Guidelines on certain aspects of the MiFID suitability requirements (the "Guidelines")
In July 2012 the European Securities and Markets Authority (ESMA) published its "Guidelines on certain aspects of the MiFID suitability requirements" applicable to both national competent authorities (in Ireland the Central Bank) and firms providing certain MiFID investment services.
When do they take effect?
The Guidelines became effective in Ireland on 23 December 2012, the Central Bank having already prior to that date formally declared its intention to comply with the Guidelines to ESMA.
To whom do they apply?
The Guidelines apply to the following firms:
MiFID investment firms; credit institutions (banks) that provide MiFID 'investment services'; and UCITS management companies when they are providing the investment services of individual portfolio management or of investment advice within the meaning of Article 6(3)(a) and (b) of the UCITS Directive. The Guidelines apply only in relation the provision of investment advice and portfolio management. Firms should note that the ESMA has, confirmed that "...although these guidelines principally address situations where services are provided to retail clients, they should also be considered as applicable, to the extent they are relevant, when services are provided to professional clients".
What action is required?
Firms are not required to report on compliance or ability to comply with the Guidelines but it is recommended that they review and where necessary amend their processes and procedures - in particular, review the information which they provide to clients. Staff training may also need to be reviewed and updated.
The Guidelines are intended to provide clarification on the "...key investor protection requirements..." which are contained in MiFID and "... promote greater convergence in interpretation and supervisory approaches across the EU."
Aimed at achieving a uniformity in approach at a pan-European level, they contain guidance on how firms can ensure that they have the right 'suitability assessment' policies and procedures in place for their business, how this information might be conveyed to clients, when it should be updated etc - all of which should, in turn, assist those clients in understanding why investment firms need to assess suitability.
Standards of knowledge and experience of appropriate staff are also addressed, as is record keeping. They are made up...