Legal Updates

 Financial RegulationAugust 01, 2023

The definition of advice under MiFID

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On 11 July 2023, the European Securities and Markets Authority (ESMA) published a Supervisory Briefing on understanding the definition of advice under MiFID II (Supervisory Briefing)[1].

The Supervisory Briefing supplements and further specifies certain aspects of the Questions and Answers document on understanding the definition of advice under MiFID published in 2010 by ESMA’s predecessor, the Committee of European Securities Regulators (CESR) (CESR Paper) [2]. This is the first time that the CESR Paper has been updated.

The Supervisory Briefing applies to investment firms, UCITS management companies, AIFMs and credit institutions (In-Scope Firms) and sets out the supervisory expectations of ESMA and National Competent Authorities in relation to the consideration of whether or not “investment advice” is being provided within the meaning of MiFID II.

ESMA has sought to update the CESR Paper to align with new business models and recent technological developments (e.g., the increased use of social media and mobile apps by In-Scope Firms). ESMA notes that the legal definition of investment advice has remained substantially unchanged from the MiFID I to the MiFID II framework and states that the content of the Supervisory Briefing does not constitute new policy.

What is investment advice?

Under MiFID II, “investment advice” means “the provision of personal recommendations to a client, either upon its request or at the initiative of the investment firm, in respect of one or more transactions relating to financial instruments.”[3]

The MiFID II Delegated Regulation makes it clear that the recommendation provided must be presented as suitable for the client or must be based on a consideration of the circumstances of the client.[4] Merely providing objective information without making any comment, value judgement, or suggestion on its relevance to decisions which an investor may make, will not constitute a recommendation for these purposes.

Firms wishing to avoid giving investment advice

The Supervisory Briefing restates the CESR Paper to the effect that firms that do not intend providing investment advice should ensure that their internal systems and controls, their staff training and their information to clients appropriately and consistently reflect the nature of their services. ESMA notes that describing a service as non-advised in client documentation will not be sufficient, on its own, to ensure that the service does not amount to investment advice.

Client-facing staff should be trained to understand that when they provide information to clients, they should not give their own views or recommendations about the suitability for the client of any particular financial instrument. Firms that interact with clients online are expected to make sure that staff involved in designing and operating online systems understand the nature of the service that they should, and should not, be providing.

The provision of personal recommendations

ESMA has updated the CESR Paper to clarify that a recommendation does not need to be an explicit statement clearly indicating a type of investment behaviour (such as “buy”, “sell” or “hold”), but may also include an indication of the suggested behaviour in an “indirect”, “implicit” manner. For example, if a client is given information on one preselected product, and is told that this particular product is “best in class” in comparison with its peers, then the context in which this information is presented could amount to a personal recommendation to a client.

Providing clients with access to model investment portfolios may also, depending upon the circumstances, amount to the provision of personal recommendations. In addressing the increasing popularity of copy trading services, ESMA states that depending on how a copy trading service is designed and provided, it can be the case that copied traders provide investment advice to the investors who are copying their trades.

Relating to transactions in financial instruments

Any advice that relates to particular financial instruments, whether or not transactions ultimately go ahead, may be considered investment advice. For example, a recommendation not to buy a financial instrument can also constitute investment advice.

ESMA clarifies that generic advice about a type of financial instrument and general recommendations will not constitute investment advice unless it forms part of the investment advice process (e.g. information on an asset allocation preceding investment advice concerning a portfolio). The Supervisory Briefing reiterates that acts that are preparatory to the provision of an investment service or activity should be considered as an integral part of that service or activity.

Use of disclaimers

ESMA acknowledges that disclaimers may be of some use to firms seeking to ensure that they do not inadvertently present financial instruments as suitable for particular clients. However, even where a clear, prominent and understandable disclaimer is provided stating that no advice or recommendation is being given, a firm may still be viewed as having presented a recommendation as suitable for the client.

The Supervisory Briefing clarifies that any disclaimers or other similar types of statements aimed at limiting the firm’s responsibility with regard to the provision of advice will not in any way impact the characterisation of the service provided in practice to clients.

Online distribution and the use of social media

The Supervisory Statement clarifies that a recommendation concerning financial instruments made through internet websites, investment apps, and/or social media (including through so-called “finfluencers”) may, in certain instances, be regarded as a personal recommendation, and not as issued exclusively to the public. The use of “targeted messaging” (i.e. the creation of content for a specific target audience) that includes personalised information may also be considered a “personal recommendation.”

Training courses

Reflecting another recent trend, the Supervisory Statement makes it clear that firms providing online training courses which gather information on an individual’s circumstances and use it as a basis for a recommendation will fall within the definition of investment advice.


In-Scope Firms will find it useful to review the Supervisory Briefing when considering whether any of their services may be considered to amount to the provision of investment advice. ESMA has also provided four new case studies, providing simplified illustrations of situations where firms will, or will not, be considered to be providing investment advice.

A copy of the Supervisory Briefing can be accessed here.

If you have any queries about the information contained in this article, please contact the authors or your usual Dillon Eustace contact.


[1] ESMA35-43-3861

[2] CESR/10-293

[3] Article 4(4), MiFID II

[4] Article 9, MiFID II Delegated Regulation

DISCLAIMER: This document is for information purposes only and does not purport to represent legal advice. If you have any queries or would like further information relating to any of the above matters, please refer to the contacts above or your usual contact in Dillon Eustace.

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