ESMA’s July 2018 Q&A tightens requirements for non-EEA financial institutions doing business with European investors. Having issued the new guidance on top of the MiFID II regulation, what was understood from the beginning was that cross-border products and services may only be offered to European (potential or existing) clients on the client’s own exclusive initiative. With the Q&A, the client must now specify, and the bank must document, which product category or categories are being requested. And while ESMA doesn’t dictate the categories outright, the fifteen examples of distinctions that must be made point to a highly granular partititioning of the product space. Even worse, ESMA specifically excludes contractual language from meeting the requirement, insisting that it must be a documented, specific request from the client.
To be able to continue offering cross-border advice, banks from non-EEA countries (without a licensed branch in the EEA) will have to adjust processes, IT systems and controls.
- Analysis and risk assessment of existing global offerings
- Specification and implementation of product categories according to ESMA reverse enquiry criteria
- Contractual adjustments and communication with existing clients
- Training and guidance for front staff on reverse enquiry requirements