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What’s next? The final report has been submitted to the EU Com- mission on 11 December 2015. The EU Commission has three months to decide whether to endorse the technical standards. However, this period can be ex- tended by one additional month. The publication of the above mentioned ITS follows two other sets of Technical Standards on the imple- mentation of MiFID II published in June and Septem- ber. ESMA’s different sets of Technical Standards have been sent for approval to the European Com- mission. MiFID II EU - ESMA publishes final guidelines on MiFID II requirements for knowledge and competence Background Directive 2014/65/EU on markets in financial instru- ments (“MiFID II” - available here) entered into force on 2 July 2014. According to Article 25(1) of MiFID II, investment firms have to “ensure and demonstrate to com- petent authorities on request that natural persons giving investment advice or information about fi- nancial instruments, investment services or ancillary services to clients on behalf of the investment firm possess the necessary knowledge and competence to fulfil their obligations under Article 24 (ie general principles and information to clients) and this Article (ie assessment of suitability and appropriateness and reporting to clients). On 23 April 2015, ESMA published a consulta- tion paper on draft guidelines for the assessment of knowledge and competence under MiFID II (ESMA/2015/753 – available here). The consultation closed on 10 July 2015. What’s in there? On 17 December 2015, ESMA published the final re- port on guidelines for the assessment of knowledge and competence (ESMA/2015/1886, the “Guide- lines”). The below highlights the Guidelines main features: A - Criteria required for the assessment of knowl edge and competence of staff member providing

information on investment products, investment services or ancillary services. « Staff members shall be able to understand : - the investment services and the investment prod- ucts which they provide to the client or which is being offered or recommended (key characteris- tics, risk and features, total amount of costs and charges to be incurred by the client, impact of the financial markets and other events on the value and pricing of the investment products). - the difference between past performance and fu- ture performance scenarios as well as the limits of predictive forecasting; - Staff members shall be able to assess the data relevant to the investment products on which they provide information to clients such as KIID, prospectuses, financial statements, or financial data; « Staff members shall have basic knowledge of valu- ation principles for the type of investment products offered or recommended to clients; B - Enhanced requirements for the assessment of knowledge and competence of staff providing in- vestment advice on investment products. Staff providing investment advice shall take the fol- lowing actions: « Take into account the complexity of products when providing advice on investment products; « Perform suitability tests and understand how the type of investment product provided by the firm may not be suitable for the client considering its profile: « Understand the fundamentals of managing a portfolio, including being able to understand the implications of diversification regarding individual investment alternatives. C - Investment firms organisational requirements to assess, maintain and update knowledge and competence. « Establish a process to ensure that a clear distinc- tion is made between the role of “giving advice” and the role of “giving information” on investment products; « Ensure the adequacy of the knowledge and com- petence of staff member through ongoing training; « Carry out internal or external reviews of suitability assessments; « Submit upon request to the management body of records concerning knowledge and competence; « Supervise staff without appropriate qualification or experience;

« Ensure staff is familiar with the firm’s conflicts of interest policy and with the regulatory framework on the reception/payment of inducements. These guidelines specify that all staff members (new and existing) are subject to knowledge and compe- tence requirements according to relevant regulatory and legal requirements, and business ethics stand- ards. Exemption to the Guidelines is only granted to staff member distributing documentation (bro- chures, KIID, leaflets, etc.) or back office employees without any direct contact with the client. What’s next? The guidelines will be published on the ESMA web- site and shall come into effect on 3 January 2017. UCITS V The EU Commission proposes level 2 measures on UCITS V Background Directive 2014/91/EU namely the UCITS V Directive, entered into force on 25 September 2014. It will ap- ply from 18 March 2016 onwards. The UCITS V Directive is largely aligning the UCITS requirements as regards to the depositary and re- muneration with AIFMD. What’s in there? On 17 December 2015, the EU Commission pub- lished a proposal for a Commission Delegated Reg- ulation (the “Proposal”) supplementing the UCITS IV Directive with regard to the depositaries functions. The depositaries functions as set forth in the Propos- al specify the depositaries obligations which are for most of them aligned to the Commission Delegated Regulation 213/2013 on the AIFM depositary duties except for areas where UCITS level 1 text differ from AIFMD requirements (re-use of assets, insolvency protection, liability discharge, independence of de- positary, etc.). The delegated acts shall enter into force in Sep- tember 2016, 6 months after the entry into force of UCITS V (18 March 2016). THE GUIDELINES ARE AVAILABLE HERE.

THE PROPOSAL IS AVAILABLE HERE.

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