Published date: 29 August 2017

Review of suitability requirements finds many investment firms fail to meet the required standard

  • Suitability requirements are there to ensure client investments align to investment objectives and personal circumstances.
  • Boards are required to rigorously examine their suitability governance framework on a continuous basis.    
  • MiFID II regulations will introduce significant changes to suitability requirements by placing a number of the Guidelines on a statutory footing and by introducing new requirements.

The Central Bank of Ireland has carried out a themed review to examine the suitability processes of investment firms. Suitability is the process by which firms take all reasonable steps to ensure that a client’s investments align to their investment objectives and personal circumstances. The review focused on the information gathering phase of the suitability process and firms were assessed for compliance with the European Securities and Markets Authority (ESMA) Suitability guidelines.

The review found that:

  • Firms could not demonstrate that suitability policies and procedures