The European Securities and Markets Authority (ESMA) is consulting on some aspects of investment suitability requirements under the Markets in Financial Instruments Directive (MiFID II). The regulator is doing consultation in order to update its guidelines with regards to how companies comply with investment suitability requirements.
The assessment launched by
ESMA
ESMA
European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of the EU financial system by ensuring the integrity, transparency, efficiency, and orderly functioning of securities markets, as well as enhancing investor protection. ESMA fosters supervisory convergence among securities regulators and financial sectors through its work with other EU supervisory authorities. ESMA is independent; there is full accountability towards the European Parliament, where it appears before the Economic and Monetary Affairs Committee, at their request for formal hearings. What Functions Does ESMA Perform?The purpose of assessing risks to investors, markets, and financial stability is to spot emerging trends, threats, and vulnerabilities, and where possible opportunities in a timely fashion so that they can be responded to. ESMA uses its unique position to identify market developments that threaten financial stability, investor protection, or the orderly functioning of financial markets. ESMA’s risk assessments build on and complement risk assessments made by others. The purpose of compiling a single rulebook for European financial markets is to enhance the EU Single Market by creating a level playing field for investors and issuers across the EU. ESMA’s four activities are linked. Insights gained from risk assessment feed into the work on the single rulebook, supervisory convergence, and direct supervision, and vice versa.
European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of the EU financial system by ensuring the integrity, transparency, efficiency, and orderly functioning of securities markets, as well as enhancing investor protection. ESMA fosters supervisory convergence among securities regulators and financial sectors through its work with other EU supervisory authorities. ESMA is independent; there is full accountability towards the European Parliament, where it appears before the Economic and Monetary Affairs Committee, at their request for formal hearings. What Functions Does ESMA Perform?The purpose of assessing risks to investors, markets, and financial stability is to spot emerging trends, threats, and vulnerabilities, and where possible opportunities in a timely fashion so that they can be responded to. ESMA uses its unique position to identify market developments that threaten financial stability, investor protection, or the orderly functioning of financial markets. ESMA’s risk assessments build on and complement risk assessments made by others. The purpose of compiling a single rulebook for European financial markets is to enhance the EU Single Market by creating a level playing field for investors and issuers across the EU. ESMA’s four activities are linked. Insights gained from risk assessment feed into the work on the single rulebook, supervisory convergence, and direct supervision, and vice versa.
Read this Term is important as it aims to determine whether authorized companies are taking all reasonable steps to ensure that clients’ investments align with their personal preferences and investment objectives. The regulator is conducting such consultation to determine whether suitability steps are in place to ensure investments do not expose clients to the risks of buying products and services that do not align with their needs.
The assessment of investment suitability is vital protection for investors under the Markets in Financial Instruments Directive (MiFID II). Such assessment also applies to all regulations of all types of investment advice and portfolio management.
ESMA has been reviewing major amendments recently introduced under the
MIFID II
MiFID II
MiFID II stands for the Markets in Financial Instruments Directive, and is the second iteration of a sweeping directive. As such it is known as MiFID II. The original Markets in Financial Instruments Directive (MiFID) became effective in November 2007. It was intended as the foundation of the EU’s Financial Services Action Plan, a comprehensive project to create a single European market in financial services. MiFID is intended to create a level playing field for firms to compete in the EU’s financial needs and to ensure a consistent level of consumer protection across the EU. MiFID II rules come into force for the European financial sector on January 3, 2018, which are set to have far-reaching consequences for the industry. MiFID II ExplainedMiFID II relates to the framework of trading venues/structures in which financial instruments are traded. MiFID is concerned with regulating the operation of the full range of trading venues and the processes, systems, and governance measures adopted by market participants. The newest version of MiFID updates requires trading transactions and information to be more transparent than ever before. MiFID II requires that all prices are posted before and after trades are completed, no matter the type of trading platform on which transactions occur. Giving investors access to a whole new scope of data and information and enables them to make more educated decisions regarding their clients’ portfolios. One of the primary purposes of this new requirement is to allow retail firms and their customers to find the best deals available by comparing prices and other factors from the newly available data. MiFID II looks to substantially increase the protection of retail investors and severely limit the types of financial instruments with which retail investors can complete transactions without being legally obligated to consult a trader or similar professional.
