ESMA identifies areas for improvement in disclosures under MiFID
The European Securities and Markets Authority (ESMA) has found that disclosures of costs and charges under MiFID II do not always meet the quality levels required. The findings of its 2022 Common Supervisory Action (CSA) and mystery shopping exercise showed that most firms demonstrate compliance with the ex-post cost and charges requirements.
However, the level of compliance varies across the EU.
The CSA exercise revealed shortcomings in the format and content of ex-post disclosures, including differences across firms and Member States, inadequate disclosure of inducements, lack of disclosure of implicit costs, inconsistency in illustrating the cumulative impact of costs and charges, and failure to disclose corresponding percentages alongside cost figures. ESMA also conducted a mystery shopping exercise, which revealed disparities in the quality and timing of ex-ante cost and charges information provided to retail clients.
In response, ESMA will explore introducing a standardised format for cost and charges information to better align disclosures and ensure consistency. As MiFID II did not initially mandate a specific data format, consistency has been a challenge. Additional standardisation is one route to helping the regulation deliver on its aim of improving access to market data for retail investors. ESMA will also aim to increase quality by providing more effective guidance and taking follow-up actions on regulatory breaches.
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