ESMA highlights areas for improvement in firms’ disclosure of cost and charges under MIFID

Overall, firms comply with most of the elements of the ex-post cost and charges requirements under MiFID II. This level of compliance varies across Member States. The CSA exercise revealed certain shortcomings in information provided to retail clients and suggests areas for improvement regarding both disclosure format and content.

The identified shortcomings concern:

• significant differences across firms and Member States in the format and content of ex-post disclosures
• differing practices and sometimes no disclosure of information on inducements
• lack of disclosure of implicit costs to clients
• lack of consistency in the way firms illustrate the cumulative impact of the costs and charges on the return of the investment
• disclosing cost figures only in nominal amounts and not also the corresponding percentages

Concurrently with the CSA, ESMA coordinated and ran its first mystery shopping exercise on the ex-ante cost and charges information provided to retail clients. In most cases, mystery shoppers received information about costs and charges before the investment service was provided, however the quality and the timing of the information provided differed between firms.

Next steps

Based on the insights from the CSA and the mystery shopping exercise, ESMA will focus its convergence efforts on the review and development of new Q&As and work on a possible standardised EU format for the provision of information about costs and charges to clients. Where required, NCAs will undertake follow-up actions on individual cases that involve regulatory breaches as well as other shortcomings.

Further information:

Sarah Edwards 

Senior Communications Officer

@ press@esma.europa.eu