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Risk disclosure 

01 December 2011

Impact Amber traffic light Medium impact as some systems changes required

Other areas to consider

Inducements; Reporting to clients; Suitability

Current MiFID rules

A firm must provide appropriate information in a comprehensible form to clients or potential clients so that they are reasonably able to understand the nature and risks of the MiFID investment service and activity, and of the specific type of financial instrument that is being offered, and consequently to make investment decisions on an informed basis

MiFID Level 1 Directive Art: 19(3)

FSA rules

COBS 2.2.1 and COBS 14.3

Proposed changes
Draft Directive
Article 24(3) and 24(5)

In the context of recent debates on the quality of investment advice, several areas for improvement have emerged.  The draft Directive therefore imposes:

  • a requirement for investment firms to inform the client whether they give advice on an independent basis and whether it is based on a broad or more restricted analysis of the market.
  • when an investment firm informs the client that advice is based on an independent basis:
        • it shall be obliged to assess a sufficiently large number of financial instruments available on the market, notably, financial instruments of different types and from different providers and not limited to financial instruments issued or provided by entities having close links with the investment firm; and
        • the firm would be prohibited from accepting any fees, commission, or any monetary benefits from any third party in relation to the provision of the service to clients 
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