ESMA Guidelines on MiFID II product governance requirements
On 27 March 2023, ESMA published its final report on guidelines on Directive 2014/65/EU of 15 May 2014 on markets of financial instruments (“MiFID II”), regarding product governance requirements (the "Guidelines"). The objectives of the Guidelines are to establish consistent, efficient and effective supervisory practices within the European System of Financial Supervision and to ensure the uniform and consistent application of the MiFID II requirements regarding product governance.
The main amendments to the Guidelines include:
- the determination of a compatible distribution strategy where a distributor considers that a more complex product can be distributed under non-advised sales;
- the specification of any sustainability-related objectives a product is compatible with;
- identifying a target market per cluster of products rather than per individual product; and
- the periodic review of products, including the application of the proportionality principle.
The Guidelines will be translated in all official EU languages and published on ESMA’s website. The publication of the translations in all official languages of the EU will trigger a two-month period during which the national competent authorities must notify ESMA whether they comply or intend to comply with the guidelines.
ESMA Guidelines on certain aspects of the MiFID II suitability requirements
On 3 April 2023, ESMA published on their website in all official EU languages guidelines on certain aspects of the MiFID II suitability requirements (the “Guidelines on Suitability Requirements”). The following aspects are addressed in these guidelines:
- information to clients about the purpose of the suitability assessment and its scope;
- know your client and know your product;
- matching clients with suitable products; and
- other related requirements, which includes qualifications of firm staff and record-keeping.
The Guidelines on Suitability Requirements shall apply from 3 October 2023.
On 16 May 2023, the CSSF published Circular CSSF 23/835 (the "Circular") by which they confirmed that the CSSF would apply the Guidelines on Suitability Requirements from 3 October 2023.
ESMA Guidelines on certain aspects of the MiFID II remuneration requirements
On 3 April 2023, ESMA published on their website in all official EU languages guidelines on certain aspects of the MiFID II remuneration requirements (the “Guidelines on Remuneration Requirements”). The Guidelines on Remuneration Requirements discuss the following topics:
- the design of remuneration policies and practices;
- governance; and
- controlling risks related to remuneration policies and practices.
The Guidelines on Remuneration Requirements shall apply from 3 October 2023.
ESMA Q&A on MiFID II and MiFIR
Since our last newsletter, ESMA has updated (on 31 March 2023) the following questions and answers on MiFID II and Regulation (EU) 600/2014 on markets of financial instruments ("MiFIR"):
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