Independent investment advice
MIFID II makes a distinction between advice on an independent basis and on a non-independent basis. Before providing advice, an investment firm must inform a client whether this advice is being provided on an independent or a non-independent basis.
Advice is independent if the investment firm:
- assesses a sufficient range of available financial instruments or structured deposits in the advice;
- includes different types of financial instruments offered by various providers in the advice;
- ensures that the advice is not limited to financial instruments that are issued or provided by the investment firm itself or entities with which the investment firm is closely related in a legal or economic sense.
If the advice does not satisfy these requirements then the advice is not independent.
The qualification of advice is also of importance for the manner in which the inducement rules apply in relation to advice provided to professional investors and eligible counterparties.
ESMA has prepared Q&As for this topic, which can be found in the document ESMA Q&As Investor Protection (Chapter 5).