EU · MiFID II · TITLE II AUTHORISATION AND OPERATING CONDITIONS FOR INVESTMENT FIRMS · CHAPTER II Operating conditions for investment firms · Section 2 Provisions to ensure investor protection
Article 25 MiFID IIAssessment of suitability and appropriateness and reporting to clients
Requires staff giving advice or information to have the necessary knowledge and competence, and firms to assess suitability for advice and portfolio management (including bundled packages and the costs and benefits of switching) and appropriateness for other services, with warnings where a product is unsuitable or information is lacking. Execution-only is allowed for non-complex instruments at the client's initiative; firms must keep client agreements and give clients reports, including a suitability statement before an advised transaction.
Amendments and application dates
| Amending act | Change | Applies from |
|---|---|---|
| Directive (EU) 2016/1034 | Text amended | 1 Jul 2016 |
| Directive (EU) 2021/338 | Text inserted | by 28 Feb 2022 |
Level 2: delegated and implementing acts
- Delegated actIn forceLegal basis
AI summaryAmends the MiFID II Delegated Regulation 2017/565 to integrate sustainability: firms must consider sustainability risks in their organisational arrangements, risk management and conflicts of interest, and investment advisers and portfolio managers must ask about clients' sustainability preferences in the suitability assessment and must not recommend products as meeting preferences they do not meet. Applies from 2 August 2022.
- Implementing actExpiredLegal basis
AI summaryTime-limited Commission equivalence decision recognising Swiss stock exchanges under Article 25(4)(a) MiFID II for the share trading obligation, following Decision 2017/2441; it applied from 1 January 2019 and expired on 30 June 2019.
- Implementing actExpiredLegal basis
AI summaryTime-limited Commission equivalence decision recognising Swiss stock exchanges under Article 25(4)(a) MiFID II, which let EU investment firms meet the share trading obligation in Article 23 MiFIR by trading on them. It is no longer in force.
- Implementing actIn forceLegal basis
AI summaryCommission equivalence decision under Article 25(4)(a) MiFID II finding the Australian framework for listed financial markets equivalent, so EU investment firms may meet the share trading obligation in Article 23 MiFIR by trading on them.
- Implementing actIn forceLegal basis
AI summaryCommission equivalence decision under Article 25(4)(a) MiFID II finding that the legal and supervisory framework for recognised exchange companies in Hong Kong is equivalent, so EU investment firms may meet the share trading obligation in Article 23 MiFIR by trading on those exchanges.
- Implementing actIn forceLegal basis
AI summaryCommission equivalence decision under Article 25(4)(a) MiFID II finding the US framework for national securities exchanges and alternative trading systems equivalent, so EU investment firms may meet the share trading obligation in Article 23 MiFIR by trading on those venues.
- Delegated actIn forceLegal basis
AI summaryThe main MiFID II Delegated Regulation: defines key terms (such as investment advice, systematic internaliser, algorithmic and high-frequency trading, and direct electronic access) and sets detailed organisational requirements and operating conditions for investment firms, including compliance, conflicts of interest, remuneration, client information, suitability and appropriateness, best execution, client order handling, reporting to clients, record keeping and transaction-level obligations.
Level 3: ESMA Q&As, guidelines and opinions
- Q&ARejectedExplicit reference
AI summaryAsked how investment advice is attributed in split or system-supported workflows, and what organisational features evidence advice given 'under supervision'. ESMA rejected the question, so there is no answer.
- Q&ARejectedExplicit reference
AI summaryAsked whether investment advice is attributed to whoever communicates the personal recommendation rather than whoever produces the suitability statement, and whether these steps can be split in automated processes. ESMA rejected the question, so there is no answer.
- Q&ARejectedInferred · 75%
AI summarySought clarification of 'under supervision' in ESMA's guidelines on knowledge and competence (ESMA/2015/1886), covering real-time versus after-the-event supervision, responsibility and supervisory sign-off in investment advice. ESMA rejected the question, so there is no answer.
