Article 9(12)(c) of the MiFID II Delegated Directive
How should firms manufacturing financial instruments ensure that the charging structure of the financial instrument is appropriately transparent for the target market, such as that it does not disguise charges or is too complex to understand as required by Article 9(12)(c) of the MiFID II Delegated Directive?
Answer 4
Target clients should be able to access and choose the product(s) that best serve their needs, objectives and characteristics by assessing all relevant costs and benefits of the product(s). Therefore, during the product design phase the firm should ensure that the charging structure of the product is not opaque, hard to assess or designed to mislead clients and to exploit behavioural biases. For example, ESMA expects firms to:
• Ensure that artificially low initial rates/costs are not used to attract and mislead unsophisticated clients.
• Avoid the use of unnecessarily complex formulas for the determination of co
…