ESMA highlights areas for improvement in firms’ disclosure of cost and charges under MIFID

ESMA has released a statement on its 2022 CSA and mystery shopping exercise related to the disclosure of costs and charges under MiFID II (eventid=14244).
The CSA revealed that most firms comply with the ex-post cost and charges requirements, although compliance levels vary across Member States. However, there are several areas for improvement identified, including significant differences in disclosure format and content across firms and countries, varying practices and lack of disclosure of inducements, failure to disclose implicit costs to clients, lack of consistency in illustrating the cumulative impact of costs on investment returns, and disclosing cost figures only in nominal amounts without corresponding percentages.
The mystery shopping exercise focused on ex-ante cost and charges information provided to retail clients. While most mystery shoppers received some information about costs and charges before receiving the investment service, the quality and timing of the information varied among firms.
ESMA plans to address the identified issues by developing new Q&As and potentially establishing a standardized EU format for cost and charges information. NCAs will take follow-up actions on individual cases involving regulatory breaches and other shortcomings. The aim is to enhance convergence in supervision and improve investor protection.
ESMA emphasizes the importance of compliance with MiFID II requirements and will continue its efforts to promote transparency, simplicity, and fairness in the market for consumer financial products or services.