[Newsflash n. 51]

On 12 July 2018, ESMA updated its Question and Answers document on the implementation of investor protection topics under the Market in Financial Instruments Directive (MiFID II) and Regulation (MiFIR).  The purpose of this Q&A is to promote common supervisory approaches and practices in the application of MiFID II/MiFIR.

This update concerns the topics of inducements (research) and provision of investment services by third-country firms, in particular:

Section 7: Inducement (research) – Question 12

Is a free trial period of research services acceptable when it is provided in relation to portfolio management or advice on an independent basis?

ESMA clarifies that a free trial period of research may be qualified as acceptable minor non-monetary benefit under Article 12(3) of the MiFID II Delegated Directive when the following conditions are met:

• the trial period must be offered and agreed upon prior to the decision to enter into a contract or arrangement relating to the provision of research services for a fee;
• the scope and extent of the research services offered during the trial period must be agreed upon by the parties prior to the start of the trial period;
• the trial period must be strictly defined and limited in time and, in any case, shall not last for longer than three months;
• no monetary or non-monetary consideration is due by the research recipient during the trial period (this includes implicit benefits such as abnormally high order flows with the research provider compared to volumes normally carried out with the research provider or an entity part of the same group);
• the trial period is not commenced within twelve months from the termination of an arrangement for the provision of research (including any previous trial period) with the same research provider;
• the firm has controls in place to ensure that the research received during the trial period is not billed to its clients; and
• the firm makes and retains a record of how the conditions above were satisfied for each such trial period.

Section 13: Provision of investment services by third-country firm – Question 3