On 16 June 2023, the European Securities and Markets Authority (ESMA) launched a Call for Evidence (CfE) on the integration of sustainability preferences in the suitability assessment and product governance arrangements.

Per Article 25(2) of MiFID II and Articles 54 and 55 of Commission Delegated Regulation 2017/565 (MiFID II Delegated Regulation), investment firms providing investment advice or portfolio management have to provide suitable personal recommendations to their clients or have to make suitable investment decisions on behalf of their clients. The MiFID II Delegated Regulation was subsequently updated as part of a broader European Commission initiative on sustainable development. In particular, sustainability factors, risk and preferences were integrated into certain organisational requirements and operating conditions for investment firms. The amendments entered into application on 2 August 2022. The MiFID II Delegated Directive was further amended to integrate sustainability factors in product governance obligations, amendments which entered into application on 22 November 2022. These changes were a factor which triggered a review of the 2017 ESMA guidelines on product governance which was completed in March 2023.

The amendments to the MiFID II Delegated Regulation also prompted a review and update of the 2018 ESMA guidelines on suitability. In ESMA’s final report published in September 2022 an updated version of the guidelines was published and these apply from 3 October 2023. It was also mentioned in the final report that the Securities and Markets Stakeholder Group suggested that ESMA organise a CfE on how suitability preferences are assessed and on possible alternative approaches following the publication of the updated guidelines.

ESMA agrees that it is important to continuously engage industry on this topic and has therefore decided to launch this CfE to gather evidence on the evolution of the market and on how firms are applying the legal requirements.

In particular, the CfE is intended to help ESMA:

  • Develop a better understanding of how MiFID II requirements are being implemented and applied by firms across the European Union and the challenges firms face in their application.
  • Gain a better understanding of investor experience and reactions to the inclusion of sustainability factors in investment advice and portfolio management services.
  • Collect information, views and data on main trends on aspects related the provision of sustainable investment products and services to retail clients.

The deadline for responding to the CfE is 15 September 2023.

ESMA, together with Member State competent authorities, will assess the replies to the CfE and will continue monitoring the application by firms of the MiFID II requirements on the topics of suitability and product governance and the related ESMA guidelines to ensure supervisory convergence on this important topic.