MiFID II stands for the Markets in Financial Instruments Directive, and is the second iteration of a sweeping directive. As such it is known as MiFID II. The original Markets in Financial Instruments Directive (MiFID) became effective in November 2007. It was intended as the foundation of the EU’s Financial Services Action Plan, a comprehensive project to create a single European market in financial services. MiFID is intended to create a level playing field for firms to compete in the EU’s financial needs and to ensure a consistent level of consumer protection across the EU. MiFID II rules come into force for the European financial sector on January 3, 2018, which are set to have far-reaching consequences for the industry. MiFID II ExplainedMiFID II relates to the framework of trading venues/structures in which financial instruments are traded. MiFID is concerned with regulating the operation of the full range of trading venues and the processes, systems, and governance measures adopted by market participants. The newest version of MiFID updates requires trading transactions and information to be more transparent than ever before. MiFID II requires that all prices are posted before and after trades are completed, no matter the type of trading platform on which transactions occur. Giving investors access to a whole new scope of data and information and enables them to make more educated decisions regarding their clients’ portfolios. One of the primary purposes of this new requirement is to allow retail firms and their customers to find the best deals available by comparing prices and other factors from the newly available data. MiFID II looks to substantially increase the protection of retail investors and severely limit the types of financial instruments with which retail investors can complete transactions without being legally obligated to consult a trader or similar professional.
Read this Term. Such amendments include the following:
- Companies are expected to collect information from clients on their investment preferences and to what extent customers want to invest in such products.
- Once companies have identified various suitable products for clients, they are expected to identify products that fulfil the client’s sustainability preferences.
- Firms are also required to give their employees appropriate training on sustainability topics and keep appropriate records of the sustainability preferences of customers and any updates of such preferences.
ESMA’s consultation comes to an end in April this year. The regulator will consider the feedback it gets and plans to conduct another consultation session in Q2 of 2022. Additionally, it finally expects to publish a final report in Q3 of 2022.
Efforts towards Creation of a Sustainable Financial System
The announcement by ESMA comes at a time when securities regulators work to protect investors, maintain fair efficient and transparent markets, and reduce systemic risk. Sustainability matters can raise important challenges in meeting such core objectives.
Market events that happened in 2020 and ongoing concerns about stability in the capital markets are influencing regulators to reexamine risks and redefine resilience. Appropriate investor protection and good governance remain regulatory necessities and are being reinforced and re-standardized.
The European Securities and Markets Authority (ESMA) is consulting on some aspects of investment suitability requirements under the Markets in Financial Instruments Directive (MiFID II). The regulator is doing consultation in order to update its guidelines with regards to how companies comply with investment suitability requirements.
The assessment launched by
ESMA
ESMA
European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of the EU financial system by ensuring the integrity, transparency, efficiency, and orderly functioning of securities markets, as well as enhancing investor protection. ESMA fosters supervisory convergence among securities regulators and financial sectors through its work with other EU supervisory authorities. ESMA is independent; there is full accountability towards the European Parliament, where it appears before the Economic and Monetary Affairs Committee, at their request for formal hearings. What Functions Does ESMA Perform?The purpose of assessing risks to investors, markets, and financial stability is to spot emerging trends, threats, and vulnerabilities, and where possible opportunities in a timely fashion so that they can be responded to. ESMA uses its unique position to identify market developments that threaten financial stability, investor protection, or the orderly functioning of financial markets. ESMA’s risk assessments build on and complement risk assessments made by others. The purpose of compiling a single rulebook for European financial markets is to enhance the EU Single Market by creating a level playing field for investors and issuers across the EU. ESMA’s four activities are linked. Insights gained from risk assessment feed into the work on the single rulebook, supervisory convergence, and direct supervision, and vice versa.
European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of the EU financial system by ensuring the integrity, transparency, efficiency, and orderly functioning of securities markets, as well as enhancing investor protection. ESMA fosters supervisory convergence among securities regulators and financial sectors through its work with other EU supervisory authorities. ESMA is independent; there is full accountability towards the European Parliament, where it appears before the Economic and Monetary Affairs Committee, at their request for formal hearings. What Functions Does ESMA Perform?The purpose of assessing risks to investors, markets, and financial stability is to spot emerging trends, threats, and vulnerabilities, and where possible opportunities in a timely fashion so that they can be responded to. ESMA uses its unique position to identify market developments that threaten financial stability, investor protection, or the orderly functioning of financial markets. ESMA’s risk assessments build on and complement risk assessments made by others. The purpose of compiling a single rulebook for European financial markets is to enhance the EU Single Market by creating a level playing field for investors and issuers across the EU. ESMA’s four activities are linked. Insights gained from risk assessment feed into the work on the single rulebook, supervisory convergence, and direct supervision, and vice versa.
