Dear CEO letter on MiFID II marketing communications

Ensuring compliance with Central Bank of Ireland requirements

On 10 October 2024, the Central Bank of Ireland (CBI) issued a Dear CEO letter to all Irish MiFID investment firms, credit institutions and fund management companies. This letter summarised the findings from a review of how these firms apply marketing communications disclosure requirements under MiFID II regulations. It also outlined several follow-up actions for the relevant firms to ensure compliance with the CBI’s standards and improve their governance and control frameworks.

The review, which assessed firms’ compliance with the MiFID II marketing and advertising requirements when providing MiFID II services to retail investors, was part of the European Securities and Markets Authority’s (ESMA) Common Supervisory Action (CSA).

Several deficiencies in governance and control frameworks, especially in firms outsourcing their marketing functions, were identified. These deficiencies can undermine investor confidence by distorting the presentation of financial products’ benefits and risks.

To address these issues, the CBI has asked firms to review their marketing and advertising practices in both the ESMA report and the expectations and good practices set out in Schedule 1 of the letter. Firms have until 31 January 2025 to complete this review and any subsequent action plans should be approved by the board in advance of this deadline. 

Key findings

• Many firms did not clearly identify all marketing and advertising content, resulting in ineffective and non-transparent communication with clients. This includes failing to prominently label content as marketing material and inconsistencies in defining marketing content.

• Significant deficiencies were found in the governance and control frameworks of many firms, especially those outsourcing their marketing functions. These include inadequate internal controls and a lack of documented policies and procedures.

• Several firms outsourcing their marketing functions to parent companies or group entities lacked documented service level agreements (SLAs). This led to unclear roles, responsibilities and oversight of the outsourced services.

• Some firms published marketing content that was imbalanced, unclear or potentially misleading. Issues included insufficient explanations for product characteristics and failing to include required risk warnings.

• There was an over-reliance on initial reviews and approvals, with insufficient ongoing monitoring of published marketing content. The compliance function in many firms was not effectively involved in the post-publication review process.

• Finally, firms varied considerably in defining and targeting their marketing content to specific investor groups. Many lacked policies to ensure that marketing content reached the appropriate audience.

Actions required

1. Firms must review their marketing and advertising practices against the ESMA Report and the findings, expectations, and good practices outlined in the CBI’s letter. This review should be documented, detailing the actions taken to address any deficiencies.

2. The review and accompanying action plan must be completed and approved by the board of each firm by 31 January 2025. The minutes of the relevant board meeting should reflect these discussions and approvals.

3. Firms that were part of the review and received formal mitigating actions must also consider the feedback from both the ESMA Report and the CBI’s letter in conjunction with these mitigating actions.

We are here to help

PwC offers a range of services to help firms address the findings from this Common Supervisory Action (CSA). We design and implement gap analyses to identify areas for improvement and provide recommendations. Our team reviews policies and procedures to ensure compliance with CBI requirements, and we also develop and implement risk mitigation plans and monitor their progress. Additionally, we construct governance frameworks that include management and board reporting, helping firms meet the highest standards of governance and control. To discuss any of these issues, contact a member of our team today.