ESMA reviews supervisory practices on MiFID investor information

12 December 2014

The peer review focused on NCAs’ organisation, supervisory approaches, monitoring and complaints handling in relation to information and marketing communications under MiFID.

ESMA conducted a peer review of how national regulators (national competent authorities or NCAs) supervise MiFID conduct of business rules on providing fair, clear and not misleading information to clients.

The Report found that there was overall a high degree of compliance amongst NCAs with the good practices identified in these key areas. However, a variety of approaches were observed, leading to different intensity of supervision. A number of areas for improvement were identified. They include:

• Enhanced use of on-site inspections and thematic reviews
• A specific focus on conduct of business issues in firms’ risk assessments
• Greater efforts to detect failings by firms in a timely manner

The review was conducted on the basis of information provided by NCAs in a self-assessment questionnaire and complemented by on-site visits to the NCAs of Cyprus, the Czech Republic, Germany, Italy, Portugal, and the United Kingdom.

Steven Maijoor, ESMA Chair, said: “Providing fair, clear and not misleading information to clients is essential for investor protection and should be applied consistently throughout the EU. This review is a major step forward in ensuring that progress is being made towards convergence in this area by national regulators. The report provides a thorough insight and analysis of national supervisory practices, facilitated by ESMA’s first on-site visits, and includes a number of recommendations which I urge national regulators to consider when reviewing their practices in this area”.

The review’s key findings covered the following areas:

• Ex-ante and ex-post supervision – supervisory systems are divided between ex-ante and ex-post reviews of marketing material. Within the ex-post approach there is also divergence in terms of the timeliness with which NCAs review the material following its dissemination and consider complaints made by clients of firms


• Direct and indirect supervision – while some NCAs directly supervise firms’ compliance with their obligations relating to the provision of information and marketing material to clients, others rely on annual checks performed by external auditors. The latter approach may make it difficult to detect failings by firms in a timely manner due to the successive sampling process employed by auditors and then the NCA?s concerned


• Complaints and Sanctions – a low level of complaints and equally low level of sanctions are reported by NCAs in the area of information and marketing to clients


• Definition of information and marketing communication - There is no precise definition of the term marketing communication in EU law: this would need to be further defined in order to build effective convergence of supervisory practices

The Report identifies a number of areas for future work by NCAs and ESMA which could promote a more coherent cross-EU application of the requirements. These include:

• Establishing more robust structures and efficient coordination and cooperation arrangements between different supervisory units within NCAs


• Defining a clear set of information and marketing material to be supervised


• Assessing the frequency of NCAs’ monitoring of investor information and marketing


• Assessing the adequacy of monitoring the distribution channels used by firms including in the cross border provision of services


• Requiring investment firms to submit to their NCAs details of all information and marketing material to be provided including material used for cross-border business


• Considering the use of integrated databases to assist in supervision of information and marketing to clients


• Assessing the frequency and consistency of the use of sanctions by NCAs


• Assessing the implementation and effectiveness of the guidelines for complaints-handling for the securities (ESMA) and banking (EBA) sectors

ESMA should continue its efforts, including the use of Opinions, in promoting the development of a level-playing field regarding the provision of information in an understandable format to clients and the quality of service to clients.

Full press release

Full report

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