The European Securities and Markets Authority (ESMA) has published a consultation paper containing draft guidelines on certain aspects of the suitability requirements under MiFID II.
The purpose of the draft guidelines is to enhance clarity and foster convergence in the implementation of certain aspects of the MiFID II suitability requirements, replacing the existing ESMA guidelines on the same topic, issued in 2012.
While the objectives of the suitability assessment under MiFID I remain unchanged under MiFID II, the obligations have been strengthened and specified further under the new legislative framework by including the following requirements:
- 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; and
- the requirement for firms to provide clients with a suitability report prior to the conclusion of the recommended transaction.
When producing the draft guidelines ESMA has sought to:
- consider recent technological developments of the advisory market, i.e. the increasing use of automated or semi-automated systems for the provision of investment advice or portfolio management (so called ‘robo-advice’);
- take into account the results of supervisory activities conducted by national competent authorities on the implementation of the suitability requirements;
- incorporate the outcome of studies in the area of behavioural finance; and
- provide additional detail on some aspects that were already covered in the 2012 guidelines.
ESMA has also sought to avoid any unnecessary repetitions when drafting the draft guidelines. For instance it has deleted the 2012 guidelines that have been incorporated directly in the MiFID II Delegated Regulation (for example, the general guidelines 1, 4, 5, 6 and 7 are now incorporated within Article 54 of the MiFID II Delegated Regulation).
The deadline for comments on the consultation paper is 13 October 2017. ESMA will consider the responses it receives to the consultation paper in Q4 2017/Q1 2018 and expects to publish a final report, and final guidelines, in Q1 / Q2 2018.
View ESMA consults on certain aspects of the MiFID II suitability requirements, 13 July 2017