Knowledge Base
Communicate the conflict of interest management policy to clients
Which documents govern the obligation to communicate the conflict of interest management policy under MiFID II?
Article 23 of the MiFID II Directive and Articles 33 to 43 of Delegated Regulation 2017/565 govern this obligation. These documents specify the requirements for transparency and conflict of interest management to ensure client protection.
Which article of Delegated Regulation 2017/565 requires a specific communication to the client in case of residual risk?
Article 34 of the Delegated Regulation requires this communication to enable the client to make an informed decision on whether to continue the relationship despite the identified conflict.
When must a service provider transmit its conflict of interest management policy to the client?
The conflict of interest management policy must be communicated upon establishment of the business relationship, either on a durable medium or made available on the company's website with notification to the client. This allows the client to be aware of risks before making a commitment.
What is one of the situations where a service provider may have an interest distinct from that of the client?
When the service provider also trades on its own account on the same instruments as those of the client, it may have a distinct financial interest that could be detrimental to the client's interests.
The disclosure of inducements is mandatory for all financial services under MiFID II.
Under Article 24 of MiFID II, this disclosure is mandatory to inform the client about remuneration received from third parties, except for discretionary portfolio management and independent advice, where inducements are prohibited.
Inducements from fund manufacturers are always prohibited in discretionary portfolio management.
Under Article 24 of MiFID II and AMF Position DOC-2013-10, inducements are prohibited for discretionary portfolio management and independent advice, except for minor non-monetary benefits that enhance the quality of the service. This rule aims to prevent conflicts of interest.
Definition of a 'Chinese wall'
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A 'Chinese wall' is an information barrier that separates activities likely to generate conflicts of interest. It aims to prevent the circulation of sensitive information between different departments to avoid bias.