The EACB welcomes the opportunity to participate in the ESMA’s public consultation (ESMA35- 36-2159) on guidelines on appropriateness and execution-only requirements of MiFID II.
We acknowledge that the proposed guidelines have been inspired by the outcome of the Common Supervisory Action (CSA) of 2019 published by ESMA with respect to the appropriateness assessment on clients under MiFID II which has concluded that there is insufficient supervisory convergence on this topic. Whilst we understand that such outcome of the CSA is undesirable, we would very much encourage ESMA to publish the actual general outcomes of the CSA in order for the industry to better understand how the proposed guidelines would benefit investor protection and supervisory convergence goals. Currently, we fail to justify the European Commission’s rationale for the strict guidelines that seem to:
(i) go beyond the original mandate of MiFID II and its Delegated Regulation 2017/565;
(ii) contradict Recital 1 and 2 of the MiFID II Quick Fix as part of the Capital Markets Recovery Package published by the European Commission. These recitals aim to reduce unnecessary bureaucracy, as well as, administrative and economic burdens on consumers and financial firms, in order to counteract the effects of the COVID-19 pandemic on capital markets in the European Union. We note that some of the guidelines are more likely to discourage large parts of customers from making investments and would even motivate them to invest in investments, which are not regulated by MiFID II and could potentially be riskier to clients and contain more loss potential. Furthermore, banks would have to consider significant impact on their IT capacity during the COVID-19 pandemic which is even more difficult due to the stretching of banks’ resources in order to implement the Sustainable Finance Disclosures Regulation (SFDR), MiFID II Quick Fix and upcoming MiFIR/MIFID review, the KID under the PRIIPs RTS, and finally the end of the UCITS KIID exemption. The implementation of any new requirements in tools and processes also requires appropriate time for implementation in advance, and this time-aspect has not been appropriately considered (usually, IT changes require at least 1.5 – 2 years of preparation time);
(iii) try to mimic the assessment required when providing investment advice to clients, known as ‘suitability’: There should be a clear divergence between suitability and appropriateness assessments because the latter is normally linked to non-advised services which means requirements under MiFID II are narrower in terms of assessing clients’ knowledge and experience, as well as, the complexity of the product; and
(iv) propose the introduction of sustainability risks and factors in the appropriateness assessment, when in reality it is the suitability assessment in the case of advised services which takes into account the client’s sustainability preferences. Guidelines on sustainability in relation to the appropriateness assessment, are thus not relevant.
We kindly ask that ESMA takes the above concerns into account when analysing our position in further detail.