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Financial services have a significant impact on investors. It is important that investors make informed decisions and feel confident they are adequately protected if something goes wrong.

MiFID and Investor Protection MiFID and Investor Protection

ESMA is committed to a harmonised and high degree of protection for investors by ensuring good conduct from firms which sell or advise consumers to buy financial instruments. ESMA is committed therefore to ensuring:

  • Firms treat their customers in a fair and transparent way and put customers interests at the centre of their business models and corporate culture;
  • Investors are provided with clear and relevant information; and
  • Investors are provided with products that match their needs and investment objectives.

ESMA plays an important role in developing rules and guidance in the area of investor protection. A significant part of ESMA’s work in this area is in enhancing the implementation and supervision of the Markets in Financial Instruments Directive (MiFID). This is an important piece of European legislation which regulates all aspects of firm conduct with investors. It was recently updated in key areas to strengthen protections for retail investors across the European Union.

The Markets in Financial Instruments Directive: why and what has recently changed ?

This key piece of European legislation was recently revised in order to improve the functioning of financial markets after the financial crisis and to strengthen investor protection. These changes were scheduled to take effect from 3 January 2017. However, in February 2016, the European Commission announced a new application date of 3 January 2018.

The investor protection elements of MiFID II amend existing provisions on authorisation, conduct of business, and organisational requirements for providers of investment services. These rules aim at strengthening the protection of investors through the introduction of new requirements on product governance and independent investment advice, the extension of existing rules to structured deposits, and the improvement of requirements in several areas, including on the responsibility of management bodies, inducements, information and reporting to clients, cross-selling, remuneration of staff, and best execution.


The Regulation : what has been introduced?

The investor protection elements of MiFIR introduce under Article 40 specific product intervention powers where ESMA and national supervisors are able to temporarily prohibit or restrict the marketing, distribution or sale of a financial instrument or a type of financial activity or practice where certain conditions are met.


Latest on ESMA’s MiFID II work

Since MiFID II (Level 1- framework legislation) was adopted into European law on 5 April 2014, ESMA has been working to provide detailed implementing measures, so-called ‘Level 2 legislation’, across key aspects of the MiFID investor protection provisions.

This Level 2 work takes two forms:

•‘delegated acts’ which are drafted by the European Commission (EC) on the basis of advice given by ESMA; and

•‘technical standards’ which are drafted by ESMA and approved by the EC.