EUROPE: ESMA Updates Q&A on Costs and Charges

Tuesday December 22 2020

The European Securities and Markets Authority (ESMA) has updated its Questions and Answers on the implementation of investor protection topics under the Market in Financial Instruments Directive and Regulation (MiFID II/ MiFIR).

The Q&As on MiFID II and MiFIR investor protection and intermediaries’ topics includes one new Q&As on ‘Information on costs and charges’ that aim to give guidance on how firms can present ex-post costs and charges information to clients in a fair, clear and not misleading manner.

In particular, the information should be presented:

1. through a standalone document (which could still be sent together with other periodic documents to clients); or
2. within a document of wider content, provided that it is given the necessary prominence to allow clients to find it easily.

The purpose of the MiFID II/MiFIR investor protection Q&As is to promote common supervisory approaches and practices in the application of MiFID II and MiFIR.

Updated Q:

How can firms present ex-post costs and charges information to clients in a fair, clear and not misleading manner in accordance with Article 24(3) of MiFID II?

In ESMA’s view, to facilitate the understanding of ex-post costs and charges information by clients (especially retail), in line with the general obligation according to which information addressed to clients shall be fair, clear and not misleading, it should be presented:

1. through a standalone document (which could still be sent together with other periodic documents to clients); or
2. within a document of wider content, provided that it is given the necessary prominence to allow clients to find it easily.

In the latter case, the section on ex-post costs and charges information could, for example, be placed at the beginning of the document with a clear explanatory title and clients’ attention drawn to it also graphically (e.g. through the use of appropriate fonts). Ex-post information on costs and charges should also not be mixed with other information or marketing communications included in that wider document, so that clients can focus on its contents.

Where a breakdown of aggregated figures is provided (at the client’s request), it is important that the consistency of the overall ex-post disclosure presented is ensured so that clients are in the position of easily reconciling aggregated figures with their itemised breakdown referring to the same reporting period (both for cash amounts and percentages). Any discrepancies (typically with regard to percentages) should be clearly explained and justified.

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