On 29 April 2022, the European Securities and Markets Authority (ESMA) issued a final report on the European Commission mandate on certain aspects relating to retail investor protection under MiFID II. The Commission sent a formal request (mandate) to the ESMA last year seeking technical advice on certain aspects relating to retail investor protection asking that it focus in particular on disclosures, digital disclosures and digital tools and channels. The final report sets out the ESMA’s final proposals and includes summaries of the feedback that it received to a Call for Evidence that it published last October.

The ESMA’s recommendations include:

  • Requiring machine readability of disclosure documents to facilitate the development of searchable databases available to the public.
  • Addressing information overload by proposing to define what is vital information is and by using digital techniques such as layering of information.
  • Development of a standard EU format of information on costs and charges and aligning the disclosures under MiFID and the PRIIPs KID.
  • Possibility for Member State competent authorities and the ESMA to impose on firms the use of risk warnings for specific financial instruments.
  • Addressing aggressive marketing communications.
  • Addressing issues related to misleading marketing campaigns on social media and the use of online engagement practices, such as the use of gamification techniques by firms or third parties.

In addition, the ESMA also supports the Commission’s proposal to prohibit the receipt of payment for order flow to adequately address the serious investor protection risks arising from this practice.

The final report has been submitted to the Commission.