Tisa’s MiFID II guide to reduce mis-selling risk

Industry body Tisa has published a MiFID II guide to help investment firms avoid selling inappropriate products.

The guide may help in reducing mis-selling risk, which some see as a possibility for product providers under the Markets in Financial Instruments Directive II, or MiFID II as it is known.

The directive contains an ‘appropriateness assessment’ to prevent inexperienced customers investing in complex products, which Tisa lists as investment trusts, non-Ucits retail schemes (Nurs) and regulated alternative investment funds, or “Aifs”. Nurs, for example, are allowed to invest in a wider choice of assets than Ucits-regulated funds and have less stringent rules about portfolio concentration.

All Ucits funds will be considered non-complex and therefore not subject to the test.

Tisa’s guide – which is called ‘MiFID II – Appropriateness Approach to Implementation’ – recommends that complex products should be assessed on a case-by-case basis. 

Jeffrey Mushens, technical policy director at Tisa, said the number of firms that have to perform appropriateness tests will increase when MiFID II is implemented on January 3, 2018.

“The directive makes it clear that there is a responsibility on the product manufacturer and the distributor to ensure that complex products are appropriate for customers buying without advice.”

He added: “If the investor fails the appropriateness test, they still may be allowed to buy the product, but a warning will be given saying that it may not be appropriate. The directive increases expectations on existing systems and controls.”

Mis-selling was a subject touched on at a recent Funds Europe MiFID II roundtable.

The appropriateness guide is the first of a series of MiFID II guides that Tisa intends to publish and can be found here.

©2016 funds europe

HAVE YOU READ?

THOUGHT LEADERSHIP

The tension between urgency and inaction will continue to influence sustainability discussions in 2024, as reflected in the trends report from S&P Global.
FIND OUT MORE
This white paper outlines key challenges impeding the growth of private markets and explores how technological innovation can provide solutions to unlock access to private market funds for a growing…
DOWNLOAD NOW

IRELAND SPOTLIGHT

Visit our dedicated Ireland channel for all the latest news and analysis on the country's investment industry.
READ MORE

PRIVATE MARKETS FUND ADMIN REPORT

Private_Markets_Fund_Admin_Report

LATEST PODCAST