esma guidelines on marketing communications under the cross border distribution regulation

ESMA Guidelines on Marketing Communications Under the Cross-Border Distribution Regulation

The European Securities and Markets Authority (ESMA) has recently issued new guidelines on marketing communications under the cross-border distribution regulation. These guidelines aim to provide clarity and consistency to market participants engaged in cross-border distribution of financial products. The guidelines will be useful for companies, financial institutions, and individuals who want to market their products in the European Union (EU) and other countries.

Key Points

1. Clear and balanced information: ESMA emphasizes the importance of providing clear and balanced information to investors. Market participants should avoid misleading or exaggerating product features, benefits, and risks. They should also present all relevant information in a way that is understandable and easy to access.

2. Disclosure of costs and fees: ESMA requires market participants to disclose all costs and fees associated with the product in a straightforward and understandable manner. This includes all charges, such as transaction costs, maintenance fees, and exit fees.

3. Compliance with national laws: Market participants should ensure that their marketing communications comply with national laws and regulations in the countries where they are distributed. This includes complying with laws on financial marketing, privacy, and data protection.

4. Prohibition of product placement: ESMA prohibits the practice of product placement, where companies or financial institutions provide financial products or services to influencers or other individuals in exchange for a positive review or recommendation. Market participants should avoid any form of kickbacks or other forms of bribery in order to obtain a positive review or recommendation.

5. Clear identification of the product: ESMA requires market participants to clearly identify the product being promoted, including its name, logo, and other relevant information. This will help investors make an informed decision about their investment choices.

6. Compliance with anti-money laundering and countering the financing of terrorism (AML/CFT) regulations: Market participants should ensure that their marketing communications comply with AML/CFT regulations. This includes preventing the distribution of financial products to individuals or entities involved in money laundering or terrorism financing.

7. Transparency in relationships with third parties: ESMA requires market participants to be transparent about their relationships with third parties, such as financial advisors, investment consultants, or other intermediaries. Market participants should disclose any financial relationships they have with third parties and provide full and accurate information about the products they recommend.

The ESMA guidelines on marketing communications under the cross-border distribution regulation provide important guidelines for market participants engaged in cross-border distribution of financial products. By following these guidelines, market participants can ensure that their marketing communications are clear, balanced, and in compliance with national laws and regulations. This will not only help them build trust with investors but also enhance the overall integrity and efficiency of the financial market.