Introduction

The European Securities and Markets Authority (ESMA) has added 14 new Q&As to its Questions and Answers document on the implementation of investor protection topics under MiFID II and MiFIR.

The new Q&As cover the following topics:

  • Post-sale reporting;
  • Information on costs and charges; and
  • Appropriateness / complex financial instruments.

Post sale reporting

In relation to post-sale reporting, answers to the following questions have now been given:

  • When fulfilling the obligation to report on a portfolio depreciating by the 10% threshold, how should the firm take account of a client marking additions to the portfolio after the reporting period has started?
  • When fulfilling the obligation to report on a portfolio depreciating by the 10% threshold, how should a firm value on a daily basis financial instruments within the portfolio for which there is no secondary market or daily price reference?
  • How should a firm fulfil the obligation under Article 62 if a firm’s reporting period commences after the introduction of MiFID II on 3 January 2018?
  • When fulfilling the obligation to report on a portfolio depreciating by the 10% threshold, on what basis should a firm calculate the 10% threshold? Should a firm continue to refer to the value of the portfolio at the beginning of the reporting period or refer to the portfolio value at the previous value that triggered the reporting obligation?

Information on costs and charges

In relation to costs and charges, answers to the following questions have now been given:

  • Does the PRIIPs calculation methodology cover product cost components that need to be disclosed under MiFID II cost disclosure?
  • How should investment firms use the product’s costs as presented in the PRIIPs KID?
  • Should the PRIIPs methodology also be applied when calculating costs and charges of financial instruments that do not fall within the scope of PRIIPs?
  • How does the investment firm obtain access to the relevant data for a financial instrument to apply the PRIIPs methodology?
  • What steps should an investment firm take when calculating the costs of products that fall within the PRIIPs transition period, like UCITS during the 3 January 2018 to 31 December 2019 period?
  • What should an investment firm do when they are unable to obtain the relevant data from the manufacturer?
  • Which methodology should an investment firm use when calculating the ‘costs related to transactions initiated in the course of the provision of an investment service’ for its ex-post cost disclosure?
  • When providing information of costs and charges to clients, on which basis should costs be aggregated? What is the level of aggregation that firms need to apply?
  • How should investment firms provide ex-ante disclosure of information on costs and charges to clients when there is no available data on actually incurred costs?

Appropriateness / complex financial instruments

In relation to appropriateness / complex financial instruments, an answer to the following question has been given:

  • Can shares in non-UCITS collective investment undertakings explicitly excluded under point (i) of Article 25(4)(a) of MiFID II be nevertheless assessed against the criteria set out in Article 57 of the MiFID II Delegated Regulation and as a consequence potentially be deemed non-complex financial instruments for the purposes of the appropriateness test?

View ESMA updates MiFID II / MiFIR investor protection Q&A, 6 June 2017

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