of clients and offering investment advice, which aligns with the types of services that MiFID regulates. These services include dealing in financial instruments, managing portfolios, and providing investment advice, which are all crucial aspects of stockbroking activity. In contrast, insurance providers are primarily regulated under separate insurance legislation and may not conduct the same type of designated investment business as stockbrokers. Real estate agencies focus on property transactions rather than financial instruments, falling outside the scope of MiFID. Likewise, tax advisors provide services related to taxation and financial planning rather than investment services directly covered by MiFID. The clear distinction lies in the nature of services each type of firm provides. Stockbrokers are directly engaged in activities that involve trading and advising on financial instruments, firmly placing them within the MiFID regulatory framework.