MFSA Circular on ESMA Publishing the Main Findings from the Common Supervisory Action

25th September 2023 – MFSA Circular on ESMA Publishing the Main Findings from the Common Supervisory Action (CSA) for the year 2022 and the Mystery Shopping Exercise on Information on Costs and Charges Emanating from MiFID II Requirements.

Conduct of business

The European Securities and Markets Authority (‘ESMA’) has released its main findings from the Common Supervisory Action (‘CSA’) and mystery shopping exercise conducted in 2022, focusing on investor protection and the application of Markets in Financial Instruments Directive (‘MiFID II’) regulations regarding costs and charges disclosure to retail clients.


In the CSA exercise, ESMA found that while there was generally adequate compliance with most ex-post costs and charges requirements, some shortcomings were identified. These included issues such as costs not consistently displayed as percentages, varying cost allocation methods, differing practices for inducements disclosure, inconsistent representation of implicit costs, and a lack of uniformity in ex-post disclosure formats.


ESMA also expressed concerns about how license holders inform retail clients about ex-ante costs and charges. Most mystery shoppers received some cost information, but it was often incomplete or disclosed late in the sales process. Additionally, disclosure of the independence of investment advice and inducements was often inadequate, with inducements sometimes only disclosed after the client had made a product decision.


The Mystery Shopping Exercise provided information on how firms communicated costs and charges to retail clients. While some clients received proper MiFID II ex-ante information, in many cases, the information was incomplete or provided only orally which could hinder informed investment decisions. ESMA’s target audience for these findings includes all investment firms and credit institutions subject to MiFID II regulations.


Going forward, ESMA will focus on developing Questions and Answers to address simple issues identified in the exercises and work on providing information about costs and charges in a more standardised EU format. The report acknowledges that there may be some limitations in the interpretation of results due to factors like limited real account use, technical complexities, and differences between outsourced providers. Despite these limitations, the report underscores the need for better standardisation and more transparent communication of costs and charges to protect retail investors.


The full circular can be accessed through this link:

For more information on MiFID II and related regulations, feel free to contact us here.