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#1 06-03-2020 13:37:45

johnedward
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From: Paris - France
Registered: 21-12-2009
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CySEC will visit brokers to ensure of their compliance with MiFID II

CySEC will visit brokers to ensure of their compliance with MiFID II rules


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Today, CySEC issued a circular to inform forex brokers that it regulates of its actions in response to this year's Joint Supervisory Approach on the "adequacy requirements of MiFID II" that the ESMA announced last month.

The European Financial Markets Authority is launching CSA 2020 with the competent national authorities regarding the application of MiFID II rules on European soil. The CSA (common surveillance approach) will be carried out this year, and will focus on the application of the assessment of the adequacy as it is carried out by the relevant brokers.

Under the CSA, the Cypriot regulatory authority intends to carry out visits and reviews on a sample of regulated brokers which provide forex trading services, investment advice and/or portfolio management. This action should allow the CySEC to assess the way in which regulated brokers apply the MiFID II adequacy requirements. It is also intended to help the regulator assess whether, and how, the costs of investment products are taken into account by regulated brokers when they recommend an investment product to a client and/or when they provide portfolio management services.

CySEC advises the brokers it regulates to ensure that they fully comply with the MiFID II compliance rules.

One of the main obligations to protect traders is the assessment of adequacy. It applies to the provision of investment advice (whether independent or not) and to trading portfolio management. In accordance with the obligations set out in Article 25 of MiFID II and Articles 54 and 55 of the MiFID II Delegated Regulation, brokerages that provide investment advice or portfolio management services must provide make appropriate personal recommendations to their traders or make appropriate investment decisions on behalf of them.

This adequacy must be assessed according to traders' knowledge and experience, their financial situation and their investment objectives. To do this, brokers must obtain the necessary information from their traders.

The obligations have been strengthened and detailed by requiring the following:

Arrow reference to the fact that the use of IT systems to make recommendations or personal decisions in trading doen't reduce the broker's liability to its traders;
Arrow the obligation for brokers to provide traders with a statement on adequacy;
Arrow the obligation for brokers carrying out an assessment of adequacy to assess, taking into account costs and complexity, whether equivalent products can meet the needs of their traders;
Arrow the obligation for brokers to analyse the costs and benefits of switching from one investment to another;
Arrow the reinforced obligation for brokers to take into account the risk tolerance of traders and their ability to support losses;
Arrow extension of the adequacy requirements to structured deposits.

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