The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, today published a Statement on securities lending to retail clients setting out the applicable requirements under the Markets in Financial Instruments Directive (MiFID II).
The Statement highlights investor protection concerns related to securities lending and outlines the obligations of firms engaging in this practice. It also outlines ESMA’s expectations for firms’ compliance with the relevant MiFID II requirements regarding:
Revenues from securities lending should directly accrue to the retail client, net of a normal compensation for the firm’s services
Express prior consent of retail clients should not be sought by way of the firm’s general terms and conditions