Since our last newsletter on the topic, the European Securities and Markets Authority (“ESMA”) updated a number of its Q&A regarding the Markets in Financial Instruments Directive – Directive 2014/65/EU of 15 May 2014 (“MiFID II”) and the Markets in Financial Instruments Regulation – Regulation
No. 600/2014 of 15 May 2014 (“MiFIR”) on the following topics:
- Q&A on ESMA’s temporary product intervention measures on the marketing, distribution or sale of CFDs and Binary options to retail clients;
- Q&A on MiFID II and MiFIR transparency topics;
- Q&A on MifID II and MiFIR commodity derivatives products;
- Q&A on MiFID II and MiFIR market structures topics, and
- Q&A on MiFIR data reporting.
We will focus here on just a few of the updates to the Q&A on investor protection and intermediaries topics in the field of investment advice on an independent basis and inducements.
Firstly, in the field of independent investment advice, the question was posed whether an investment firm can hold itself out as providing investment advice on an independent basis in a scenario where it only offers financial instruments issued or provided by itself or by entities having close links to it, if a look-through approach is taken, on the basis that the financial instruments offered (e.g. wrappers/investment funds) allow an investment in entities without close links. ESMA has answered in the negative, and confirmed that a look-through approach is not appropriate. When determining the range of financial instruments assessed by it, it should consider the financial instruments (directly) offered by the investment firm.
On the subject of inducements, ESMA confirmed that a free trial period of research services would qualify as an inducement (i.e. a non-monetary benefit) where it is provided in connection with the provision of an investment service or ancillary service. In light of Article 12(3)(e) of Commission Delegated Directive (EU) 2017/593 supplementing Directive 2014/65/EU with regard to safeguarding of financial instruments and funds belonging to clients, product governance obligations and the rules applicable to the provision or reception of fees, commissions or any monetary or non-monetary benefits (the “MiFID II Delegated Directive”) which provides that Member States may qualify certain “minor non-monetary benefits” as acceptable, ESMA went on to clarify the circumstances in which a free trial period of research services may qualify as non-monetary benefits under Article 12(3)(e) of the MiFID II Delegated Directive.
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