We support the reference made to the proportionality principle on pages 26-27 of the draft guidelines. As mentioned in our introductory comments, many of the financial intermediaries who are members of our national associations, are micro to SME-type companies. Under MiFID, many of these firms fall under “opt-out” national regimes (according to Article 3 of MiFID I and II). Some firms however, are investment firms that do not fall under the Article 3 exemption.
In paragraph 34 on page 26, it is said that small and less complex institutions “may implement simpler policies and processes”. We believe the complementing requirement for competent authorities to apply simpler rules could be clarified, especially since paragraph 36 on page 26 lists the criteria to be taken into account by institutions and competent authorities for the application of the proportionality principle.
Finally, it is not clear to us how the application of the proportionality principle will work in practice and how the guidelines’ proposed suitability requirements will indeed be applied in a proportionate way to small/ micro-size type businesses.
See answer to question 4
See also Q 4. BIPAR wonders how appropriateness will be applied in this respect with the notions of suitability.
In paragraph 77 (page 36), regarding “independence of mind”, the draft guidelines state that members of the management body should not have conflicts of interest that cannot be managed that impede their ability to perform their duties independently and objectively. Paragraph 77 continues and lists situations that can create conflicts of interests that should be considered. We stress the importance of not defining certain situations as conflicts of interest per se and, if there are conflicts of interest, to indeed focus on those that cannot be managed.
In this respect, we believe that the proposed rules re. “independence of mind” would be too strict for SMEs and especially for very small investment firms. In a small community of investment firms, many managing directors will have personal, professional or economic relationships (point b) with relevant external stakeholders. Having a good relationship should not necessarily be considered as reducing the independence of mind. We also do not see how political influence or political relationships (point f) are relevant for this evaluation.
We believe that, due to their size, it may be difficult for very small firms to comply with diversity policy requirements for the management body. Also here, we stress the importance of application of the appropriateness principle and we believe that this regulation should not be relevant for non-CRD investment firms that have one or two managing directors. The burden would be too high.
We note the level of detail of the draft guidelines on the assessment, re-assessment and ongoing monitoring of the individual and collective suitability of the members of the management body. This level of detail is likely to be not appropriate for micro-size and small firms.