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Consideration of sustainability risks |
Due Diligence |
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- Description:
- Take sustainability risks into account when complying with the relevant requirements, while considering the nature, scale and complexity of the business and the nature and range of investment services and activities undertaken.
- Frequency:
- Continuous
- Check frequency:
- Continuous
- Products/Services:
- Investment services and activities of investment firms
- Checking responsibility:
- Investment firm
- Check method:
- Review of risk-management requirements and sustainability risks taken into account
- Rule set:
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- Source reference:
- Article 1(2)(a) and Article 1(2)(b), amending Article 21(1)
- Source excerpt:
- Investment firms shall take into account sustainability risks when complying with the requirements set out in this paragraph.
When complying with the requirements set out in this paragraph, investment firms shall take into account the nature, scale and complexity of the business of the firm, and the nature and range of investment services and activities undertaken in the course of that business.
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Risk management taking sustainability risks into account |
Governance |
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- Description:
- Establish, implement and maintain adequate risk-management policies and procedures that identify risks relating to the firm's activities, processes and systems and, where appropriate, set the firm's tolerated risk level, taking sustainability risks into account.
- Frequency:
- Continuous
- Check frequency:
- Continuous
- Products/Services:
- Activities, processes and systems of the investment firm
- Checking responsibility:
- Investment firm
- Check method:
- Review of risk-management policies and procedures for identification of sustainability risks
- Rule set:
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- Source reference:
- Article 1(3), amending Article 23(1)(a)
- Source excerpt:
- establish, implement and maintain adequate risk management policies and procedures which identify the risks relating to the firm’s activities, processes and systems, and, where appropriate, set the level of risk tolerated by the firm. In doing so, investment firms shall take into account sustainability risks;
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Identification of conflicts of interest |
Due Diligence |
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- Description:
- When identifying conflicts of interest potentially detrimental to a client, take into account whether the investment firm, a relevant person or a person linked by control falls within the specified minimum criteria.
- Frequency:
- Continuous
- Check frequency:
- Continuous
- Products/Services:
- Investment and ancillary services and related activities
- Checking responsibility:
- Investment firm
- Check method:
- Identification and assessment of potential conflicts of interest using the minimum criteria
- Rule set:
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- Source reference:
- Article 1(4), replacing Article 33
- Source excerpt:
- For the purposes of identifying the types of conflict of interest that arise in the course of providing investment and ancillary services or a combination thereof and whose existence may damage the interests of a client, including his or her sustainability preferences, investment firms shall take into account, by way of minimum criteria, whether the investment firm or a relevant person, or a person directly or indirectly linked by control to the firm, is in any of the following situations, whether as a result of providing investment or ancillary services or investment activities or otherwise:
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Description of financial instruments and selection factors |
Reporting |
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- Description:
- Provide a description of the types of financial instruments considered, the range of instruments and providers analysed for each type, and, where relevant, the sustainability factors considered in selection; for independent advice, additionally describe how the service meets the conditions for independent advice and the selection factors considered.
- Frequency:
- Event-triggered
- Check frequency:
- Event-triggered
- Products/Services:
- Financial instruments and providers considered or selected in the course of the investment service
- Checking responsibility:
- Investment firm
- Check method:
- Preparation and updating of a description of the instruments, providers and selection factors considered
- Rule set:
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- Source reference:
- Article 1(5), replacing Article 52(3)
- Source excerpt:
- Investment firms shall provide a description of:
- **(a)** the types of financial instruments considered;
- **(b)** the range of financial instruments and providers, analysed per each type of instrument according to the scope of the service;
- **(c)** where relevant, the sustainability factors taken into consideration in the selection process;
- **(d)** when providing independent advice, how the service provided satisfies the conditions for the provision of investment advice on an independent basis, and the factors taken into consideration in the selection process used by the investment firm to recommend financial instruments, including risks, costs and complexity of the financial instruments.
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Consideration of investment objectives and sustainability preferences |
Due Diligence |
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- Description:
- Ensure that the client's investment objectives, including risk tolerance and any sustainability preferences, are met.
- Frequency:
- Event-triggered
- Check frequency:
- Event-triggered
- Products/Services:
- Investment advice and portfolio management
- Checking responsibility:
- Investment firm
- Check method:
- Collection and assessment of the client's investment objectives, risk tolerance and sustainability preferences
- Rule set:
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- Source reference:
- Article 1(6)(a), amending Article 54(2)(a)
- Source excerpt:
- it meets the investment objectives of the client in question, including the client’s risk tolerance and any sustainability preferences;
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Collection of investment objectives and sustainability preferences |
Due Diligence |
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- Description:
- Obtain information about the investment objectives of the client or potential client, including, where relevant, the desired investment term, risk-taking preferences, risk tolerance, investment purpose and sustainability preferences.
