I The changes introduced by the CONSOB Resolution no. 22430 of July 28, 2022 (the “Resolution”) to the CONSOB Regulation on Intermediaries – Overview
By means of the Resolution, CONSOB amended and/or integrated its Regulation on Intermediaries no. 20307 of 15 February 2018 – the main piece of Italian second-level regulations implementing the MiFID, hereinafter, the “RI” – in order to transpose in Italy a number of pieces of European regulations on investment services, including:
- Directive (EU) 2021/338, amending the MiFID Directive (Directive (EU) 2014/65) as regards information requirements, product governance and position limits;
- the EU delegated acts implementing the MiFID, the UCITS Directive, the AIFMD and the IDD (Insurance Distribution Directive) with regard to the sustainable finance; and
- Directive (EU) 2019/2034 on the prudential supervision of investment firms, amending, inter alia, the MiFID in relation to the services rendered by third country financial intermediaries.
In addition, the Resolution integrated with some clarifications the section of the RI on the requirements of competence and knowledge of the collaborators of the financial intermediaries, and, with a very important measure, introduced simplifications to the procedure applicable to the Italian MiFID investment firms that apply for an extension of their authorization, e.g., in order to render additional investment services.
II The changes introduced by the Resolution to the RI in order to transpose the European legislation
II.A Directive (EU) 2021/338R
The changes to the RI in relation to this Directive concern:
- the disclosure of the information on costs and charges applied to the purchase/sell of financial instruments carried out at distance when a prior disclosure is not possible (revised article 24(4) of the MiFID) and the exemption from the disclosure requirements regarding the costs and charges to clients, classified as professional clients, that receive investment services other than investment advice or portfolio management (new article 29-bis, para. 1 of the MiFID);
- the new provisions applicable to the assessment of suitability in connection with the services of investment advice and portfolio management and in particular the new obligation of the intermediaries to assess the costs/benefits in relation to switch transactions and to inform the client of the outcome of such analysis, with the exemption from this duty for the professional clients which didn’t opt-in for receiving the same (new article 29-bis, para. 2 of the MiFID);
- some exemptions from reporting requirements in case of professional clients which didn’t opt-in to receive these reports (new article 29-bis, para. 2 of the MiFID);
- additional simplifications for the information and reporting requirements when the clients are “eligible counterparties” under the MiFID.
In addition to the above, the Resolution extended the scope of the rules of the RI implementing the MiFID – including the above changes – also to the “structured deposits” (as defined in the MiFID) and the financial products, other than financial instruments, issued by banks.
II.B EU delegated acts implementing the MiFID, the UCITS Directive, the AIFMD and the IDD (Insurance Distribution Directive) with regard to the sustainable finance
The RI has been amended in relation to the sustainability issues by introducing: (i) the obligation for the “manufacturers” of financial instruments to consider also the sustainability factors for the purpose of defining and periodically reviewing the potential target market, and (ii) the corresponding duty of the “distributors” to ensure consistency of the actual target market, in terms of ESG, with the financial instruments actually offered or recommended, also for the purpose of reviewing the product range of the same distributors.
With regard to the fund management companies (AIFM and UCITS ManCo), the RI was integrated in order to implement some provisions of the revised AIFM Regulation (EU) 231/2013, specifically the new article 18, and some provisions of the “SFDR” (Regulation (EU) 2019/2088). In particular, the (Italian) fund managers must take into account sustainability risks and, where they are taken into account, the main adverse effects of investment decisions on the sustainability factors; these requirements apply both to AIFs and UCITS funds.
Finally, the section of the RI on the distribution of insurance investment products was amended in order to transpose some MiFID-originated rules on sustainable finance that apply to insurance products.
II.C Directive (EU) 2019/2034
The transposition in the RI of some provisions of Directive (EU) 2019/2034 concern the services rendered by third country financial intermediaries to Italian clients, and, in particular, the reverse solicitation.
Whereas the basis of the reverse solicitation – that excludes the authorization requirements for the third country intermediary – is the “initiative” of the Italian potential client, the RI has been integrated in order to provide that any kind of solicitation to retail/professional by request of non-EU firms, even if carried out by third parties (including companies of the same group of the relevant non-EU firm) on their behalf, excludes that the provision of investment services can be deemed as started at the sole initiative of the Italian client, thus entailing the application of the relevant MiFID II rules. On the other hand, it has been clarified in the RI that the exemption for the reverse solicitation originated from a “genuine” initiative of the Italian client also covers any subsequent or related contractual relationship “specifically linked” to the relevant investment services.
In addition, the RI has been integrated in order to clarify that the obligation for third country intermediaries to carry out investment services in Italy only through a local branch in case of clients other than eligible counterparties or per se professional clients also applies when the EU Commission issued a decision of equivalence for the relevant third country, in relation to the investment services not contemplated by that decision.
III Requirements of competence and knowledge of the collaborators of the financial intermediaries
The provisions of the RI on the requirements of competence and knowledge of the collaborators of the financial intermediaries (see our Regulatory Reports 2018 04 and 2021 04) have been integrated in order to clarify that the duty of keeping the documentation evidencing the actual performing of the training activities has to be kept for five years starting from the end of the relationship (e.g., employment contract) with the relevant collaborator.
IV Simplification of the authorization procedure for additional investment services to be rendered by existing Italian investment firms (SIM)
The RI has been amended in order to simplify the procedure to be followed by the Italian MiFID investment firms that apply for an extension of their authorization, e.g., in order to render additional investment services.
In particular, whereas the previous rules required to file a complete set of documents as if a brand-new authorization were applied for, the new rules consider that the supervised entities have already been subjected to scrutiny regarding their ability to meet the regulatory requirements for market access.
Therefore, the requirements in terms of documentation for the extension of the authorization have been reduced to the presentation of only the appropriate documentation to certify the changes in terms of internal organization, staff, procedures and policies and capital requirements, in connection with the extension of the activity, with a view to allow the Authorities to verify the applicant’s continued compliance with the regulatory requirements.