European Securities and Markets Authority Issues Final Guidelines on MiFID II Suitability
05/28/2018The European Securities and Markets Authority has published a Final Report setting out finalized Guidelines on aspects of the suitability requirements under the revised Markets in Financial Instruments Directive. ESMA consulted previously on a draft version of the Guidelines between July and October 2017.
The finalized Guidelines largely confirm ESMA's previous 2012 guidelines on MiFID I, but have a broader scope and ESMA has added clarifications and refinements where necessary.
The finalized Guidelines have been broadened to reflect the suitability requirements under MiFID II by:
- considering technological developments of the advisory market, notably the increasing use of automated or semi-automated systems for the provision of investment advice or portfolio management (robo-advice);
- building on national regulators' supervisory experience on the application of suitability requirements (including the 2012 guidelines);
- taking into account the outcome of studies in the area of behavioural finance; and
- providing additional details on some aspects that were already covered under the 2012 guidelines.
In addition, ESMA explains, in the Overview section of the finalized Guidelines, that it has taken into account the European Commission's Action Plan on sustainable finance and has included a good practice at this stage, to ensure that non-financial factors (i.e. environmental, social, ethical impacts associated to investments, and sustainable development) are taken into account in the product assessment process and suitability assessment. ESMA will monitor the legislative proposals stemming from the Commission's action plan and will consider making focused amendments to the guidelines to reflect sustainability-related changes to the MIFID II delegated acts.
The finalized Guidelines will replace ESMA's 2012 guidelines and will apply to national regulators supervising investment firms that provide investment advice (whether independent or not) or portfolio management. Firms offering these services must, as applicable, provide suitable personal recommendations to their clients or make suitable investment decisions on behalf of their clients.
The finalized Guidelines will now be translated into the official EU languages and published on ESMA's website, following which national regulators will have a two-month period in which to notify ESMA whether they comply or intend to comply with the guidelines. National regulators should state their reasons for non-compliance where they do not comply or do not intend to comply. The Guidelines will take effect (replacing the 2012 Guidelines) 60 calendar days after expiry of the two-month notification period.
View ESMA's Final Report.
View the Commission Proposal for Sustainable Finance legislation.
View ESMA's 2012 Guidelines on suitability.
View ESMA's July 2017 consultation.
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