The European Securities and Markets Authority (Esma) has issued a consultation document on its draft guidelines around aspects of the suitability requirement demands under Mifid II.
Originally brought in under Mifid, the regulations place requirements on financial intermediaries and product providers to ensure that they are acting in the best interests of end clients. Esma has proposed that the regime be strengthened with additional requirements, including:
- an explicit reference to the fact that the use of electronic systems shall not reduce the responsibility of firms
- further details on conduct rules for firms providing a periodic assessment of the suitability
- the requirement for firms performing a suitability assessment to assess, taking into account costs and complexity, whether equivalent products can meet client’s needs
- the requirement for firms to analyse the costs and benefits of switching from one investment to another one
- the extension of suitability requirements to structured deposits
- the requirement for firms to provide clients with a suitability report prior to the conclusion of the recommended transaction.
Esma references factors such as fintech developments and the rise of robo-advice and the need for further guidance for national competent authorities (NCAs), which are responsible at the individual member state level for implementing the Directive, for the updates contained in the draft now out on consultation.
The consultation closes on 13 October 2017, and full details are available at: https://www.esma.europa.eu/sites/default/files/library/2017-esma35-43-748_-_cp_on_draft_guidelines_on_suitability.pdf