UK local government pension schemes (LGPS) have been urged to complete their “opt up” processes well in advance of the introduction of MiFID II on 3 January.

The funds must apply to managers and providers to obtain permission to access some asset classes. The LGPS’ Scheme Advisory Board (SAB) has worked with the Investment Association (IA) and the Financial Conduct Authority (FCA) to streamline this process for the 89 LGPS funds in England and Wales.

Andrien Meyers, a senior policy adviser to the SAB, said: “We would like all funds to opt up as soon as possible – the 3 January deadline is critical.”

Most funded UK public sector schemes are operated by local authorities, which under MiFID II definitions will be designated as retail investors from 3 January.

It was initially feared that this would lead to many funds being denied access to more sophisticated investment strategies and asset classes, resulting in a fire sale of assets.

However, the FCA has softened its interpretation of the directive to allow LGPS funds to more easily opt up to become sophisticated investors.

As of today, all but three LGPS funds have applied to their providers to opt up, according to the SAB’s website. Speaking at an LGPS event in London this week, Meyers said the board would continue to track the opt-up process for each fund and publish the data online.

“The work seems to be very positive and everyone in the industry is very Co-operative. 3 January should not be an issue,” he added.

Meyers said the SAB was working on guidance notes in conjunction with the IA to help explain processes applicable after 3 January. Opt-up forms and templates are freely available online on the board’s website.

Daniel Measor, a senior associate within the FCA’s wholesale conduct policy team, said after the rules were introduced providers would be required to regularly review the status of their clients.

“The client is under an obligation to inform of changes of circumstances, and firms are required to take appropriate action if this happens,” Measor added.

“It doesn’t mean the provider needs to stop providing services or the investor needs to sell assets, but it does mean you need to consider what to do under those circumstances. We stress the need for a firm to consider what is in the best interests of the client.”

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