On Jul. 24, ESMA issued report on MiFID suitability requirements.
- Follows ESMA Apr. 2016 peer review of MiFID suitability requirements.
- Follows ESMA's May 2018 final guidelines on MIFID II suitability rules.
Follow-Up Report
- Review found improvements with NCA supervision of these suitability requirements.
- Issued follow-up report regarding oversight by national competent authorities (NCA).
- Report assesses the actions ten NCAs have undertaken since the earlier peer review.
- Identifies enhancements, greater deployment of enforcement action by some NCAs.
- Improvement should lead to an increased level of EU-wide supervisory convergence.
Improvements since 2016 Review
- Follow-up report identifies improvements by NCAs through thematic reviews, on-site inspections, improvements to IT systems to identify firms operating on branch basis.
- It highlights the greater use by three NCAs of enforcement tools to address breaches.
Going Forward
- MiFID II, which came into effect on Jan. 3, 2018, expands MiFID suitability provisions.
- ESMA stresses importance of continued and meaningful supervisory and enforcement efforts by NCAs to ensure a high level of compliance with the suitability requirements.
- As only these actions can ensure proper application of EU law and investor protection.
Background
- MiFID requires investment firms to assess suitability of services, financial instruments taking into account clients’ profiles, when providing advice and portfolio management.
- These requirements form key element of the MiFID investor protection requirements.
- Investment firms’ compliance with requirements paramount to protection of investors.
