It may be recalled that ESMA issued a consultation paper towards the end of last year (see Regulatory Roundup 38) concerning guidance on certain aspects of the MiFID suitability requirements.
As will be known, the rules on ‘suitability’ are found in COBS 9 and apply to a firm making a personal recommendation or when managing investments and is relevant to both retail and professional clients – albeit that certain assumptions can be made in respect of the latter (see COBS 9.2.8). For the avoidance of doubt, COBS 9 is also applicable to non-MiFID business, but only to the extent that it relates to retail clients or the management of certain pension schemes.
Feedback and the near-final guidelines have now been published (if you experience problems with the ESMA link on the left, please copy and paste http://www.esma.europa.eu/system/files/2012-387.pdf into your web browser). The guidelines shouldn’t come as too much of a surprise and cover areas such as record-keeping; the need not to rely unduly on a client’s self-assessment in relation to knowledge, experience and financial situation; and the use of questionnaires as a useful tool but they should not be a substitute for a physical meeting.
The guidance is aimed at both market participants and competent authorities – with the latter having to notify ESMA whether they comply or intend to comply with the guidelines. The FSA issued finalised guidance on ‘Assessing suitability’ in March 2011 so whether the Regulator will issue any further communication on the subject as a result of the ESMA publication remains to be seen. The guidelines can be found in Annex II of the paper.
