MiFID II and Suitabilty Reports
Keith
Member
Hi all
There is an issue that one of my IFA firms keeps raising, which is causing me a little concern. It relates to (a) the preparation, (b) time of drafting, and (c) the issue of suitability reports to clients. The firm in question is indicating to me (in their instructional emails) that suitability reports need to be completed even before the application stage. For example:
CLIENT A
'.. suitability report needs to be written prior to the application being made.'
CLIENT B
'This report also needs to be ready for the clients prior to the application being submitted ..'
Despite the still unclear - and somewhat confusing - new MiFID II regulations, this is not my understanding of the current situation. I believe that the position remains much the same as before 3rd January - i.e. suit reports need to be completed and sent to the relevant client(s) before the contractual and implementation process is completed. This, to my mind, means before the end of the statutory cooling-off period of 14 - 30 days.
Can anyone shed any light and clarify what’s going on with the post MiFID II preparation and issue of disclosure and suitability reporting (timing-wise) responsibilities?
thanks
KEITH
(outsourced paraplanner)
There is an issue that one of my IFA firms keeps raising, which is causing me a little concern. It relates to (a) the preparation, (b) time of drafting, and (c) the issue of suitability reports to clients. The firm in question is indicating to me (in their instructional emails) that suitability reports need to be completed even before the application stage. For example:
CLIENT A
'.. suitability report needs to be written prior to the application being made.'
CLIENT B
'This report also needs to be ready for the clients prior to the application being submitted ..'
Despite the still unclear - and somewhat confusing - new MiFID II regulations, this is not my understanding of the current situation. I believe that the position remains much the same as before 3rd January - i.e. suit reports need to be completed and sent to the relevant client(s) before the contractual and implementation process is completed. This, to my mind, means before the end of the statutory cooling-off period of 14 - 30 days.
Can anyone shed any light and clarify what’s going on with the post MiFID II preparation and issue of disclosure and suitability reporting (timing-wise) responsibilities?
thanks
KEITH
(outsourced paraplanner)
Comments
Please don't take this as gospel as I'm not sure anyone is 100% clear on this, but we've interrupted this to mean that the SR should be issued to the client before the application is submitted to the provider.
Hope that helps in some way.
Ed
Hi Keith
We have tended to always send SLs prior to application stage, so it has mostly been business as usual. However, there are occasions where this is not always possible (tax year end, products with a closing date, for instance). I believe you are probably right, and that suitalbity is required in the same timeframe as previously.
However, under MIFIDII there is a requirement to ensure the clients are aware of costs prior to investment (see the TISA guide which you can find online). The cost disclosure will usually form part of our SL but for those occasions where it is not possible to issue the SL prior to investment:
1. We issue a standalone cost disclosure letter before any funds can be invested.
2. We ensure the acknowledges the disclosure and save this to file.
We have a good compliance department in house who have spent the past six months with their heads buried deep in MIFIDII legislation and this process is perfectly satisfactory to them.
Hope that helps
Tom
Cobs 9a.3.2 (2) mifid
Note the subtle difference in the use of 'contract and 'transaction'. In non-mifid the contract is concluded when a life policy is on risk or a pension policy document is dated.
I don't know what the mifid definition of 'transaction' is, but I think it would be a good idea to issue suitability reports in advance of application.