The European Securities and Markets Authority (Esma) has released a statement on its 2022 Common Supervisory Action (CSA) and a mystery shopping exercise investigating compliance with MiFID II cost and charge disclosure requirements.
While most firms generally comply, variations exist among Member States.
The CSA identified several shortcomings, including varying formats and content of ex-post disclosures across firms and countries, inadequate disclosure of inducements, omission of implicit costs, inconsistent illustrations of cumulative costs’ impact on investment returns and disclosure of cost figures only in nominal amounts without corresponding percentages.
Simultaneously, Esma’s mystery shopping exercise found that while most retail clients received pre-investment service information on costs and charges, quality and timing differed across firms.
Esma plans to address these issues by developing new Q&As and exploring a standardised EU format for cost and charge information. National Competent Authorities (NCAs) will take corrective actions for regulatory breaches and other deficiencies.
Ralf Rühling, head of investor protection propositions at SIX, highlighted the challenge of quantifying implicit costs and recommended reassessing reference and market data to address Esma’s concerns.
He stated, “Embracing a standardised, scalable service will help firms meet MiFID II cost and charge rules.”
Esma’s assessment emphasises the need for improved transparency and consistency in disclosing costs and charges, promoting better retail investor protection.
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