- Frequency:
- Event-triggered
- Check frequency:
- Event-triggered
- Products/Services:
- Investment advice and portfolio management
- Checking responsibility:
- Investment firm
- Check method:
- Collection of client information on investment term, risk-taking preferences, risk tolerance, investment purpose and sustainability preferences
- Rule set:
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- Source reference:
- Article 1(6)(b), replacing Article 54(5)
- Source excerpt:
- The information about the investment objectives of the client or potential client shall include, where relevant, information about the length of time for which the client wishes to hold the investment, his or her preferences regarding risk taking, his or her risk tolerance, the purpose of the investment and in addition his or her sustainability preferences.
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Policies for suitability assessment |
Governance |
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- Description:
- Have in place, and be able to demonstrate, adequate policies and procedures to understand the features, including costs and risks, of services and instruments selected for clients, including sustainability factors, and assess whether equivalent services or instruments can meet the client's profile.
- Frequency:
- Continuous
- Check frequency:
- Continuous
- Products/Services:
- Investment advice and portfolio management, and selected investment services and financial instruments
- Checking responsibility:
- Investment firm
- Check method:
- Adequate policies and procedures and assessment of costs, risks, sustainability factors, cost, complexity and equivalent alternatives
- Rule set:
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- Source reference:
- Article 1(6)(c), replacing Article 54(9)
- Source excerpt:
- Investment firms shall have in place, and be able to demonstrate that they have in place, adequate policies and procedures to ensure that they understand the nature features, including costs and risks of investment services and financial instruments selected for their clients, including any sustainability factors, and that they assess, while taking into account cost and complexity, whether equivalent investment services or financial instruments can meet their client’s profile.
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No unsuitable sustainability recommendations |
Approval |
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- Description:
- Do not recommend financial instruments or decide to trade them as meeting the client's or potential client's sustainability preferences when they do not meet those preferences.
- Frequency:
- Event-triggered
- Check frequency:
- Event-triggered
- Products/Services:
- Financial instruments recommended or traded by the investment firm
- Checking responsibility:
- Investment firm
- Check method:
- Suitability assessment against the client's sustainability preferences
- Rule set:
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- Source reference:
- Article 1(6)(d), replacing Article 54(10)
- Source excerpt:
- An investment firm shall not recommend financial instruments or decide to trade such instruments as meeting a client’s or potential client’s sustainability preferences when those financial instruments do not do meet those preferences.
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Recording reasons for not recommending |
Record Keeping |
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- Description:
- Explain to the client or potential client the reasons for not recommending or trading an instrument and keep records of those reasons.
- Frequency:
- Event-triggered
- Check frequency:
- Event-triggered
- Products/Services:
- Investment advice and portfolio management
- Checking responsibility:
- Investment firm
- Check method:
- Documentation and retention of reasons for not making a recommendation
- Rule set:
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- Source reference:
- Article 1(6)(d), replacing Article 54(10)
- Source excerpt:
- The investment firm shall explain to the client or potential clients the reasons for not doing so and keep records of those reasons.
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Recording adaptation of sustainability preferences |
Record Keeping |
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- Description:
- Where no financial instrument meets the client's sustainability preferences and the client adapts them, keep records of the client's decision, including the reasons for that decision.
- Frequency:
- Event-triggered
- Check frequency:
- Event-triggered
- Products/Services:
- Investment advice and portfolio management
- Checking responsibility:
- Investment firm
- Check method:
- Recording the client's decision, including the reasons for that decision
- Rule set:
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- Source reference:
- Article 1(6)(d), replacing Article 54(10)
- Source excerpt:
- Where no financial instrument meets the sustainability preferences of the client or potential client, and the client decides to adapt his or her sustainability preferences, the investment firm shall keep records of the decision of the client, including the reasons for that decision.
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Report on suitable investment advice |
Reporting |
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- Description:
- Provide the retail client with a report outlining the advice given and explaining how the recommendation is suitable, including how it addresses the client's investment objectives, personal circumstances, knowledge and experience, attitude to risk, capacity to sustain losses and sustainability preferences.
- Frequency:
- Event-triggered
- Check frequency:
- Event-triggered
- Products/Services:
- Investment advice provided to retail clients
- Checking responsibility:
- Investment firm
- Check method:
- Preparation of a report outlining and explaining the investment advice
- Rule set:
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- Source reference:
- Article 1(6)(e), replacing Article 54(12)
- Source excerpt:
- When providing investment advice, investment firms shall provide a report to the retail client that includes an outline of the advice given and that explains how the recommendation provided is suitable for the retail client, including how the recommendation meets the client’s investment objectives, his or her personal circumstances with reference to the investment term required, the client’s knowledge and experience, the client’s attitude to risk his or her capacity to sustain losses and his or her sustainability preferences.
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