MiFID - Investor Protection

The European Securities and Markets Authority (ESMA) has added 10 new Q&As to 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 MiFID II Q&A provide clarifications on the following topics:

  • Best execution;
  • Suitability;
  • Post sale reporting;
  • Inducements (research);
  • Information on charges and costs; and
  • Underwriting and placement of a financial instrument.

MiFID II applies from 3 January 2018 and will strengthen the protection of investors by both introducing new requirements and reinforcing existing 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.

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 published today an updated version of its question and answer document (Q&A) on the application of the Markets in Financial Instruments Directive (MiFID) to the marketing and sale of financial contracts for difference (CFDs) and other speculative products to retail clients, such as binary options and rolling spot forex.

This Q&A includes a new section 10 – pages 84-96 – and provides clarifications on:

• Passporting and the cross-border provision of services by investment firms offering CFDs and other speculative products to retail clients;

• Assessment of the use of third parties by investment firms; and

• Examples of poor practice observed by NCAs in respect of the use of third parties by investment firms.

Many competent authorities have concerns about the protection of investors in this area and the purpose of the Q&A is to promote common supervisory approaches and practices in the application of MiFID and its implementing measures to key aspects that are relevant when CFDs and other speculative products are sold to retail clients.

The complexity of CFDs and other speculative products means it may be difficult for the majority of retail investors to understand the risks involved although they are widely advertised to the retail mass market by a number of firms, often via online platforms. There is also a considerable degree of cross-border activity across Europe in these products.

Next steps

In addition to these Q&As, ESMA will also consider the need for any further work in light of MiFID II requirements that will enter into application in 2018.

The European Securities and Markets Authority (ESMA) has issued today a call for candidates in order to renew the composition of its Consultative Working Group (CWG) which advises ESMA’s Investor Protection and Intermediaries Standing Committee (IPISC).

IPISC undertakes ESMA’s work relating to the provision of investment services and activities to different categories of clients by investment firms and credit institutions. Particular regard is made to investor protection, including the distribution of investment products and, more in general, authorisation of investment firms, conduct of business and organisational requirements regulated by the Markets in Financial Instruments Directive framework.

ESMA has established the CWG to benefit from the expertise of stakeholders who are involved in these topics. The purpose of the CWG is to provide technical assistance to ESMA in relation to the IPISC’s work, and CWG members are selected for a renewable term of two years.

Interested experts are asked to send their application to ESMA, using this form , along with their CV and letter of motivation, by 28 April 2017 COB.

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