On the 3rd of January 2022, the European Securities and Markets Authority (ESMA), published Guidelines on certain aspects of the appropriateness and execution-only requirements under Directive 2014/65/EU (MiFID II) and Commission Delegated Regulation (EU) 2017/565 (the “Guidelines”). The Guidelines were the result of a common supervisory action (CSA) that ESMA conducted in 2019.
Following a review of the data collected from the CSA, ESMA identified the need to issue guidelines for NCAs and firms operating in EU Member States on the application of the appropriateness assessment and execution-only requirements. The Guidelines were published following a public consultation which took place in 2021, wherein ESMA received feedback and advice from multiple stakeholders and the Securities and Markets Stakeholders Group.
The main purpose for the issue of the Guidelines is to foster a more uniform standard of investment protection for investors within the EU when receiving non-advised services. The following are the main topics covered by the Guidelines:
- Information to be disclosed to clients on the purpose of the appropriateness assessment
- Assessment of the knowledge and experience of a client including the use of questionnaires
- Extent of information to be collected from clients and the principle of proportionality
- Reliability of client information
- Ensuring client information is up to date
- Client information for legal entities / groups
- Ensuring a clear understanding of investment products
- Matching clients with appropriate products
- Qualifications of employees of MiFID Firms
- Record Keeping
- Identifying situations when the appropriateness assessment is required
- Internal controls and monitoring arrangements
The guidelines shall apply from six months of the date of publication of the guidelines on ESMA’s website in all EU official languages.