ESMA (European Securities and Markets Authority) continues to prioritise supervisory convergence and investor protection across the financial markets of the EU. ESMA has, on the basis of identified supervisory risks related to the distribution of financial instruments to retail clients, announced a Common Supervisory Action (CSA) which will be conducted during 2026 relating to the conflicts of interest requirements under MiFID II. Undertaking CSAs was one of the outputs identified in ESMA’s Work Programme for 2026.
The CSA is the application of a common assessment framework on supervisory questions in a priority area among national supervisors as well as ongoing exchanges between supervisors on these questions. The scope of the CSA in question will be that of assessing compliance with MiFID II by investment firms for conflicts of interest requirements when distributing financial instruments to retail clients, and to make sure that control and organizational arrangements protect the clients’ best interests.
The focus of the CSA will be on the impact of staff remuneration and the products being offered, investors being directed towards certain products by digital platforms and if such aligns with their best interests, and how potential conflicts are managed between the needs of retail investors and own profits.
This CSA will ensure consistent application of MiFID II requirements in relation to conflicts of interest across Member States. This will also strengthen investor protection through a more harmonized supervisory approach for governance in retail distribution conflicts.
This notice encompasses investment firms and credit institutions which carry out MiFID II regulated investment services, particularly those distributing financial instruments to retail clients.
Holders of an investment service licence should make sure their policies, procedures and control arrangements which tackle conflicts of interest adhere to the applicable requirements, including those under Directive 2014/65/EU, Regulation (EU) 2017/565, Directive (EU) 2017/593 and the European Securities and Markets Authority Guidelines on certain aspects of the MiFID II remuneration requirements.
Licence holders should thus ensure that any current arrangements are reviewed so as to be able to identify and manage conflicts of interest in the distribution process, giving special attention to incentive schemes, remuneration structures, third-party inducements, incentive schemes and the use of digital tools or platforms in engaging clients and recommending products.
For any other information or assistance, please contact us at info@gtg.com.mt
Author: Dr Kimberley Blundell