- Q&ARejectedInferred · 75%
AI summarySought clarification of record-keeping for staff advising 'under supervision' under ESMA's knowledge and competence guidelines (ESMA/2015/1886), including evidence of sign-off and the use of a qualified person's credentials in digital workflows. ESMA rejected the question, so there is no answer.
- Q&ARejectedInferred · 80%
AI summaryAsked whether suitability questionnaires must collect information in a set order: knowledge and experience first, then financial situation and investment objectives. ESMA rejected the question, so there is no answer.
- Q&ARejectedInferred · 75%
AI summaryAsked, in Spanish, what happens when staff whose MiFID knowledge and competence certification is current miss the annual refresher training, for example while on sick leave: must they redo the full course? ESMA rejected the question, so there is no answer.
- Q&AAnsweredESMA rulebook
AI summaryThe quarterly statement of client financial instruments and funds under Article 63(1) of the MiFID II Delegated Regulation should be sent as soon as possible after the period ends; sending it more than one month later is untimely unless the firm can justify a compelling reason.
- Q&ARejectedExplicit reference · 90%
AI summaryAsked whether a structured deposit with one return variable at maturity remains non-complex under Article 25(4)(a)(v) MiFID II when early exit pays the option's market value, which depends on several variables. ESMA rejected the question, so there is no answer.
- Q&AAnsweredInferred · 85%
AI summaryTo comply with Article 44a(1) and (2) BRRD 2 when selling subordinated eligible liabilities to retail clients, firms must collect the information for a MiFID II suitability test and, beyond it, information on the client's whole portfolio, including such liabilities held with other firms.
- Q&AAnsweredExplicit reference · 90%
AI summaryIn a Commission answer under the DLT Pilot Regime, ETFs and other collective investment undertakings represented by shares count as units in collective investment undertakings under Article 3(1)(c) DLTR, by reference to Article 25(4)(a)(iv) MiFID II, not as shares under Article 3(1)(a).
- Q&AAnsweredInferred · 85%
AI summaryFrom 28 December 2020 every sale to a retail client of subordinated eligible liabilities issued on or after that date requires a suitability test under Article 25(2) MiFID II and Article 44a BRRD 2, whatever the service (including self-placement); for earlier issues the test applies only to advice and portfolio management unless the Member State has extended it.
- Q&AAnsweredInferred · 95%
AI summaryThe suitability report must explain on an individual basis how the recommendation matches the client's objectives, risk tolerance, capacity for loss, knowledge and experience, referring to the client information used; tick-box or generic statements such as 'matches your risk tolerance' are not enough.
- Q&AAnsweredInferred · 80%
AI summaryUnder Article 62(1) of the MiFID II Delegated Regulation, a firm need not report again each time the same depreciation threshold is crossed within a reporting period; a new report is due only when a further threshold is exceeded.
- Q&AAnsweredInferred · 80%
AI summaryA firm 'holds a retail client account' for Article 62(2) of the MiFID II Delegated Regulation if it provides safekeeping and administration of the client's instruments or holds an account recording the client's transactions as part of an investment service.
- Q&AAnsweredExplicit reference · 90%
AI summaryPortfolio managers serving retail clients should meet the Article 25(6) MiFID II duty to explain periodically how the investments meet the client's preferences and objectives within the Article 60 ex-post periodic report, on the same deadlines, assessing the portfolio as a whole, with the format left to the firm.
- Q&AAnsweredInferred · 85%
AI summaryThe 10% depreciation report under Article 62(1) of the MiFID II Delegated Regulation is owed to professional as well as retail clients.
- Q&AAnsweredInferred · 90%
AI summaryFirms may not agree with clients to use a depreciation threshold higher than the 10% (and multiples of 10%) set in Article 62 of the MiFID II Delegated Regulation, such as 15%.
- Q&AAnsweredInferred · 85%
AI summaryWith the client's express and revocable consent, the 10% depreciation reporting for leveraged or contingent liability instruments under Article 62(2) of the Delegated Regulation may be done on an aggregated basis, such as the whole portfolio or all leveraged positions, instead of instrument by instrument.
