NSA response on the EC draft delegated regulation as regards the suitability assessment of investment instruments (sustainable finance)

June 25, 2018

The Nordic Securities Association (NSA) supports the European Commission’s objective to integrate sustainability targets into the European financial markets. One of the legislative proposals published on May 24th concerns the suitability assessment process of investment firms, amending regulation 2017/565 (MiFID II).

Providing clients with more information about investment instruments’ sustainability impacts can have the positive influence of more investments being directed to actions that support sustainable development goals. So far, it has been up to the companies themselves to consider how to offer and sell sustainable instruments. Adjusting to new regulation and potentially building capabilities in this area requires sufficient lead time, and the NSA is pleased that the Commission’s proposal includes 18 months transitional period. It is important to give companies this time to modify their investment service processes. Legislators need to ensure also that any future guidelines and Q&As are prepared well in time ahead of the entry into force of the legislation. However, we see a need for the proposal to be further clarified before it’s ready for implementation and usable from both an operational and a client perspective.

In terms of sequencing we recommend first putting in place a common EU taxonomy covering at least some essential elements of all E, S and G, before attempting to suggest and/or implement provisions on sustainability in the MiFID suitability assessment process. This would support disclosure of instrument level information in a relevant and uniform way. We would also like to question whether it is appropriate to implement some of the suitability rules through ESMA guidelines already before the adoption of the delegated act - and in two steps (Q 2 and Q 4 2018). In our view this will only increase the complexity for firms and create unnecessary legal uncertainty.

Read the full response here.