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Best interests of clients 

01 December 2011

Impact Red traffic light

High/medium impact, more compliance obligations when dealing with eligible counterparties.

Other areas to consider

Exemptions for ECPs and Professional Clients; Suitability; Appropriateness

Current MiFID rules

When providing investment services to professional clients and retail clients, a firm must act honestly, fairly and professionally in accordance with the best interests of its client. This is a high level principle which sits above, and is intended to inform the policy behind many of the more detailed conduct of business requirements in MiFID.

MiFID Level 1 Directive Arts: 19

FSA rules

COBS 2.1.1

Proposed changes
Draft Directive Recital (54)Articles 24 and 30

Although the Commission continues to believe that many of MiFID’s conduct of business requirements are not meaningful in the relationship between ECPs, the draft Directive provides that MiFID’s principles to act honestly, fairly and professionally and the obligation to be fair, clear and not misleading should also apply in the relationship with eligible counterparties.

The Commission is also proposing to introduce restrictions on cross-selling of products within firms. The draft Directive provides that when a service or product is offered together with another service or product as a package, the firm must provide the client with information about the costs and charges in respect of each component, and whether it is possible to buy the components separately. ESMA is to provide guidelines on the assessment and supervision of cross-selling practices.

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