The FSMA, the Financial Services and Markets Authority, publishes a new educational brochure presenting a summary of the rules arising from MiFID I and MiFID II. The brochure should help raise consumers’ awareness of their rights and of the obligations binding on the firms which provide investment services to them.
MiFID is the abbreviation for the European ‘Markets in Financial Instruments Directive’. This is a European legislative text that came into force in 2007 and regulates services relating to financial instruments rendered by regulated companies[1] (investment services). One of the principal objectives of the Directive is the harmonization of investor protection across Europe. MiFID II, which came into force in 2018, reinforces MiFID I.
The FSMA is responsible for supervising compliance with the conduct of business rules by the regulated companies. In the course of exercising its supervision, the FSMA carries out inspections aimed at verifying whether the regulated companies abide by the rules in force when providing investment services to their clients. Where shortcomings are identified, the FSMA may issue orders, adopt specific measures, formulate recommendations or raise points for consideration.
Alongside its supervision of sector participants, the FSMA intends to ensure that consumers be well informed of their rights. They should be able to rely on correct financial services and to buy financial products in line with their wishes and needs. That is why the new brochure published by the FSMA provides information on the different protection mechanisms established by MiFID I and MiFID II.
The brochure gives an overview of the different obligations imposed on firms both before, during and after the investment by the client.
Depending on the type of service requested by the client (order to buy or sell a financial product, investment advice or portfolio management), different degrees of protection will apply. The firm will, in some cases, provide an execution‑only service, while in others it will have to conduct a preliminary appropriateness or suitability test.
The brochure further details the information that should be provided to the client before, during and after a transaction and addresses the requirements that firms must meet with regard to the prevention of conflicts of interest, inducements and the handling of complaints.
The brochure is available on the website of the FSMA, in English, French and Dutch.
[1] 'Regulated companies' refers inter alia to credit institutions, portfolio management and investment advice companies and stockbroking firms.