The main regulator of the EU financial markets, the European Securities and Markets Authority, has updated its ESMA MiFID II Investor Protection Q&A Document. Which topics did the watchdog cover in the recent copy of the document?
ESMA MiFID II Investor Protection Q&A Document Update
ESMA’s Q&A document focuses on the clarification of the implementation of investor protection topics under the Market in Financial Instruments Directive and Regulation (MiFID II/ MiFIR).
The new set of Q&A covers the topics of client classification, post-sale reporting, recording of telephone conversations and electronic communications. It also talks about such important points, as best execution practices, and information on costs and charges.
Some of the new questions that have been added to the Q&A document include (among many others):
- "How should firms and competent authorities understand the difference between “reasonable steps” and “sufficient steps”?"
- "How do the OTF best execution obligations apply when third-party brokers are clients of the OTF or when these brokers provide Direct Electronic Access (DEA) to the OTF (see Article 4(1)(41) of MiFID II)?"
- "Which internal telephone conversations or electronic communications regarding the handling of orders and transactions need to be recorded?"
- "Which methodology should an investment firm use when calculating the ‘costs related to transactions initiated in the course of the provision of an investment service’ for its ex-ante cost disclosure?"
MiFID II requirements deadline
MiFID I stands for Markets in Financial Instruments Directive (2004/39/EC). It has been applicable throughout the European Union since November 2007. The regulation aims to create a single financial market within the EU. Thus, it ensures the harmonized protection of the investors across its territory.
In October 2011, the initial directive got a revision. Nearly three years after MiFID II and MiFIR (the Regulation on Markets in Financial Instruments) were adopted by the European Parliament. The regulator has published the announcement in the EU Official Journal on 12 June 2014.
ESMA has announced the application date for MiFID II requirements – January 3, 2018. The key European Authority aims to further develop its Q&A on investor protection topics under MiFID II. The ESMA stated that it plans to add questions and answers in relation to the topic already covered. Moreover, it will introduce new sections for different MiFID II investor protection areas that did not appear yet in this document.
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