The European Securities and Markets Authority (ESMA) launched yesterday a consultation on draft guidelines on complex debt instruments and structured deposits. These guidelines are intended to enhance investor protection by offering further clarification on which types of financial instruments and structured deposits can be provided, that all the relevant legal conditions are fulfilled, without the firm assessing a client’s knowledge and experience (i.e. to carry out an appropriateness test).
The consultation paper (CP) sets out the draft guidelines for the assessment of
(i) bonds, other forms of securitised debt and money market instruments incorporating a structure which makes it difficult for the client to understand the risk involved; and
(ii) structured deposits incorporating a structure which makes it difficult for the client to understand the risk of return or the cost of exiting the product before term.
This CP also covers the concept of embedded derivative for debt instruments.
Who should read this paper
This paper is primarily of interest to competent authorities and firms that are subject to MiFID, in particular, investment firms and credit institutions performing investment services and activities. This paper is also important for trade associations, investors, and consumer groups, because the guidelines seek to implement enhanced provisions to ensure investor protection with potential impacts for anyone engaged in dealing with or processing of financial instruments.
ESMA invites comments on all matters in this paper and in particular on the specific questions summarised in Annex 1. Comments are most helpful if they:
• respond to the question stated;
• indicate the specific question to which the comment relates;
• contain a clear rationale; and
• describe any alternatives ESMA should consider.
All contributions should use the response form and be submitted online at www.esma.europa.eu under the heading ‘Your input – Consultations’.
The consultation will be open until 15 June 2015. ESMA expects to publish final guidelines in Q4 2015.
Publication of responses and data protection
All contributions received will be published following the close of the consultation, unless you request otherwise. Please clearly and prominently indicate in your submission any part you do not wish to be publically disclosed. A standard confidentiality statement in an email message will not be treated as a request for non-disclosure. A confidential response may be requested from ESMA in accordance with ESMA’s rules on access to documents. ESMA may consult you if they receive such a request. Any decision ESMA makes not to disclose the response is reviewable by ESMA’s Board of Appeal and the European Ombudsman. Information on data protection can be found at www.esma.europa.eu under the heading Legal Notice.