07 May 2020

By Ciara Davies.

The statement is intended to draw firms’ and clients’ attention to the risks that this poses for retail clients and to remind investment firms of their conduct of business obligations under MiFID II.

ESMA believes that firms have even greater duties when providing investment or ancillary services to investors during these times of intensified market volatility, particularly when they are new or have limited investment knowledge or experience.

ESMA reminds firms of their obligation to act honestly, fairly and professionally in accordance with the best interests of their clients and to comply with all MiFID II conduct of business and organisational requirements.

Firms need to ensure that they have determined the target market and associated distribution strategy for the financial instruments that they manufacture or intend to offer. The target market assessment should be done in an appropriate and proportionate manner, taking into account the nature of the financial instrument and the investment service provided.

Firms need to provide appropriate information in good time to clients or potential clients and ensure that all information provided to clients shall be fair, clear and not misleading.

ESMA also reminds firms of the suitability and appropriateness requirements, highlighting in particular that firms should pay particular attention to the possible ramifications of the COVID-19 crisis on the client’s personal situation. ESMA stresses that this appropriateness assessment is particularly important for new clients wishing to invest in complex financial instruments.

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