July 13, 2017

ESMA published consultation paper on draft guidelines on certain aspects of the suitability requirements under the second Markets in Financial Instruments Directive (MiFID II). The finalized guidelines will replace the existing ESMA guidelines on this topic, which were issued in 2012. The draft guidelines are intended to enhance clarity and foster convergence in the implementation of certain aspects of the new MiFID II suitability requirements. ESMA will consider the feedback it receives to the consultation in Q4 2017/Q1 2018 and expects to publish a final report in Q1/Q2 2018.

The suitability requirements were introduced under MiFID to enhance investor protection by ensuring that firms that provide investment advice and portfolio management act in the clients’ best interests. The objectives of suitability assessment under MiFID II remain unchanged from the objectives under MiFID I. However, the obligations have been strengthened and specified further under the new legislative framework by including following requirements:

An explicit reference to that the use of electronic systems shall not reduce the responsibility of firms

Further details on conduct rules for firms providing a periodic assessment of the suitability

Requirement for firms performing a suitability assessment to assess, taking into account costs and complexity, whether equivalent products can meet client needs

Requirement for firms to analyze the costs and benefits of switching from one investment to another

Extension of suitability requirements to structured deposits

Requirement for firms to provide clients with a suitability report prior to the conclusion of the recommended transaction


Related Link: Consultation Paper (PDF)

Comment Due Date: October 13, 2017

Keywords: ESMA, Europe, MiFID II, Securities, Suitability Requirements, Investor Protection

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