EUROPE: ESMA tells firms to improve their selling practices for complex financial products

Monday February 10 2014

The European Securities and Markets Authority (ESMA) has published an Opinion on practices to be observed by investment firms when selling complex financial products to investors. ESMA has issued the opinion to remind national supervisors and investment firms about the importance of requirements governing selling practices under MiFID (Markets in Financial Instruments Directive).

ESMA is concerned that firms’ compliance with the MiFID selling practices when selling complex products may have fallen short of expected standards. The concerns relate mainly to the suitability and appropriateness of complex products that are increasingly within the grasp of retail investors. The Opinion sets out ESMA’s minimum expectations with respect to the conduct of firms when selling complex products to retail investors.

The areas covered by the Opinion relate to:

• firms’ organisation and internal controls;
• the assessment of the suitability or appropriateness of certain products;
• disclosures and communications in relation to products; and
• compliance monitoring of the sales functions.

Click on the above link for more details.