[Newsflash n. 38]

On 10 November 2017, Esma published an update to its Q&A on MiFID II and MiFIR investor protection and intermediaries topics.

The update concerns, inter alia, the following clarifications on inducements.

Section 12

1. Does Article 24(9) of MiFID II also apply to payments made by investment firms to a third party in relation to the provision of the investment service of investment advice provided on an independent basis or of portfolio management?

ESMA has clarified that article 24(9) – which basically sets out the so called “three-part test” that shall be satisfied for an inducement to be permitted in relation to the provision of an investment service, i.e. the inducement (i) being designed to enhance the quality of the service to the client, (ii) not impairing the firm’s duty to act in accordance with the client’s best interests and (iii) disclosure to the client of its existence, nature and amount – also applies to payments made by investment firms to a third party in connection with the provision of investment advice provided on an independent basis or of portfolio management.

2.In connection with an investment firm providing investment advice on an independent basis or portfolio management services, what is, with a perspective on Chapter II of the implementing directive, the legal status of a fee, commission or monetary benefit, after it has been received by an investment firm from a third party or a person acting on behalf of a third party as an inducement, and prior to it being transferred in full by the investment firm to the client?

ESMA clarifies that the legal status of a fee, commission or monetary benefit, in the period of time after it has been received by an investment firm as an inducement and prior to it being transferred in full by the investment firm to the client, should be considered a liability of the investment firm. As a consequence, the investment firm must have systems and controls in place to transfer the money to the client as soon as reasonably possible after receipt and is not allowed to offset the inducement from any fees owed by the client to the firm.

We remain at your disposal should you need any clarification on these and other MiFID II related matters.

Contacts:

Vito Vittore
Partner

Elena Pagnoni
Of counsel

Mirella Conte
Associate