ESMA issues consultation on MIFID II suitability guidelines

The European Securities and Markets Authority (ESMA) has issued a consultation on aspects of suitability requirements under the Markets in Financial Instruments Directive (MiFID II).

According to ESMA, the consultation is taking place in order to update MiFID II’s guidelines following amendments to MiFID II relating to sustainability.

The assessment of suitability is one of the most key protections for investors under MiFID II and applies to the provision of all kinds of investment advice and portfolio management.

The main amendments introduced to the MiFID II delegated Regulation are the collection of information from clients on sustainability preferences, which will require firms to collect information from clients on their preference in relation to the different kinds of sustainable investment products to what extent they want to invest in these products.

Other amendments include the assessment of sustainability preferences. With this, once a firm has identified a range of suitable products for a client, it shall identify the product that fulfil the client’s sustainability preferences. Lastly, companies will need to give staff the necessary training on sustainability topics and keep appropriate records of the sustainability preferences of the client.

The consultation will conclude on 27 April 2022. The authority will consider the feedback it receives and is then expected to publish a final report in the third quarter of this year.

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