Knowledge Base
Obtain explicit client consent to execute orders outside trading venues
Which is one of the financial instruments typically traded outside regulated markets?
Certain financial instruments, particularly bonds or OTC derivatives, are typically traded outside regulated markets. This justifies the need to obtain the client's explicit consent.
Which directive imposes the obligation to obtain the client's explicit consent for executing orders outside trading venues?
Article 27(5) of MiFID II imposes this obligation when the execution policy provides for the possibility of executing orders outside regulated trading venues.
What is the main risk mentioned in Article 66(3)(e) of Delegated Regulation 2017/565 regarding off-venue order execution?
Article 66(3)(e) of Delegated Regulation 2017/565 refers to counterparty risk, meaning that if the counterparty to the transaction defaults, the client may not receive the purchased securities or the payment for their sale, unlike trading venues where a clearing house generally guarantees settlement.
Under Article L. 533-18 III of the Code monétaire et financier, what obligation is imposed when the execution policy provides for the possibility of executing orders outside regulated trading venues?
Article L. 533-18 III of the Code monétaire et financier imposes the obligation to obtain the client's explicit consent for executing orders outside regulated trading venues. This means the professional must obtain a formalised agreement from the client before proceeding with such transactions.
Most probative form of proving the client's explicit consent
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A handwritten or electronic signature on a dedicated document constitutes the most probative form of proving the client's explicit consent, according to AMF Position-Recommendation DOC-2014-07.
Categorize items by dragging them to the appropriate zones
Items to categorize:
Physical or electronic evidence
Interactive electronic evidence
Audio evidence
Evidence of consent can be classified into signatures (handwritten or electronic), electronic agreements (ticking a checkbox, validation click) and recordings (telephone recordings). These forms must be retained and accessible in the event of an audit.
A validation click on a dedicated consent web page may suffice if the client has been clearly informed of the implications.
According to AMF Position-Recommendation DOC-2014-07, a validation click on a dedicated web page may suffice if the client has been clearly informed of the implications of their agreement. This constitutes acceptable evidence of explicit consent.
A recorded oral agreement during a telephone call meets the regulatory requirements for obtaining the client's explicit consent.
According to AMF Position-Recommendation DOC-2014-07, a recorded oral agreement during a telephone call meets the regulatory requirements provided the recording is retained. This enables proof that the client gave their explicit consent.