- Q&AAnsweredExplicit reference · 90%
AI summaryShares or units in non-UCITS collective investment undertakings are complex per se under Article 25(4)(a) MiFID II and cannot be reassessed as non-complex under Article 57 of the Delegated Regulation, so execution-only services in them require an appropriateness assessment.
- Q&AAnsweredInferred · 85%
AI summaryThe 10% depreciation thresholds are always measured against the portfolio value at the start of the reporting period (for example 90,000, 80,000 and 70,000 for a 100,000 start), resetting at the start of the next period.
- Q&AAnsweredInferred · 85%
AI summaryFor the 10% depreciation report, instruments with no secondary market or daily price (such as funds without a daily NAV, unlisted or illiquid shares) should be valued using appropriate fair-value estimates consistent with those used in the Article 60 periodic statement.
- Q&AAnsweredInferred · 85%
AI summaryFor the 10% depreciation report, cash added during a reporting period is excluded from the current portfolio value, while invested cash or added investments are added to the starting value; firms should not encourage clients to add funds to avoid the report.
- Q&AAnsweredInferred · 80%
AI summaryWhere a firm's reporting period began after 3 January 2018, the portfolio valuation on that date served as the reference value for the Article 62 depreciation reports until the first reporting period started.
- Q&AAnsweredInferred · 85%
AI summaryFor the 10% depreciation report under Article 62(1) of the MiFID II Delegated Regulation, a firm must value the portfolio at the start of the reporting period and at least once each day, but need not value it continuously; a fixed daily valuation point, with clients informed by the end of that business day, is acceptable.
- Q&AAnsweredInferred · 85%
AI summaryFor the 10% depreciation report, cash the client withdraws must be added back when measuring the portfolio's overall value against the value at the start of the period, until a periodic statement reflects the withdrawal.
- Q&AAnsweredInferred · 85%
AI summaryFor the 10% depreciation report on leveraged instruments or contingent liability transactions, made instrument by instrument against original cost under Article 62(2) of the Delegated Regulation, firms may use a fixed daily valuation point; any instrument that can magnify the investor's exposure counts as leveraged.
- Q&AAnsweredInferred · 80%
AI summaryFirms may meet their record-keeping obligations on advice (records of services, the suitability statement and minutes of face-to-face conversations) in a single document, provided it meets each requirement, is kept for the required period and is given to the client where required.
- Q&AAnsweredInferred · 95%
AI summaryFirms giving investment advice must always provide a suitability report, including where the advice is not to buy, hold or sell a financial instrument.
- Q&AAnsweredInferred · 95%
AI summaryWhen advising, firms may recommend only suitable instruments and must apply suitability to every decision to buy, hold or sell; they must not steer a client to buy an unsuitable product 'on their own initiative' or alter the client's profile to make it fit, as ESMA's case examples illustrate.
- Q&AAnsweredInferred · 95%
AI summaryThe suitability report must reach the client before the transaction, so it cannot be sent with the post-execution order report, except where the agreement is concluded by distance communication, when it may follow without undue delay.
- Q&AAnsweredInferred · 95%
AI summaryA suitability report must be given to a retail client whenever investment advice is provided, whether or not a transaction follows; 'before the transaction is made' only sets the timing where one does.
- Q&AAnsweredInferred · 95%
AI summaryA suitability report may be provided in a secure, client-specific area of the firm's website with a notification to the client, provided the website qualifies as a durable medium, suits the way the firm interacts with the client and the client consents.
- Q&AAnsweredInferred · 90%
AI summaryThe suitability report should record the date and time the advice was given, and firms should also record when the report was provided (if different) and keep it under the record-keeping rules; timestamping is useful but not mandatory.
- Q&AAnsweredInferred · 95%
AI summaryFirms must not advise or manage portfolios without the necessary information on a client's financial situation, but in limited cases may assess suitability without full disclosure of assets, for example where the client gives complete information on all liabilities; this must be stated in the suitability report.
- GuidelinesPublishedESMA rulebook
AI summaryESMA guidelines (ESMA71-1154262120-153), applying from 3 January 2018, setting minimum knowledge and competence criteria for staff giving information about investment products and services and for staff giving investment advice under Article 25(1) MiFID II, including qualifications, experience and supervision of staff not yet qualified, firms' assessment and ongoing training, and publication of national criteria.
