ESMA Updates on MIFID II and MIFIR Investor Protection

ESMA (European Securities and Markets Authority) today updates its Questions and Answers on the implementation of investor protection issues. That is under the markets in Financial Instruments Directive and Regulation (MiFID II / MiFIR)

04 December, 2019 | AtoZ Markets – The update brings a new answer on the subject of the product intervention. That is to say, on the restrictions concerning the offering of CFDs to retail customers and the binary options ban.

ESMA Updates on MIFID II and MIFIR

In particular, the updating concerns the application of national intervention measures on products in the case of services provided on a cross-border basis. The competent national authorities (NCAs) may take intervention measures on products. That is under Article 42 of the Markets in Financial Instruments Regulation (EU) No 600/2014 (MiFIR) in or from their Member State. ESMA has approved most of these measures, but restrictions may differ from country to country.

The question that many brokerages are facing is: which national product intervention measures should a company apply in the case of cross-border provision of investment services?

ESMA explains that when two NCAs adopt product intervention measures that apply both in and from their Member State. And those are different from each other investment firms need to comply with the product intervention measures. That is applicable in the Member State where they authorized in the case of cross-border provision of investment services. And also, the product intervention measures are applicable in a Member State where the customer is established.

For instance, if Member State (MS) A adopts more stringent measures than MS B, firms from MS B have to comply with the national product intervention measures for the MS A. That is in respect of cross-border activity provided to MS A.

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The Product Intervention Measures Apply to Firms 

Product intervention measures in a Member State apply from that Member State. This implies that the intervention measures on products apply to undertakings when marketing, distributing, or selling financial instruments MiFID also to clients located in third country jurisdictions, without prejudice to any local laws and/or regulations.

Companies should consider factors such as the client’s habitual residence based on the information collected the client integration process as part of the know-your-customer assessment to determine the client’s location.

National product intervention measures may contain specific rules concerning their territorial scope. Therefore, when providing cross-border investment services, companies should ensure compliance with product intervention measures.

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