ESMA is fully supportive of Commission’s objective to take a holistic view of investor protectionrules and to make the EU an even safer place for individuals to save and invest long-term andthus to increase participation of retail investors in capital markets.
On 21 February 2022 the European Commission (Commission) published a consultation
document1 to complement the 2021 Commission consultation on its retail investment strategy
and explore the feasibility of a new retail assessment to improve the current suitability and
appropriateness tests. The published consultation document states that the suggested
approach might “modify the current MIFID II/IDD suitability and appropriateness tests with the
view to no longer differentiate among the various investment services offered to retail
investors”, and it might replace the current “’per product’ approach with a new element, a
personalised asset allocation strategy.”
ESMA is fully supportive of Commission’s objective to take a holistic view of investor protection
rules and to make the EU an even safer place for individuals to save and invest long-term and
thus to increase participation of retail investors in capital markets. MiFID II has already taken
important steps towards putting clients’ interest at the heart of the provision of investment
services and ESMA supports further emphasis on a client-focused approach.
ESMA observes that the suitability assessment, together with appropriateness, are two of the
key requirements for investor protection in the MiFID II framework and both have been at the
centre of supervisory and policy work over the past years. On these topics, ESMA has issued
two sets of guidelines2, various Q&As3, two supervisory briefings4 and has conducted two Common Supervisory Actions (CSAs) to ensure consistent implementation and application of
EU rules and to enhance the protection of investors.
With this in mind, we welcome any proposal to strengthen this crucial framework and would be
happy to contribute to the Commission’s further thinking in this area.
At this stage, some key elements of the Commission’s proposal appear open, understandably,
in the consultation document including, among others, on who should prepare the clients’
assessment and their asset allocation strategy, on the articulation of responsibilities among
various entities potentially involved in the value chain5, the methods for determining the asset
allocation strategy, the investors’ level of discretion concerning the proposed investment
strategy, the extent of information to be transferred. It is therefore challenging to clearly identify
and analyse all supervisory and investor protection aspects stemming from the envisioned
framework. Nevertheless, ESMA would like to use the opportunity of this letter to convey its
observations on some elements of the Commission proposals.
More specifically, ESMA would like to bring to the Commission’s attention the following points:
• The proposal to apply a unique and standardised retail investor assessment regime
that no longer differentiates among the various investment services might raise
questions of whether a “one size fits all” approach can effectively serve all different
types of retail investors and situations. The existing regulatory regime has been
designed to serve retail clients with different needs and approaches to investing. It
encompasses services such as portfolio management (that implies a full delegation of
investment decisions to the investment firm), investment advice (that is based on a
personal recommendation proposed to the client) and services of reception,
transmission and/or execution of orders that allow self-directed investors to
independently make their own investment decisions (with or without an assessment of
the client’s ability to understand the risk of a given investment opportunity, on the basis
of its complexity and the initiative of the client).
ESMA supports the simplification of the regulatory framework. At the same time, ESMA
notes that the design of a new standardised regime would need to fully take into
account the needs of the different kinds of investors and safeguard the principle of
proportionality....
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