On Thursday, June 21, MFA submitted a response to the European Commission (the “Commission”) on its proposal for a delegated regulation as regards organisational requirements and operating conditions for investment firms (the “Draft Delegated Regulation”). Consistent with MFA views, in the proposed MiFID II amendments, the European Commission has focused on disclosures to clients, to enable clients to communicate their ESG preferences to their asset managers, which will allow managers to meet clients’ objectives. Though we generally support the approach taken by the Commission, we do believe that further clarification of certain provisions in the text is needed. Among other points, , MFA believes the Commission should avoid including broad wording requiring investment managers to build “environmental, social and governance considerations” into their suitability assessments under the proposed amendments. Instead, as part of the investment manager’s suitability assessment, the investment manager could check as to whether a client or potential client has any particular ESG preferences. The manager can then determine whether any of its products or services meets the client’s ESG preferences (or otherwise make adjustments to existing product offerings to take into account such ESG preferences), and provide such products or services to the client accordingly. Additionally, we added that, in the context of an alternative investment fund (outside the scope of MiFID), the fund’s offering documents would clearly disclose to investors and potential investors the fund’s investment objectives.