Read this Term is important as it aims to determine whether authorized companies are taking all reasonable steps to ensure that clients’ investments align with their personal preferences and investment objectives. The regulator is conducting such consultation to determine whether suitability steps are in place to ensure investments do not expose clients to the risks of buying products and services that do not align with their needs.
The assessment of investment suitability is vital protection for investors under the Markets in Financial Instruments Directive (MiFID II). Such assessment also applies to all regulations of all types of investment advice and portfolio management.
ESMA has been reviewing major amendments recently introduced under the
MIFID II
MiFID II
MiFID II stands for the Markets in Financial Instruments Directive, and is the second iteration of a sweeping directive. As such it is known as MiFID II. The original Markets in Financial Instruments Directive (MiFID) became effective in November 2007. It was intended as the foundation of the EU’s Financial Services Action Plan, a comprehensive project to create a single European market in financial services. MiFID is intended to create a level playing field for firms to compete in the EU’s financial needs and to ensure a consistent level of consumer protection across the EU. MiFID II rules come into force for the European financial sector on January 3, 2018, which are set to have far-reaching consequences for the industry. MiFID II ExplainedMiFID II relates to the framework of trading venues/structures in which financial instruments are traded. MiFID is concerned with regulating the operation of the full range of trading venues and the processes, systems, and governance measures adopted by market participants. The newest version of MiFID updates requires trading transactions and information to be more transparent than ever before. MiFID II requires that all prices are posted before and after trades are completed, no matter the type of trading platform on which transactions occur. Giving investors access to a whole new scope of data and information and enables them to make more educated decisions regarding their clients’ portfolios. One of the primary purposes of this new requirement is to allow retail firms and their customers to find the best deals available by comparing prices and other factors from the newly available data. MiFID II looks to substantially increase the protection of retail investors and severely limit the types of financial instruments with which retail investors can complete transactions without being legally obligated to consult a trader or similar professional.
MiFID II stands for the Markets in Financial Instruments Directive, and is the second iteration of a sweeping directive. As such it is known as MiFID II. The original Markets in Financial Instruments Directive (MiFID) became effective in November 2007. It was intended as the foundation of the EU’s Financial Services Action Plan, a comprehensive project to create a single European market in financial services. MiFID is intended to create a level playing field for firms to compete in the EU’s financial needs and to ensure a consistent level of consumer protection across the EU. MiFID II rules come into force for the European financial sector on January 3, 2018, which are set to have far-reaching consequences for the industry. MiFID II ExplainedMiFID II relates to the framework of trading venues/structures in which financial instruments are traded. MiFID is concerned with regulating the operation of the full range of trading venues and the processes, systems, and governance measures adopted by market participants. The newest version of MiFID updates requires trading transactions and information to be more transparent than ever before. MiFID II requires that all prices are posted before and after trades are completed, no matter the type of trading platform on which transactions occur. Giving investors access to a whole new scope of data and information and enables them to make more educated decisions regarding their clients’ portfolios. One of the primary purposes of this new requirement is to allow retail firms and their customers to find the best deals available by comparing prices and other factors from the newly available data. MiFID II looks to substantially increase the protection of retail investors and severely limit the types of financial instruments with which retail investors can complete transactions without being legally obligated to consult a trader or similar professional.
Read this Term. Such amendments include the following:
- Companies are expected to collect information from clients on their investment preferences and to what extent customers want to invest in such products.
- Once companies have identified various suitable products for clients, they are expected to identify products that fulfil the client’s sustainability preferences.
- Firms are also required to give their employees appropriate training on sustainability topics and keep appropriate records of the sustainability preferences of customers and any updates of such preferences.
ESMA’s consultation comes to an end in April this year. The regulator will consider the feedback it gets and plans to conduct another consultation session in Q2 of 2022. Additionally, it finally expects to publish a final report in Q3 of 2022.
Efforts towards Creation of a Sustainable Financial System
The announcement by ESMA comes at a time when securities regulators work to protect investors, maintain fair efficient and transparent markets, and reduce systemic risk. Sustainability matters can raise important challenges in meeting such core objectives.
Market events that happened in 2020 and ongoing concerns about stability in the capital markets are influencing regulators to reexamine risks and redefine resilience. Appropriate investor protection and good governance remain regulatory necessities and are being reinforced and re-standardized.
Source: https://www.financemagnates.com/institutional-forex/esma-is-consulting-on-investment-suitability-requirements/