The European Securities and Markets Authority (ESMA) has conducted a peer review
of how national regulators (national competent authorities or NCAs) supervise
MiFID conduct of business rules on providing fair, clear and not misleading information
to clients.
The peer review focused on NCAs’ organisation, supervisory approaches, monitoring
and complaints handling in relation to information and marketing communications
under MiFID. The Report found that there was overall a high degree of compliance
amongst NCAs with the good practices identified in these key areas. However, a
variety of approaches were observed, leading to different intensity of supervision.
A number of areas for improvement were identified. They include:
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enhanced use of on-site inspections and thematic reviews;
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a specific focus on conduct of business issues in firms’ risk assessments; and
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greater efforts to detect failings by firms in a timely manner.
The review was conducted on the basis of information provided by NCAs in a self-assessment
questionnaire and complemented by on-site visits to the NCAs of Cyprus, the Czech
Republic, Germany, Italy, Portugal, and the United Kingdom.
Steven Maijoor, ESMA Chair, said:
“Providing fair, clear and not misleading information to clients is essential
for investor protection and should be applied consistently throughout the EU.
This review is a major step forward in ensuring that progress is being made towards
convergence in this area by national regulators.
“The report provides a thorough insight and analysis of national supervisory
practices, facilitated by ESMA’s first on-site visits, and includes a number of
recommendations which I urge national regulators to consider when reviewing their
practices in this area”.
Key Findings
The review’s key findings covered the following areas:
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Ex-ante and ex-post supervision – supervisory systems are divided between ex-ante and ex-post reviews of marketing
material. Within the ex-post approach there is also divergence in terms of the
timeliness with which NCAs review the material following its dissemination and
consider complaints made by clients of firms;
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Direct and indirect supervision – while some NCAs directly supervise firms’ compliance with their obligations
relating to the provision of information and marketing material to clients, others
rely on annual checks performed by external auditors. The latter approach may
make it difficult to detect failings by firms in a timely manner due to the successive
sampling process employed by auditors and then the NCA s concerned;
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Complaints and Sanctions – a low level of complaints and equally low level of sanctions are reported by
NCAs in the area of information and marketing to clients; and
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Definition of information and marketing communication - There is no precise definition of the term marketing communication in EU law: this would need to be further defined in order to build effective
convergence of supervisory practices.
Recommendations for future work
The Report identifies a number of areas for future work by NCAs and ESMA which
could promote a more coherent cross-EU application of the requirements. These
include:
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establishing more robust structures and efficient coordination and cooperation
arrangements between different supervisory units within NCAs;
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defining a clear set of information and marketing material to be supervised;
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assessing the frequency of NCAs’ monitoring of investor information and marketing;
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assessing the adequacy of monitoring the distribution channels used by firms
including in the cross border provision of services;
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requiring investment firms to submit to their NCAs details of all information
and marketing material to be provided including material used for cross-border
business;
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considering the use of integrated databases to assist in supervision of information
and marketing to clients;
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assessing the frequency and consistency of the use of sanctions by NCAs; and
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assessing the implementation and effectiveness of the guidelines for complaints-handling
for the securities (ESMA) and banking (EBA) sectors.
In addition, ESMA should continue its efforts, including the use of Opinions,
in promoting the development of a level-playing field regarding the provision
of information in an understandable format to clients and the quality of service
to clients.
Notes for editors
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2014/1485 Peer Review Report: MiFID – Conduct of Business, fair, clear and not
misleading information;
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The review covered the period from 1 January 2010 to 30 June 2012. The on-site
visits took place between 04 December 2013 and 23 May 2014.
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The NCAs subject to on-site visits were BaFin (Germany); Comissao do Mercado
de Valores Mobiliários (Portugal), Consob (Italy), Cyprus Securities and Exchange
Commission (Cyprus), Czech National Bank (Czech Republic) and the Financial Conduct
Authority (United Kingdom).
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ESMA has issued the following Opinions in relation to MiFID client issues:
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ESMA is an independent EU Authority that was established on 1 January 2011 and
works closely with the other European Supervisory Authorities responsible for
banking (EBA), and insurance and occupational pensions (EIOPA), and the European
Systemic Risk Board (ESRB).
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ESMA’s mission is to enhance the protection of investors and promote stable and
well-functioning financial markets in the European Union (EU). As an independent
institution, ESMA achieves this aim by building a single rule book for EU financial
markets and ensuring its consistent application across the EU. ESMA contributes
to the regulation of financial services firms with a pan-European reach, either
through direct supervision or through the active co-ordination of national supervisory
activity.
Further information:
David Cliffe
Senior Communications Officer
Tel: +33 (0)1 58 36 43 24
Mob: +33 6 42 48 29 06
Email: press@esma.europa.eu