ESMA has published a peer review on how national regulators assess compliance with the current Markets in Financial Instruments Directive’s (MiFID) suitability requirements when firms provide investment advice to retail clients. ESMA’s key findings include:
- national regulators have a good understanding of the types of distribution methods used in their jurisdictions and where the boundary between investment advice and information lies. However, they carry out only limited supervision to verify whether clients are receiving investment advice in practice or have the perception that they are receiving advice;
- most regulators do not perform supervision which is targeted at the particular behaviour of a firm or group of firms as part of a specific suitability project;
- most regulators stated they used a wide range of tools to monitor the main aspects of advice suitability but only a limited number of regulators provided specific information on the tools they use to supervise compliance with the suitability requirements;
- enforcement action, such as imposing fines or placing restrictions on firms’ activities, was rarely taken. Many regulators considered their supervisory approach alone was sufficient to address issues; and
- in many cases, regulators could improve how they publicly communicate with stakeholders on their supervision and enforcement activities and findings.