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Background

Article 7d EMIR (as amended by Regulation (EU) 2024/2987) creates an annual reporting obligation on EU clearing members and on clients that clear through a third country CCP recognised under Article 25 EMIR. Where the reporting entity is established in the Union and not part of a group under consolidated supervision in the Union, it reports to its NCA; where it belongs to a Union consolidated group, the Union parent undertaking reports on a consolidated basis to its NCA, including the information related to entities of the same group which are not established in the EU.

This requirement has given rise to questions regarding the interpretation and practical application of the reporting obligation, in particular in relation to the scope of contracts and of entities covered.

1. Scope of contracts covered by Article 7d(1) EMIR
While recital 17 of EMIR 3 specifically states that the information to be reported (under Article 7d of EMIR) should distinguish between securities transactions, derivative transactions on regulated markets and OTC derivative transactions, Article 7d(1) refers generally to “contracts” cleared at third country CCPs and to “type of financial instruments or non-financial instruments”, without further qualification or cross reference to existing EMIR or MiFID II definitions. Therefore, the provision does not specify whether the reporting obligation should cover:
• OTC derivative contracts within the meaning of Article 2(7) EMIR;
• all derivative contracts, including both OTC derivatives and exchange traded derivatives;
• specific asset classes or all financial instruments as listed in Annex I, Section C of MiFID II;
• commodities and other non-financial instruments cleared in third-country CCPs.

1. Which contracts are referred to in Article 7d(1) EMIR?

Can a second-party opinion provider producing and using an ESG rating for its second-party opinion, without publishing or distributing it on a standalone basis, benefit from the exemption set out in Article 2(2)(i) of Regulation (EU) 2024/3005?  

What types of activities are considered “internal purposes” or “in-house” or “intragroup financial services or products” for the purposes of Article 2(2)(b)?

Under MiFID II, investment advice is defined as a personal recommendation to a client in relation to transactions in financial instruments. In practice, the personal recommendation, the suitability assessment, the documentation and the technical generation/transmission of the suitability statement may be performed by different persons and/or partly automated systems.

Could ESMA clarify the following points:

1. For determining whether and by whom investment advice was provided, is it primarily relevant who gave/communicated the personal recommendation to the client, rather than who merely prepared/generated/transmitted the suitability statement through IT systems?

2. Should the suitability statement under MiFID II / Delegated Regulation (EU) 2017/565 be understood as documentation and rationale of a recommendation that has already been made, rather than as a constitutive element of “investment advice”?

3. Is it necessary, for the attribution of investment advice to a specific staff member, that the same staff member is technically able to create/approve/transmit the suitability statement, or can these steps be separated without changing the attribution of who “advised”?

In practice, investment firms may apply “tandem” or split workflows where one staff member conducts the client meeting, gathers the client’s circumstances and communicates/explains a concrete course of action to the client, while another staff member and/or a partly automated system performs the suitability assessment, approval and/or generates/transmits the suitability statement.

Against this background, could ESMA clarify, under MiFID II and relevant Level-2 measures, the EU-law criteria for determining whether the staff member who leads the client interaction and explains the recommendation is already providing investment advice, or whether that activity can be regarded as acting under supervision?

In particular:

1. For the attribution of investment advice, is the decisive element who communicates the personal recommendation to the client, rather than who technically generates/approves/transmits the suitability statement?

2. In split workflows, what organisational minimum features are expected to evidence “under supervision” (e.g. explicit assignment of the supervisory role, timely intervention capability, documented review/approval/sign-off), where the supervised staff member communicates the personal recommendation?