ESMA Report on the 2023 Common Supervisory Action and Mystery Shopping Exercise on marketing
On 27 May 2024, ESMA published a report (the “ESMA Report”) on its 2023 Common Supervisory Action (“CSA”) with National Competent Authorities (“NCAs”) and its Mystery Shopping Exercise (“MSE”) related to marketing disclosure rules under MiFID II.
The findings related to marketing organisation and procedures of firms (including drafting, approval and review of marketing communications) as well as outsourcing arrangements, record-keeping and complaints handling. The ESMA Report included also findings on the contents of marking communications to client and potential clients and whether they comply with MiFID II requirements.
ESMA will maintain communication with NCAs regarding this matter and share information on their intended follow-up measures. Additionally, ESMA will evaluate if the implementation of supervisory convergence tools is necessary to enhance a robust supervisory environment throughout the EU; it will encourage efficient, prudent, and uniform supervision concerning marketing communications, including advertisements.
Updates to ESMA Q&A
On 28 May 2024, ESMA has updated its questions and answers related to reporting of accumulator contracts under MiFIR. With this update, ESMA clarified how the accumulators should be classified for the purpose of transaction data reporting.
ESMA guidance statement to firms using artificial intelligence in investment services
On 30 May 2024, ESMA has issued a statement providing initial guidance to firms using Artificial Intelligence technologies (AI) when providing investment services to retail clients. ESMA emphasizes that firms must comply with MiFID II requirements, particularly regarding organizational aspects, business conduct, and the obligation to act in the client's best interest. While AI offers benefits, it also presents risks like algorithmic biases and data quality issues, opaque decision-making, overreliance in the context of decision-making, and privacy and security concerns related to data handling. Possible applications of AI by investment firms that fall under the scope of MiFID II requirements encompass customer assistance, fraud identification, risk control, regulatory compliance, and aiding firms in delivering investment guidance and portfolio management services. ESMA and the NCAs will continue to monitor the utilization of AI in investment services and assess the applicable EU regulatory framework to ascertain if additional measures are warranted in this domain.
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