Requirement (MIFID)
Article 7 Risk management
Requirements MIFID - DIRECTIVE 2006/73/EC
Description
Description
1. Member States shall require investment firms to take the
following actions:
(a) to establish, implement and maintain adequate risk
management policies and procedures which identify the
risks relating to the firm's activities, processes and systems,
and where appropriate, set the level of risk tolerated by the
firm;
(b) to adopt effective arrangements, processes and mechanisms
to manage the risks relating to the firm's activities,
processes and systems, in light of that level of risk
tolerance;
(c) to monitor the following:
(i) the adequacy and effectiveness of the investment
firm's risk management policies and procedures;
(ii) the level of compliance by the investment firm and its
relevant persons with the arrangements, processes and
mechanisms adopted in accordance with point (b);
(iii) the adequacy and effectiveness of measures taken to
address any deficiencies in those policies, procedures,
arrangements, processes and mechanisms, including
failures by the relevant persons to comply with such
arrangements, processes and mechanisms or follow
such policies and procedures.
2. Member States shall require investment firms, where
appropriate and proportionate in view of the nature, scale and
complexity of their business and the nature and range of the
investment services and activities undertaken in the course of
that business, to establish and maintain a risk management
function that operates independently and carries out the
following tasks:
(a) implementation of the policy and procedures referred to in
paragraph 1;
(b) provision of reports and advice to senior management in
accordance with Article 9(2).
Where an investment firm is not required under the first subparagraph
to establish and maintain a risk management function
that functions independently, it must nevertheless be able to
demonstrate that the policies and procedures which it is has
adopted in accordance with paragraph 1 satisfy the requirements
of that paragraph and are consistently effective.
Comment
Applies to second subparagraph of Article 13(5) of Directive 2004/39/EC