Requirement (MIFID)
Article 45 Duty of investment firms carrying out portfolio management and reception and transmission of orders to act in the best interests of the client
Requirements MIFID - DIRECTIVE 2006/73/EC
Description
Description
1. Member States shall require investment firms, when
providing the service of portfolio management, to comply with
the obligation under Article 19(1) of Directive 2004/39/EC to act
in accordance with the best interests of their clients when placing
orders with other entities for execution that result from decisions
by the investment firm to deal in financial instruments on behalf
of its client.
2. Member States shall require investment firms, when
providing the service of reception and transmission of orders,
to comply with the obligation under Article 19(1) of Directive
2004/39/EC to act in accordance with the best interests of their
clients when transmitting client orders to other entities for
execution.
3. Member States shall ensure that, in order to comply with
paragraphs 1 or 2, investment firms take the actions mentioned
in paragraphs 4 to 6.
4. Investment firms shall take all reasonable steps to obtain the
best possible result for their clients taking into account the
factors referred to in Article 21(1) of Directive 2004/39/EC. The
relative importance of these factors shall be determined by
reference to the criteria set out in Article 44(1)and, for retail
clients, to the requirement under Article 44(3).
An investment firm satisfies its obligations under paragraph 1 or
2, and is not required to take the steps mentioned in this
paragraph, to the extent that it follows specific instructions from
its client when placing an order with, or transmitting an order to,
another entity for execution.
5. Investment firms shall establish and implement a policy to
enable them to comply with the obligation in paragraph 4. The
policy shall identify, in respect of each class of instruments, the
entities with which the orders are placed or to which the
investment firm transmits orders for execution. The entities
identified must have execution arrangements that enable the
investment firm to comply with its obligations under this Article
when it places or transmits orders to that entity for execution.
Investment firms shall provide appropriate information to their
clients on the policy established in accordance with this
paragraph.
6. Investment firms shall monitor on a regular basis the
effectiveness of the policy established in accordance with
paragraph 5 and, in particular, the execution quality of the
entities identified in that policy and, where appropriate, correct
any deficiencies.
In addition, investment firms shall review the policy annually.
Such a review shall also be carried out whenever a material
change occurs that affects the firm's ability to continue to obtain
the best possible result for their clients.
7. This Article shall not apply when the investment firm that
provides the service of portfolio management and/or reception
and transmission of orders also executes the orders received or
the decisions to deal on behalf of its client's portfolio. In those
cases Article 21 of Directive 2004/39/EC applies.
Comment
Applies to Article 19(1) of Directive 2004/39/EC