France’s financial markets regulator, the (AMF), has identified compliance violations concerning the client suitability and appropriateness practices applied by some investment firms.
To stay on top of compliance, financial services operators have to gain insights into the financial situation of the client, including his investment knowledge, experience and objectives. The genesis of these requirements lies in Markets in Financial Instruments Directive , which took effect in January 2018.
As a result of the conducted at the beginning of 2018, several types of violations were found in three compliance areas. The following hierarchy of problems running from the most common to the lesser were observed, according to the French watchdog:
The AMF has also red-flagged breaches of regulations that were observed in two of the firms inspected.
Specifically, the violations cited by the regulator fell within the automatic modification of the client’s profile when he places orders that did not match the scope of his initial profile. The regulator says such modification were made without re-assessing the client’s investment knowledge and experience, and moreover without the client being informed of the consequences of this modification.
Also embedded within AMF’s published findings, the report noted good practices among the probed firms. The bulk of these supposed “best practices” border on the regular updates of the client knowledge and experience questionnaire, identifying the client’s assets, liabilities, income and outgoings.
In concluding its report, AMF recommended a set of purported best compliance practices to address various concerns, and mentioned some of the factors to determine if the firm is entitled to credit for cooperation. The regulator also said it has contacted the inspected firms requesting them to rectify compliance deficiencies in the area of the obligatory assessments to the .
Be First to Comment