ESMA: Report on oversight by NCAs
25 July 2018 Paris
Image: Shutterstock
The European Securities and Market Authority (ESMA) has issued a follow-up report regarding “oversight” by national competent authorities (NCAs) of the Markets in Financial Instruments Directive (MiFID) suitability requirements.
MiFID II, which came into effect on 3 January 2018, expands the MiFID suitability provisions by adding additional requirements.
In the report, ESMA stated the importance of continued and meaningful supervisory and enforcement efforts by NCAs.
This is to ensure a high level of compliance with the suitability requirements, as only these actions can ensure the proper application of Union Law and high level of investor protection, according to ESMA.
MiFID requires investment firms to assess the suitability of investment services and financial instruments, taking into account clients’ profiles, when providing investment advice or portfolio management.
The report commented on the previous peer review released in 2016.
The 2016 report found that amongst NCAs there was generally a good understanding of the types of distribution methods used in their jurisdictions.
The report also found consistent and good theoretical understanding of where the boundary between investment advice and information lies and therefore when the suitability requirements apply.
ESMA said: “The requirements form a key element of the MiFID investor protection requirements and apply to both retail and professional clients. Investment firms’ compliance with the MiFID suitability requirements is paramount to the overall protection of investors.”
“Therefore, it is important that NCAs are effectively overseeing and enforcing the conduct of firms.”
MiFID II, which came into effect on 3 January 2018, expands the MiFID suitability provisions by adding additional requirements.
In the report, ESMA stated the importance of continued and meaningful supervisory and enforcement efforts by NCAs.
This is to ensure a high level of compliance with the suitability requirements, as only these actions can ensure the proper application of Union Law and high level of investor protection, according to ESMA.
MiFID requires investment firms to assess the suitability of investment services and financial instruments, taking into account clients’ profiles, when providing investment advice or portfolio management.
The report commented on the previous peer review released in 2016.
The 2016 report found that amongst NCAs there was generally a good understanding of the types of distribution methods used in their jurisdictions.
The report also found consistent and good theoretical understanding of where the boundary between investment advice and information lies and therefore when the suitability requirements apply.
ESMA said: “The requirements form a key element of the MiFID investor protection requirements and apply to both retail and professional clients. Investment firms’ compliance with the MiFID suitability requirements is paramount to the overall protection of investors.”
“Therefore, it is important that NCAs are effectively overseeing and enforcing the conduct of firms.”
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