MiFID II Update: ESMA launches consultation on criteria for the assessment of competence

MiFID II Update: ESMA launches consultation on criteria for the assessment of competence

On the 23rd April 2015, the European Securities and Markets Authority (ESMA) launched a consultation on draft guidelines (which it is required to develop in terms of Article 25(9) of MiFID II) specifying criteria for the assessment of knowledge and competence of natural persons in investment firms that provide investment advice or information about financial instruments, investment services or ancillary services to clients.

The aim of ESMA’s said guidelines is clearly to bolster investor protection by establishing a knowledge and competence framework that will set principles for individuals in MiFID firms that give investment advice or information about financial instruments, investment services or ancillary services to clients on behalf of the investment firm.

The aim of ESMA’s guidelines is clearly to bolster investor protection by establishing a knowledge and competence framework that will set principles for individuals in MiFID firms that give investment advice

In its consultation ESMA has proposed that such criteria should be met by attaining an “appropriate qualification” and “appropriate experience” and sets out the areas of knowledge and competence that need to be assessed in order to provide investment advice, including a solid understanding of:

  • the key characteristics, complexity and total costs of relevant products or services;
  • how the market functions, the market structure, and the impact of economic data;
  • how to use relevant data sources and valuation principles; and
  • the relevant regulatory requirements and the firm’s internal procedures designed to ensure compliance with MiFID II.

To this end, ESMA is proposing that national competent authorities or other appropriate bodies should determine the list of appropriate qualifications or criteria for the assessment of qualifications.

The consultation will close on the 10th July 2015 and it is anticipated that ESMA’s final guidelines will be published over the course of Q4, 2015.

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