ESMA updates its guidance on the definition of advice in a supervisory briefing

ESMA released a supervisory briefing on the definition of advice under MiFID II. The briefing updates the CESR Q&A on Understanding the Definition of Advice under MiFID to align it with new business models and technological developments. It is intended for use by the NCAs in their supervisory activities and also provides guidance to investment firms.
The supervisory briefing covers several topics, including the provision of personal recommendations and other forms of information that could be considered investment advice, guidance on recommendations based on a person’s circumstances, perimeter issues surrounding personal recommendations, and issues related to communication methods, including the use of social media.
Key points covered in the briefing include:
– Distinguishing between Information and Recommendation:
Simply providing objective information without making any comment, value judgment, or suggestion on its relevance to investment decisions is not a recommendation.
Providing information in a way that influences a client’s decision to select a particular product over others may be considered a personal recommendation.
– Filtering Mechanism: Allowing clients to filter information about different financial instruments (e.g., using website options) does not necessarily constitute a recommendation, but the circumstances should be considered to determine if one is being made.
– Providing Implicit Recommendations: Presenting information in a way that implicitly suggests a particular course of action or product may be viewed as a personal recommendation.
– Market Abuse Considerations: The briefing mentions that Market Abuse requirements might apply if someone spreads information proposing an investment recommendation about EU financial instruments aimed at a broad audience.
ESMA and NCAs will continue monitoring the application of MiFID II requirements to ensure that investment services are provided in the best interest of the clients. The supervisory briefing is not binding, but serves as a tool to promote common supervisory approaches and practices. It clarifies and illustrates situations where firms would be considered as providing investment advice and helps firms and NCAs understand the requirements more effectively.