Financial Crime World

Malta Financial Regulators Gear Up for New ESMA Guidelines on Investor Protection

Introduction

The European Securities and Markets Authority (ESMA) has published new guidelines aimed at ensuring a uniform standard of investment protection across the European Union. These guidelines cover certain aspects of the appropriateness and execution-only requirements under Directive 2014/65/EU (MiFID II) and Commission Delegated Regulation (EU) 2017/565.

Background

The guidelines were published following a public consultation last year, during which ESMA received feedback from multiple stakeholders and the Securities and Markets Stakeholders Group. This move is part of a common supervisory action (CSA) conducted by ESMA in 2019 to review data collected on the application of the appropriateness assessment and execution-only requirements.

Key Topics Covered

The new guidelines aim to foster greater transparency and clarity for investors when receiving non-advised services from financial institutions operating within EU Member States. The key topics covered include:

  • Information Disclosure: Ensuring that clients receive clear and transparent information about investment products.
  • Assessment of Client Knowledge and Experience: Evaluating the knowledge and experience of clients to determine their suitability for specific investment products.
  • Extent of Information Collection: Defining the scope of information required from clients to conduct an appropriateness assessment.
  • Reliability of Client Data: Ensuring the accuracy and reliability of client data used in investment decisions.
  • Record-Keeping: Maintaining accurate records of client interactions and transactions.
  • Internal Controls: Implementing internal controls to ensure compliance with ESMA guidelines.
  • Monitoring Arrangements: Establishing monitoring arrangements to review and update appropriateness assessments.

Goals

According to ESMA, the guidelines are designed to:

  • Ensure that investors receive a clear understanding of investment products and are matched with appropriate products.
  • Guarantee the qualifications of employees working for MiFID firms.
  • Identify situations where an appropriateness assessment is required.

Implementation

The guidelines will come into effect six months after their publication on ESMA’s website in all official EU languages, marking the beginning of a new era for investor protection in Malta.