European Securities and Markets Authority Publishes Supervisory Briefing on MiFID II Appropriateness Rules

The European Securities and Markets Authority has published an updated version of its supervisory briefing on appropriateness. The original appropriateness briefing was published in December 2012 to provide guidance to EU national regulators on the appropriateness requirements under the original Markets in Financial Instruments Directive. The updated appropriateness briefing reflects the amended requirements introduced by the revised Directive or MiFID II and takes into account the new version of ESMA's suitability guidelines published in May 2018 to the extent they are relevant to the appropriateness rules.
 
The appropriateness requirements under MiFID II require investment firms providing investment services (other than investment advice or portfolio management services) to assess a potential client's knowledge and experience in the investment field to ascertain whether a particular service or product is appropriate for the client. The suitability guidelines require investment firms providing investment advice or portfolio management services to ensure that the personal recommendations or investment decisions made on behalf of clients are suitable for each client, taking into account the client's relevant knowledge and experience, financial situation and risk tolerance. While the updated appropriateness briefing is primarily aimed at national regulators, it should also assist market participants by providing indications of compliant implementation of the MiFID II appropriateness provisions.
 
The supervisory briefing does not require a "comply or explain" response from national regulators and is non-binding. It aims to promote a common supervisory approach to appropriateness by granting firms a degree of flexibility in how they comply with the requirements. In the briefing, ESMA offers examples of the types of questions that investment firms subject to the appropriateness requirements might ask to enhance their compliance.
 
View ESMA's supervisory briefing on MiFID II appropriateness requirements.
 
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