- GuidelinesPublishedESMA rulebook
AI summaryESMA guidelines of April 2022 (ESMA35-43-3006) on the appropriateness assessment and execution-only services under Article 25(3) and (4) MiFID II, covering information to clients, collecting and checking information on knowledge and experience, warnings when a product is inappropriate, the conditions for execution-only, staff training and record keeping; they apply six months after publication in all EU languages.
- GuidelinesPublishedESMA rulebook
AI summaryESMA's 2022 final report and revised guidelines (ESMA35-43-3172) on the MiFID II suitability assessment for investment advice and portfolio management, updated for the integration of clients' sustainability preferences, covering information to clients, knowing the client and the product, reliability of client information, suitability of recommendations, costs and switching, staff qualifications and record keeping, with good and poor supervisory practices.
- GuidelinesPublishedESMA rulebook
AI summaryESMA guidelines (ESMA/2015/1787), applying from 3 January 2017, on when debt instruments embed a derivative or have a structure that makes the risk hard to understand, and when structured deposits make the risk of return or the cost of early exit hard to understand, so that they are complex and excluded from execution-only under Article 25(4) MiFID II, with a non-exhaustive list of examples.
- Q&ALegacy Q&A documentESMA rulebook
AI summaryCESR's 2009 Q&As (CESR/09-559) on which financial instruments counted as complex or non-complex for the MiFID I appropriateness test and execution-only services, covering shares, money-market instruments, bonds and other securitised debt, UCITS and other funds, and the criteria for other non-complex instruments, with a non-exhaustive list. A legacy document predating MiFID II.
- Q&ALegacy Q&A documentESMA rulebook
AI summaryESMA's consolidated legacy Q&A document (ESMA35-43-349, final version 15 December 2023) on MiFID II investor protection topics, including best execution, suitability, call recording, inducements and research, costs and charges, client categorisation, third-country firms and product governance. It is no longer updated; Q&As from 2024 are in ESMA's Q&A tool.
Commentary
No law-firm commentary is linked to this provision yet.
393 more documents relate to MiFID II as a whole without naming an article.
UK counterpart
- DivergedExplicit reference · 90%
EU changes after exit: Directive (EU) 2021/338 (by 28 Feb 2022).
- SYSC 5.1.5AAR Knowledge and competence
- COBS 8A.1.9R Record keeping: client agreements
- COBS 8A.1.11R Record keeping: client agreements
- COBS 9A.2.1R
- COBS 9A.2.16R Bundled packages: MiFID business and insurance-based investment products
- COBS 10A.2.1R
- COBS 10A.2.2R Bundled packages: MiFID business and insurance-based investment products
- COBS 10A.3.1R
- COBS 10A.3.2R
- COBS 16A.2.1R
- SYSC 5.1.5ABR · Knowledge and competenceDivergedExplicit reference · 90%
EU changes after exit: Directive (EU) 2021/338 (by 28 Feb 2022). UK changes after exit to SYSC 5.1.5ABR: FCA 2025/40 (from 23 Oct 2025).
- DivergedExplicit reference · 90%
EU changes after exit: Directive (EU) 2021/338 (by 28 Feb 2022). UK changes after exit to COBS 1 Annex 1: FCA 2025/40 (from 23 Oct 2025), FCA 2025/32 (from 19 Jan 2026), FCA 2026/5 (from 2 Mar 2026).
- DivergedExplicit reference · 90%
EU changes after exit: Directive (EU) 2021/338 (by 28 Feb 2022). UK changes after exit to COBS 10A.4.1R: FCA 2025/31 (from 19 Jan 2026), FCA 2025/52 (from 6 Apr 2026).
FCA Handbook references © FCA, used under the Open Government Licence v3.0. Rulestack is independent and not endorsed by the FCA.
Version history
- From 28 Feb 2022
- From 1 Jul 2016 to 28 Feb 2022
- From 17 Sept 2014 to 1 Jul 2016
Each entry is a consolidated version of the act on EUR-Lex in which this provision appears. The text itself is on the official site.