Tuesday December 1 2015

News Source: Global Exchanges

Focus: Fixed Income

Type: General




The European Securities and Markets Authority has published the Final Report on guidelines on complex debt instruments and structured deposits.

The guidelines are intended to enhance investor protection by identifying complex financial instruments and structured deposits for which the provision of execution-only services is not possible (i.e. the firm has to ask information on client’s knowledge and competence in order to carry out an appropriateness test).

According to Article 25(10) of MiFID II the guidelines are developed for the assessment of:

  • bonds, other forms of securitised debt and money market instruments incorporating a structure which makes it difficult for the client to understand the risk involved; and 
  • Structured deposits incorporating a structure which makes it difficult for the client to understand the risk of return or the cost of exiting the product before term.

The guidelines also cover debt instruments embedding a derivative.

The final report includes the following:

Section II briefly illustrates the guidelines following the responses to the consultation. Section III contains the Annexes: Annex I provides the Summary of questions raised in the CP, Annex II describes the legislative mandate, Annex III reports the cost-benefit analysis, Annex IV explains the detailed feedback on the responses received to the CP, Annex V contains the final text of the guidelines and includes a summary of a non-exhaustive list of examples of complex products for the purpose of these guidelines.

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