On 23 September 2022, the European Securities and Markets Authority (ESMA) published its final report on guidelines on certain aspects of the MiFID II suitability requirements.
The final report builds on the text of the 2018 ESMA guidelines, which have now been reviewed following the adoption by the European Commission of the changes to the MiFID II organisational requirements and operating conditions for investment firms. The guidelines now consider:
- The adoption by the Commission of the changes to the MiFID II Delegated Regulation to integrate sustainability factors, risk and preferences into organisational requirements and operating conditions for investment firms.
- The good and poor practices identified in ESMA’s 2020 Common Supervisory Action (CSA) on suitability. These good and poor practices will give practical guidance to firms in some areas where a lack of convergence was identified.
- The amendments introduced through the Capital Markets Recovery Package to Article 25(2) of MiFID II.
The main amendments introduced to the MiFID II Delegated Regulation and reflected in the guidelines are:
- Information to clients on sustainability preferences – Firms will need to help clients understand the concept of sustainability preferences and explain the difference between products with and without sustainability features in a clear manner which avoids technical language.
- Collection of information from clients on sustainability preferences – Firms will need to collect information from clients on their preferences in relation to the different types of sustainable investment products and to what extent they want to invest in these products.
- Assessment of sustainability preferences – Once the firm has identified a range of suitable products, in accordance with the criteria of knowledge and experience, financial situation and other investment objectives, the firm shall identify the product(s) that fulfil the client’s sustainability preferences.
- Organisational requirements – Firms will need to give staff appropriate training on sustainability topics and keep appropriate records of the sustainability preferences of the client (if any) and of any updates of these preferences.
The guidelines will be translated into the official languages of the EU and published on ESMA’s website. The publication of the translations will trigger a two month period during which national competent authorities must notify ESMA whether they comply or intend to comply with the guidelines. The guidelines will apply six months after the date of the publication on the ESMA’s website in all EU languages.