The European Securities and Markets Authority (ESMA) has published two final sets of guidelines in line with the provisions under the Markets in Financial Instruments Directive (MiFID) relating to the suitability of investment advice and the compliance function.
Date: July 13, 2012
Tags: Suitability, Regulation
The European Securities and Markets Authority (ESMA) has published two final sets of guidelines in line with the provisions under the Markets in Financial Instruments Directive (MiFID) relating to the suitability of investment advice and the compliance function.
According to a statement, assessing suitability is an important MiFID investor protection requirement. Before providing investment advice or portfolio management services, investment firms must ensure that any investment product recommended is suitable for the client in question.
However, ESMA found several shortcomings in the implementation of the MiFID suitability requirements, including: failure to ask clients the right questions; failure to collect the necessary and relevant information; failure to interpret correctly the information provided by the client; and even where the right information is collected, failure to recommend a suitable investment.
The new guidelines focus on the need for firms to have in place appropriate arrangements to enable them to meet the suitability requirements on an ongoing and consistent basis for any client, irrespective of the distribution channel used.
These second sets of guidelines are focused on the responsibilities of the compliance function and are aimed at helping investment firms to increase the effectiveness, and importance, of the compliance function. They focus on:
More details: http://www.esma.europa.eu/news/ESMA-publishes-MiFID-guidelines-enhance-investor-protection?t=326&o=home
