ESMA Guidelines on MiFID II Suitability Requirements

On the 6th October 2022, the Malta Financial Services Authority (“MFSA”) issued a circular on the European Securities and Markets Authority’s (“ESMA”) final Report on the Guidelines on MiFID II Suitability Requirements (“the Report”). The Report highlights the fact that firms are expected to take into consideration sustainability factors of investment products as part of their policies and procedures.

The Guidelines issued in 2018 by ESMA have been reviewed and shall now take into account the following:

  1. The changes made to the MiFID II Delegated Regulation (EU) 2017/565 to integrate sustainability factors, risk and preferences into organisational requirements and operating conditions for investment firms;
  2. The good and poor practices identified in ESMA’s Common Supervisory Action the application of the MiFID II suitability requirements. These shall give practical guidance to firm in some area where there might be a lack of convergence; and
  3. The amendments introduced through the Capital Markets Recovery Package to Article 25(2) of MiFID II.

The main amendments introduced through the Capital Markets Recovery Package to Article 25(2) of MiFID II are the following:

  1. Information to clients on the sustainability preferences – firms need to help clients understand;
  2. The concept of sustainability preferences and the choices to be made in this context;
  3. Collection of information from clients on sustainability preferences;
  4. Assessment of sustainability preferences; and
  5. Organisational requirements.

ESMA noted that the revised guidelines will apply as from six months from the date of publication of the said revised Guidelines, with the previous guidelines ceasing to apply on the same date.

The MFSA clarified that the revised ESMA guidelines on certain aspects of the MiFID II suitability requirements will be implemented in the Conduct of Business Rulebook in due course.

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