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ESMA Guidelines on the application of the appropriateness assessment and execution-only requirements under MiFID II

Investment Funds & Asset Management

ESMA Guidelines on the application of the appropriateness assessment and execution-only requirements under MiFID II

by Ganado Advocates

20th January 2022

On the 3rd of January 2022, the European Securities and Markets Authority (ESMA), published Guidelines on certain aspects of the appropriateness and execution-only requirements under Directive 2014/65/EU (MiFID II) and Commission Delegated Regulation (EU) 2017/565 (the “Guidelines”). The Guidelines were the result of a common supervisory action (CSA) that ESMA conducted in 2019.

Following a review of the data collected from the CSA, ESMA identified the need to issue guidelines for NCAs and firms operating in EU Member States on the application of the appropriateness assessment and execution-only requirements. The Guidelines were published following a public consultation which took place in 2021, wherein ESMA received feedback and advice from multiple stakeholders and the Securities and Markets Stakeholders Group.

The main purpose for the issue of the Guidelines is to foster a more uniform standard of investment protection for investors within the EU when receiving non-advised services. The following are the main topics covered by the Guidelines:

Information to be disclosed to clients on the purpose of the appropriateness assessment
Assessment of the knowledge and experience of a client including the use of questionnaires
Extent of information to be collected from clients and the principle of proportionality
Reliability of client information
Ensuring client information is up to date
Client information for legal entities / groups
Ensuring a clear understanding of investment products
Matching clients with appropriate products
Qualifications of employees of MiFID Firms
Record Keeping
Identifying situations when the appropriateness assessment is required
Internal controls and monitoring arrangements

The guidelines shall apply from six months of the date of publication of the guidelines on ESMA’s website in all EU official languages.

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