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ESMA Consults on Guidelines on MiFID II Suitability Requirements

On July 13, the European Securities and Markets Authority (ESMA) published a consultation paper (CP) on aspects of the suitability requirements under the revised Markets in Financial Instruments Directive (MiFID II).

While suitability requirements (designed to enhance investor protection through assessment of the clients’ knowledge, experience, financial situation and investment objectives) currently apply in the EU (under the predecessor to MiFID II), obligations will be strengthened under MiFID II by including requirements such as:

  • firms performing a suitability assessment to assess, taking into account costs and complexity, whether equivalent products can meet client’s needs;
  • the requirement for firms to analyze the costs and benefits of switching from one investment to another; and
  • the requirement for firms to provide clients with a suitability report prior to the conclusion of the recommended transaction.

ESMA previously provided guidelines in 2012 (2012 Guidelines) on the current pre-MiFID II regime (available here)

The CP includes proposals on the draft guidelines, which confirm and broaden the existing guidelines, issued in 2012, in order to:

  • consider recent technological developments of the advisory market, including the increasing use of robo-advice, i.e., automated or semi-automated systems for the provision of investment advice or portfolio management;
  • give relevance to the results of supervisory activities conducted by national competent authorities on the suitability requirements;
  • incorporate some insights of studies in the area of behavioural finance; and
  • provide additional details on some aspects that were already covered under the 2012 Guidelines.

The CP consultation closes on October 13. 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 CP is available here.

©2017 Katten Muchin Rosenman LLP

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About this Author

Carolyn H. Jackson, International Attorney, Katten Muchin law firm
Partner

Carolyn Jackson is a partner in Katten Muchin Rosenman UK LLP and is a Registered Foreign Lawyer. She provides US financial regulatory legal advice to a broad range of market participants, including commercial banks, investment banks, investment managers, broker-dealers, electronic trading platforms, clearinghouses, trade associations and over-the-counter derivatives service providers.

Carolyn guides clients in the structuring and offering of complex securities, commodities and derivatives transactions and in complying with US securities and commodities laws...

+44 0 20 7776 7625
Nathaniel Lalone, Katten Muchin Law Firm, Financial Institutions Attorney
Senior Associate

Nathaniel Lalone, a partner at Katten Muchin Rosenman UK LLP, has a broad range of experience in the regulation of financial products and financial markets, and frequently provides regulatory and compliance advice to trading venues, clearing houses and buy-side firms active in the over-the-counter (OTC) derivatives, futures and securities markets. He is actively involved in advising clients on the implementation of MiFID 2 and MiFIR in the European Union as well as the international reach of US financial services regulation. He also has significant experience with structuring and documentation relating to OTC derivatives and structured products.

Prior to joining Katten, Nathaniel was a member of the US Regulatory and the Derivatives and Structured Finance practices at Allen & Overy LLP.

+44 0 20 7776 7629
Neil Robson, private equity fund managers counselor, Katten Law Firm, London
Partner

Neil Robson, a regulatory and compliance partner with Katten Muchin Rosenman LLP, focuses his practice on counseling hedge and private equity fund managers and other investment advisers on operational, regulatory and compliance issues. He regularly addresses Financial Conduct Authority (FCA) and EU authorization and compliance under both the EU Alternative Investment Fund Managers Directive (AIFM Directive) and MiFID, cross-border issues in the financial services sector, market abuse, anti-money laundering and regulatory capital requirements, formations and buyouts of...

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