Gillian Kelly, Shane Garahy and Michael Slevin of our Risk Consulting team explain the key findings, considerations and how KPMG can assist in addressing the weak practices identified by the CBI. What's in the "Dear CEO" letter from the Central Bank? focused on impact or to exclude some investments due to environmental, social or ethical concerns; Ensure that the definition of sustainability preferences recognises the different capacity of financial instruments to effectively fund sustainable economic activities (equities or bonds vs synthetic ETFs or derivatives); Require a sustainable by default basic product offer; Ensure advisors receive comprehensive professional training on sustainability requirements and requiring certification; Develop a new Q&A on sustainability preferences and key sustainability-related terms; Establish the minimum criteria for sustainable investments and products with ESG criteria under SFDR (see this joint NGOs. The investment firm must make a suitability assessment for individual portfolio management or advice regarding financial instruments. This implies that the investment firm must obtain information from the client before it provides investment advice or individual portfolio management. %PDF-1.6 % endstream endobj startxref Eurosif fully supports the need to integrate consideration of client sustainability preferences into the existing suitability assessments, especially in light of the increased demand for, and marketing of sustainable investment products. On January 2022, ESMA opened a public consultation on certain aspects of suitability requirements under the Markets in Financial Instruments Directive (MiFID II), in order to update its guidelines following amendments to MiFID II relating to sustainability. The Dear CEO Letter, published on 1 December 2021, details the outcome of their inspection and firms are now required to conduct an in-depth review of their sales practices and suitability programmes with reference to the letter, while also taking mitigating action on any formal findings issued to them as part of the CSA. For more detail about the structure of the KPMG global organisation please visit https://home.kpmg/governance. In the event of asset management, such a report should be provided periodically. Finance Watch urges policymakers to properly integrate sustainability preferences into suitability assessments and recommends several improvements of investors rights with regard to sustainable finance products. the MiFID II suitability assessment. Follow us on Twitter, Facebook and LinkedIn. In addition, under MiFID II, an investment firm must provide a report to a client for each advice given in case of an investment advice. The investor protection is enhanced due to stricter and new rules of conduct under MiFID II. Eurosif appreciates the opportunity to respond to ESMAs consultation on the draft Guidelines on certain aspects of the MiFID II suitability requirements. Since the publication of the CSA, the CBI has engaged with all authorised firms to determine if they are taking all reasonable steps to ensure that a clients investments align to their investment objectives and personal circumstances. MiFID II position paper Investing not betting, Consultation on integrating sustainability risks and factors in MiFID II, A green supporting factor would weaken banks and do little for the environment, Capital requirements: a silver bullet against the looming climate-induced financial crises, Finance Watch response to the ESMA consultation on guidelines for MiFID II suitability requirements. Receive our monthly digest in English, French or German, Our financial independence allows us to work and speak freely, We craft our positions and our workplan with our members. %%EOF Many of the rules in MiFID II are comparable to existing rules; however, there are also a number of changes. All rights reserved. Get the latest KPMG thought leadership directly to your individual personalised dashboard, Download a PDF version of this article Opens in a new window, View Print friendly version of this article Opens in a new window. 373 0 obj <>stream MiFID II: the need to improve suitability assessments, Investor protection, suitability & fair treatment of clients. Properly deal with the issue of conflicts of interest that arise where advisors receive inducements to distribute certain products and prevent it under MiFID II. Properly integrating sustainability preferences into suitability assessment is essential in the context of the EU sustainable finance agenda and regulatory framework. 2022 KPMG, an Irish partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. Position paperInvesting not bettingon MiFID II, the EUs revised Markets in Financial Instruments Directive. According to MiFID II, the suitability assessment also applies to management of or advice on structured deposits. hb```R> eaI8rI85|U``0[uu%@3-z> -9GDh Zu"JQ}A0!yo4``` BJ@HHi%PH v40w40i40*@>G!YEXPF'&=,0ogQaQcb|:s2`[%2@Ad. Read more about the supervision of the AFM. In February 2020, the European Securities and Markets Authority (ESMA) announced the launch of a Common Supervisory Action (CSA) on the application of MiFID II suitability rules, with the aim of assessing how firms comply with suitability requirements. Press release 24 April 2012. (Regulation of Retail Credit and Credit Servicing Firms) Bill 2021, Risk management should be embedded within the culture of the organisation. Allow the definition of sustainability preferences to cover a wider range of sustainability-related options and strategies especially in light of the current limitations of the EU Taxonomy and SFDR-related product categories and concepts. The AFM is committed to promoting fair and transparent financial markets. The revision of MiFID I leads to important changes in rules and regulations with regard to investor protection. These are products of which the return depends on, for example, a market index. Copyright AFM 2022 - all rights reserved, Investor protection - Suitability assessment, Assessment management and supervisory board, Commodity derivatives and emission rights, Securitisation Regulation transparency requirements, Read more about the supervision of the AFM. Disclaimer Eurosif is not an investor. The aim is to enable clients to express their preference for specific type of investments, e.g. This engagement was carried out via desktop review and virtual inspections with selected firms, to determine whether suitability steps were in place to ensure investments do not exposure clients to the risk of purchasing products that do not align to their needs. Sustainability preferences must be part of suitability assessment on an equal footing with its other components. EUROSIF 2021 PRIVACY POLICY COOKIES POLICY, Eurosif response to the ESMA consultation on guidelines re. The assessment of suitability is a crucial protection for investors under MiFID II. In our response, we provide feedback aimed at improving the draft guidelines and we point out several level 1 issues which have strong implications for the integration of sustainability considerations in the suitability test. As outlined in the Consultation Paper, the assessment of suitability is one of the most important elements for investor protection in the MiFID II framework. ESMA will consider the feedback it receives to the consultation in Q2 2022 and expects to publish a final report in Q3 2022. As an independent market conduct authority, we contribute to a sustainable financial system and prosperity in the Netherlands. 335 0 obj <> endobj For finance to become truly sustainable, we need to think differently about its development and about how it impacts on society and the economy. Eurosif strongly encourages any efforts to increase the supply of sustainable investment products, and to drive up the level of ambition when it comes to the integration of sustainability preferences in financial products. Also in , an investment firm must clearly indicate whether a suitability assessment is performed periodically with regard to the existing portfolio. 0 These guidelines need to ensure that advisors are able and required to guide clients towards the right products for them and their objectives. It is not authorized to distribute investment proposals to its members and will not respond to such solicitations. This review must consider ESMAs public statement on the results of the CSA and requires documentation and board approved action plans by the end of Q1 2022. In this report, the investment firm must explain why it believes that the investment advice is suitable based on the client information that was obtained. hbbd```b``n3d'd"A`rF`j. `] "@l*- L30R3@ Z Get our monthly newsletter with the most important news delivered to your email inbox - and occasional one-off emails with new cartoons, events and other materials about our work. How can businesses protect against potential consumer & investor harm? 358 0 obj <>/Filter/FlateDecode/ID[<142A9D3382FB6748A5D99A6638B1D845>]/Index[335 39]/Info 334 0 R/Length 110/Prev 316405/Root 336 0 R/Size 374/Type/XRef/W[1 3 1]>>stream ESMA could use the opportunity of collecting feedback and drafting guidance to raise these issues with the European Commission, European Parliament and the Council of the EU. Join us.
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