What Is MiFID II? Trying to Understand How It Actually Affects Startups

I keep coming across the term MiFID II while researching financial regulation and wanted to actually understand what is MiFID II before assuming it only applies to large banks and asset managers. Here is what I have pieced together so far, would appreciate anyone correcting me or adding context.

From what I understand, MiFID II is a European regulatory framework originally introduced to increase transparency and investor protection across financial markets, covering things like how investment firms report transactions, how they charge for research and execution separately, and what disclosures they need to give clients about costs and risks. Even though it originated as EU regulation, it still affects UK firms operating in financial markets, since the UK largely retained equivalent rules after leaving the EU, sometimes referred to separately as onshored MiFID II or UK MiFID.

A few areas seem particularly relevant for fintech startups specifically. Firms providing investment advice, portfolio management, or operating any kind of trading platform generally fall within scope and need to meet requirements around client categorisation, suitability assessments, and transaction reporting. There are also detailed rules around best execution, meaning firms need to demonstrate they are getting the best possible outcome for client orders, and strict record keeping requirements, including recording communications related to transactions in many cases.

What I am still trying to understand is how much of this genuinely applies to smaller fintech startups at an early stage versus only becoming relevant once a company scales significantly or starts handling larger volumes of client money, and whether there are simplified compliance routes for smaller regulated firms compared to what large institutions have to follow.

Has anyone here actually had to navigate MiFID II compliance as a founder or working at an early stage fintech? Curious what actually required real effort, what turned out to be overblown, and anything you wish you had understood earlier.

 

I ended up reading a related piece on Entrepreneur Plus UK when I was trying to make sense of this, it framed things from a founder angle which helped.