EFAMA comments on CESR’S consultation paper understanding the definition of advice under MiFID
15 December 2009
EFAMA disagrees with several of CESR’s conclusions regarding the distinction between the provision of personal recommendations and general information. While agreeing with the diagram/decision tree, our members would like to see objective criteria and tests playing a role in the definition of personal recommendation.
First and foremost, we disagree with the notion expressed in Para. 5 and Para. 20 that it is sufficient for the client to reasonably believe that a personal recommendation is being provided (in Para. 5 in reference to a recommendation, and in Para. 20 in reference to research material). The decision whether a specific communication to a client qualifies as personal recommendation should be based on an objective test, not simply on the subjective beliefs of the client or prospective client.
To be deemed a personal recommendation for the purposes of advice provision, “that recommendation must be presented as suitable for that person, or must be based on a consideration of the circumstances of that person”2, so a personal recommendation should be based on all the personal circumstances of that person.
In reference to CESR’s argumentation on the distinction between providing information and providing a recommendation, we are concerned by the fact that CESR’s paper does not take into account the possibility of direct distribution by fund producers. Such direct distribution will obviously focus on their own product range, and in that case CESR’s example in Para. 16 (where “placing special emphasis on the advantages of one product” seems to equate to biased information) might apply. Even in such a situation, however, it should be distinguished whether there is a true personal recommendation being provided or a simple provision of information on a product, and the language in this paragraph should therefore be modified.
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