Page 29 - BIPAR Annual Report 2020_EN short

Markets in Financial

Instruments Directive (MiFID II)

Key points from an intermediary perspective in the level 1 Background Guidelines - Best execution
Directive - Provision of investment services and activities by
The MiFID II Directive is also completed by level 3 Guide- third country firms
Key points include the “analogous regime” for “opt-out” firms (firms that MiFID II, the Directive on Markets lines prepared by the European Securities and Markets - Product governance
are regulated at national level and that do not hold clients’ money and in Financial Instruments repealing Authority (ESMA). ESMA consulted on and published - Client categorisation
only receive and transmit orders and/or provide advice can be exempted MiFID I, was adopted in May 2014. Its Guidelines on cross-selling, on complex debt instruments
by Member States but have to comply with an “analogous regime”); the and structured deposits, on the assessment of knowledge ESMA Q&As are not meant to constitute new policy and are
provisions on the ban of commission in the case of independent advice, transposition and application dates and competence, on product governance (and the target periodically reviewed to update them where required and
the requirement of quality enhancement in the case of commissions, the were delayed by one year: Member market in particular), on the assessment of suitability of to identify if some of the material has to be converted into
knowledge and competence requirements, provisions adding unjustified States had to transpose the new rules the members of the management body and key func- Guidelines and Recommendations.
burden to SME intermediaries and financial advisers such as product gov- by 2 July 2017, and they have applied tion holders, and on certain aspects of the MiFID II suit-
ernance requirements, etc. ability requirements. In summer 2019, ESMA consulted
since 3 January 2018. All Member on draft Guidelines on the MiFID II compliance function, In February 2020, ESMA launched a “common supervisory
States have now transposed MiFID II. adjusting existing 2012 guidelines to the adapted MiFID II action” on suitability, meaning that national competent
rules. BIPAR responded to this consultation, focusing on authorities simultaneously check the application of the
the application of the proportionality principle in practice. MiFID II suitability requirements. This follows a similar
The revised MiFID builds on the MiFID
ESMA published it final Guidelines in June 2020. In the final exercise in 2018 regarding the MiFID II appropriateness
I rules that were already in place and it Guidelines, the suggestion of having a “core team within test. ESMA stated the exercise would also help in the anal-

strengthens the protection of investors compliance staff members whose sole area of responsi- ysis of whether, and how, the costs of investment prod-
bility is MiFID compliance” was deleted. ucts are taken into account by firms when recommending
by introducing new organisational and
an investment product to a client.
conduct requirements. Guidelines are not legally binding, but they are subject to
the “comply or explain” procedure. From the moment that
the Guidelines are published in all languages, a two-month Review of MiFID II and next steps
During the legislative process of
Level 2 rules period starts to run during which the national competent
levels 1 and 2 texts, and during the
authorities have to notify ESMA as to whether they comply The European Commission was required to review parts
The MiFID II, level 1, Directive is completed by level 2 instruments. These development of level 3 measures or intend to comply with the Guidelines, stating their rea- of MiFID II by March 2020. ESMA had to prepare various
include: such as ESMA guidelines, BIPAR and sons for non-compliance. contributions to the Commission in this respect, for exam-
ple on the impact of the MiFID II requirement to disclose
its Working Party on MiFID have been
- a Delegated Directive which contains specifications with regard to Questions & Answers (Q&As) any fees, commissions and non-monetary benefits in con-
the safeguarding of financial instruments and funds belonging to clients, active in expressing their views to EU nection with the provision of an investment service or an
product governance obligations, and the rules applicable to the provision and national legislators on provisions In 2019 and 2020, ESMA published various updates on its ancillary service to the client, including its impact on the
or reception of fees, commissions or any monetary or non-monetary ben- affecting intermediaries and financial Q&As regarding the implementation of investor protec- proper functioning of the internal market on cross-border
efits. tion and intermediaries’ topics under MiFID II. The pur- investment advice.
- a Delegated Regulation that deals with organisational require- advisers. pose of these Q&As is to “promote common supervisory
ments and operating conditions for investment firms and defined terms. approaches and practices in the application of MiFID II/ Early 2019, ESMA sent a letter to the European Com-
- a Delegated Regulation dealing, amongst others, with product The European Commission was MiFIR for investor protection topics, providing responses mission proposing to postpone its deliveries by 6 to 24
intervention required to review certain parts of to questions posed by the general public, market partici- months, considering the uncertainties introduced by
- Regulatory Technical Standards (RTS) and Implementing Techni- pants and competent authorities in relation to the practi- Brexit and aiming to ensure that enough experience
cal Standards (ITS) relating amongst others to requirements applying on MiFID II by March 2020 and is currently cal application of MiFID II/ MiFIR requirements”. is gathered on the application of MiFID II/MiFIR before
and to trading venues, commodity derivatives, market data reporting, cri- in the process of doing so. It launched beginning the review of the functioning of the various
teria when an activity can be considered an ancillary activity under MiFID, a public consultation in this respect The recent updates deal with topics such as: MiFID II provisions.
or regarding the information and requirements for the authorisation of
investment firms. in February 2020 to which BIPAR - Investment advice on an independent basis Vice-President and Commissioner for Financial Stability,
responded. - Inducements Financial Services and Capital Markets Union, Valdis Dom-
For more details on levels 1 and 2 rules, please see the BIPAR Annual - Information on costs and charges brovskis stated such delay was unfortunate, adding, how-
Report of 2016-2017. - Suitability and appropriateness ever, that delivering the analysis to produce those reports

28 29