The European Securities and Markets Authority (ESMA) has issued guidelines, applicable from 3 January 2017, regarding the criteria for the assessment of (i) debt instruments with a structure that makes it difficult for the client to understand the risk involved and (ii) structured deposits with a structure that makes it difficult for the client to understand the risk of return or the cost of exiting the product before term.
These guidelines also clarify the concept of “embedded derivatives”, thus providing an overall framework for the application of Article 25(4)(a) of MiFID II in relation to debt instruments.
The purpose of these guidelines is to strengthen investor protection and to promote greater convergence in the classification of "complex" or "non-complex" financial instruments or structured deposits for the purposes of the appropriateness test/execution-only business in accordance with Article 25(3) and 25(4) of MiFID II.
Cyprus Securities and Exchange Commission (CySEC) has recently confirmed that it will implement the said guidelines in Cyprus’ national regulations.
You can read the guidelines by following this link.
The material contained in this update is for information purposes only. In case you require any further information regarding this matter please feel free to contact us.
