French regulator supports enabling ESMA to adopt permanent product intervention measures

France’s Financial Markets Authority (AMF) today published its response to the European Commission’s public consultation on the review of MiFID 2. In its response, the AMF supports targeted changes of certain aspects of MiFID 2 based on five pillars, including making investor protection rules more relevant and proportionate.

The AMF believes that targeted changes to MiFID 2 are needed to fully achieve its original objectives and to contribute to deepening the EU Capital Markets Union. While acknowledging the very positive contribution of MiFID 2 to the objective of investor protection, the AMF supports a number of changes aimed at improving the framework further.

The AMF proposes a number of changes in cases where an investment service is provided cross border. More specifically, where a firm provides services through a branch to retail customers in a Member State, where it is also authorised to provide the same service under the freedom to provide services, such services to retail customers should be presumed to be provided by the branch.

Further, while the AMF welcomes the extension of ESMA’s product intervention powers granted by the recently adopted texts in the ESA review, the AMF supports enabling ESMA to adopt product intervention decisions that would be permanent and not time-limited. Let’s recall that AMF has voiced its concerns about the temporary nature of ESMA-introduced measures on restricting the offering of CFDs to retail clients and banning binary options. Many EU member states have subsequently implemented these measures on a permanent basis.

The AMF says it would not consider it appropriate to implement a general ban on inducements as it could have a detrimental effect on retail investors by depriving them of access to sufficient advice.

Regarding costs and charges disclosure obligations, the AMF supports the possibility for eligible counterparties and professional clients to opt out from receiving ex ante and ex post information from investment firms provided that the latter previously agrees the format and content of alternative costs disclosures with them.

On the topic of product governance requirements, investment firms providing the services of reception/transmission of orders and/or execution of orders on behalf of clients, without active solicitation of potential clients, could only be required to define a distribution strategy rather than defining a full target client base, the regulator says.

The AMF also proposes to adjust the criteria for allowing retail clients to be treated as professional clients on request, in order to improve access to certain financial products. However, the French regulator opposes creating a new category of “sophisticated clients” as it would entail prohibitive compliance costs for firms while necessitating amendments to numerous pieces of EU financial services regulations.