Under MiFID II, Article 24(11), when an investment service is offered with another service or product as part of a package or as a condition for the same agreement, the investment firm concerned must inform the client whether it is possible to buy the components separately and should also provide evidence of the relative costs and charges of each component. Where the risks arising from the combined package are likely to be different to when they are purchased separately then, where a retail client is concerned, an adequate description must be provided.
ESMA, in cooperation with EIOPA and EBA, (the European Supervisory Authorities (“ESAs”)) were charged with developing guidelines by 3 January 2016 for the assessment and supervision of such cross-selling practices (as defined in Article 4(42)). Although the intention was to issue joint guidelines covering all cross-selling practices taking place in the banking, insurance and securities sectors, for what is described as ‘legal concerns’ the ESAs decided not to issue such joint guidelines and instead agreed that ESMA should issue ESMA-only guidelines in order to meet the above deadline.
The 10 guidelines can be found in Annex 5. Some of the guidelines are accompanied by ‘illustrative examples’ ranging from font sizes to sales incentives via not relying on general references to Terms and Conditions to alert or disclose key non-price information to clients.
Annex 6 provides examples of detrimental cross-selling practices.
Strictly speaking the guidelines, which will apply from 3 January 2017, are addressed to national regulators supervising impacted firms, rather than to the individual firms themselves, with a view to establishing a coherent and effective supervisory approach and so contributing to the enhancement of investor protection across member States. As is usual in these cases, each competent authority is required to notify ESMA whether they comply or intend to comply (or provide reasons for non-compliance) within two months of the publication of the translated versions by ESMA.