MiFID - Investor Protection

The European Securities and Markets Authority (ESMA) has today updated its Questions and Answers on ESMA’s temporary product intervention measures on the marketing, distribution or sale of CFDs and binary options to retail clients based on Article 40 of Regulation (EU) No 600/2014 (the Markets in Financial Instruments Regulation, MiFIR).

The Q&A provides clarification on the scope of the temporary product intervention measures in relation to turbo certificates and structured finance products.  The purpose of this Q&A is to promote common supervisory approaches and practices in the application of ESMA’s temporary product intervention measures in relation to the marketing, distribution or sale of CFDs and Binary options to retail clients. It aims at market participants. 

Next steps 

ESMA will continue to monitor this Q&A on ESMA’s temporary product intervention measures on the marketing, distribution or sale of CFDs and Binary options to retail clients in the coming months and will review and update them where required. 

 

The European Securities and Market Authority (ESMA) has issued today a follow-up report regarding oversight by national competent authorities (NCAs) of the Markets in Financial Instruments Directive (MiFID) suitability requirements. The Report assesses the actions ten NCAs have undertaken since the earlier peer review conducted in 2016.  The Report identifies enhancements in supervising the requirements and greater deployment of enforcement action by some NCAs. These improvements should lead to an increased level of EU-wide supervisory convergence of the suitability requirements.

Improvements since the 2016 Peer Review 

Specifically, the follow-up report identifies improvements in the supervision of the requirements by NCAs through thematic reviews and on-site inspections, improvements to IT systems to identify firms operating on a branch or freedom of service basis. The Report also highlights greater use by three NCAs of enforcement tools to address breaches of the requirements.  

Suitability follow up review image

Going forward 

MiFID II, which came into effect on 3 January 2018, expands the MiFID suitability provisions by adding additional requirements. ESMA stresses the importance of continued and meaningful supervisory and enforcement efforts by NCAs to ensure a high level of compliance with the suitability requirements, as only these actions can ensure the proper application of Union Law and high level of investor protection. 

Background

MiFID requires investment firms to assess the suitability of investment services and financial instruments, taking into account clients’ profiles, when providing investment advice or portfolio management. The requirements form a key element of the MiFID investor protection requirements and apply to both retail and professional clients. Investment firms’ compliance with the MiFID suitability requirements is paramount to the overall protection of investors. Therefore, it is important that NCAs are effectively overseeing and enforcing the conduct of firms.

 

 

The European Securities and Markets Authority (ESMA) has updated its Questions and Answers (Q&A) document on the implementation of investor protection topics under the Market in Financial Instruments Directive and Regulation (MiFID II/ MiFIR).

The new Q&As are on the topics of inducements (research) and provision of investment services by third country firms. The overall MiFID II Q&A provide clarifications on the following topics:

  • Best execution;
  • Suitability and appropriateness;
  • Recording of telephone conversations and electronic communications;
  • Post-sale reporting;
  • Record keeping;
  • Investment advice on an independent basis;
  • Inducements (research);
  • Information on charges and costs;
  • Underwriting and placement of a financial instrument;
  • Client categorisation;
  • Inducements;
  • Provision of investment services and activities by third country firms;
  • Application of MiFID II after 3 January 2018, including issues of late transposition; and
  • Other issues.

MiFID II came into force on 3 January 2018 and aims at strengthening the protection of investors by both introducing new requirements and reinforcing previous ones. The purpose of this Q&A is to promote common supervisory approaches and practices in the application of MiFID II/MiFIR for investor protection topics.

Next steps

ESMA will continue to develop this Q&A on investor protection topics under MiFID II in the coming months, both adding questions and answers to the topics already covered and introducing new sections for other MiFID II investor protection areas not yet addressed in this Q&A.

The European Securities and Markets Authority (ESMA) has today updated its Questions and Answers on ESMA’s temporary product intervention measures on the marketing, distribution or sale of CFDs and binary options to retail clients based on Article 40 of Regulation (EU) No 600/2014 (the Markets in Financial Instruments Regulation, MiFIR).

The Q&A provides clarification on the application of the temporary product intervention measures on clients established outside the Union and non-Union nationals.

The purpose of this Q&A is to promote common supervisory approaches and practices in the application of ESMA’s temporary product intervention measures in relation to the marketing, distribution or sale of CFDs and Binary options to retail clients. It aims at market participants.

Next steps

ESMA will continue to monitor this Q&A on ESMA’s temporary product intervention measures on the marketing, distribution or sale of CFDs and Binary options to retail clients in the coming months and will review and update them where required.

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