ESMA: Guidelines on certain aspects of the MiFID suitability requirements/Guidelines on certain aspects of the MiFID compliance function requirements

ESMA has published two final sets of guidelines aimed at both market participants and national competent authorities who should incorporate them into their supervisory practices. It is noted that ESMA found a number of shortcomings in the implementation of the MiFID suitability requirements, including failure to ask clients the right questions; failure to collect the necessary and relevant information; failure to interpret correctly the information provided by the client; and failure to recommend a suitable investment when the right information has been provided. The suitability guidelines focus on the need for firms to have in place appropriate arrangements to enable them to meet the suitability requirements on an on-going and consistent basis for any client, and irrespective of the distribution channel used. The compliance function guidelines focus on: the responsibilities of the compliance function for monitoring, reporting and advising; the organisational requirements of the compliance function for the standards of effectiveness, permanence and independence; the extent of interaction of the compliance function with other functions, and the outsourcing of the tasks of the compliance function; and approaches for competent authority review of compliance function requirements. Competent authorities will have two months following the publication of the official translations of these documents to confirm their compliance or intention to comply, with reasons for non-compliance, to ESMA. The guidelines will then apply 60 days after the end of the reporting period for competent authorities. Financial market participants are not required to report whether they comply with these guidelines.