MiFID II Marketing Communications Requirements – “Dear CEO” Letter

The Letter highlights the CBI’s findings about the presentation of marketing information, which can mislead retail investors in their assessment of the benefits and risks of financial products and practices including the digital engagement practices of investment firms and credit institutions that do not have investors’ best interests at heart. The Letter also sets out expectations about the actions that these institutions must take to mitigate and address the identified issues.

Background

The CBI conducted the review as part of a Common Supervisory Action (CSA) coordinated by the European Securities and Markets Authority (ESMA). The ESMA report on the application of the MiFID II marketing and advertising requirements (“ESMA Report”) included the CBI and other national competent authorities’ findings.

The review reiterates the existing MiFID requirements that marketing communications and advertisements must be fair, clear and not misleading; however, it also calls out the vulnerability of less experienced investors operating online. The ESMA report refers to investors who may be “targeted by marketing on social media through for example influencers but also through other types of (private) messages on social networks.”

The CBI’s focus areas demonstrate the evolution of investor protection supervision exercised by regulatory authorities in line with the development of media used in the sale of financial products.

Firms in scope

All Irish authorised MiFID investment firms, credit institutions and fund management companies providing MiFID II services to retail clients are in scope of the Letter.

Central Bank findings

The core findings from the CBI’s review relate to the following areas:

• marketing and advertising content not clearly identifiable as such,
• poor governance and controls,
• outsourcing arrangements,
• deficiencies in published marketing and advertising content,
• monitoring of published marketing and advertising content and compliance function review, and
• gaps in identification of target audience.

Actions required by 31 January 2025

The CBI has requested that all firms in scope document a review of their marketing and advertising practices against the ESMA Report, and the findings, expectations and good practices set out in the Letter.

In the event that firms identify gaps, they need to design an action plan to be discussed and approved by the board before 31 January 2025. The firm also needs to record the minutes from the relevant board meeting, including details from discussions about, and the approval of, the action plan.

If firms received formal mitigating actions arising out of this review, they’ll need to consider the feedback in the ESMA Report and the content of the Letter in conjunction with their action plan. 

Central Bank expectations 

In line with existing regulatory requirements, the CBI reminds the industry of the following regulatory obligations, including;

• ensuring that any material designed to promote or sell a financial instrument and/or an investment service (regardless of the means of dissemination) is clearly identifiable as marketing material;
• adopting and embedding an investor focused culture by communicating properly and effectively to clients/ potential clients to protect their interests;
• retaining full responsibility of obligations when outsourcing critical or important operational functions, with internal controls ensuring effective oversight of same to be documented;
• ensuring marketing and advertising content on digital platforms are as fair, clear and non- misleading as those on more traditional communication channels;
• conducting monitoring and regular evaluation of the adequacy and effectiveness of systems, internal control mechanisms and arrangements, with any deficiencies thereof to be addressed appropriately; and
• maintaining a robust internal control environment that ensures that any information disseminated to clients or potential clients is directed at an identified target audience, ensuring alignment of the firm’s distribution strategy with the latter.

How can we help?

With deep knowledge of the MiFID marketing and advertising requirements, our team of Risk Management experts can assist with assessing the impact of the CBI’s expectations on your firm, identifying areas where improvements may be necessary and supporting internal control, governance and compliance risk-management-framework enhancements.

In designing their action plans, firms may need to:

• review and update of existing marketing material and media,
• review and update or develop marketing and advertising policies, processes and procedures,
• review and update or develop control checklists,
• review and enhance internal control/risk management/governance and oversight frameworks,
• review and/ or develop training material, and
• review of outsourcing arrangements and governance thereof.

For more information on how we can support you in the delivery of your upcoming regulatory challenges, please reach out today.

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