In February 2020, the European Securities and Markets Authority (“ESMA) announced the launch of a Common Supervisory Action (“CSA”) on the application of MiFID II suitability rules, with the aim of assessing how firms comply with suitability requirements.
Since the publication of the CSA, the CBI has engaged with all authorised firms to determine if they are taking all reasonable steps to ensure that a client’s investments align to their investment objectives and personal circumstances. This engagement was carried out via desktop review and virtual inspections with selected firms, to determine whether suitability steps were in place to ensure investments do not exposure clients to the risk of purchasing products that do not align to their needs.
The “Dear CEO” Letter, published on 1 December 2021, details the outcome of their inspection and firms are now required to conduct an in-depth review of their sales practices and suitability programmes with reference to the letter, while also taking mitigating action on any formal findings issued to them as part of the CSA. This review must consider ESMA’s public statement on the results of the CSA and requires documentation and board approved action plans by the end of Q1 2022.
Gillian Kelly, Shane Garahy and Michael Slevin of our Risk Consulting team explain the key findings, considerations and how KPMG can assist in addressing the weak practices identified by the CBI.
