MiFID Ongoing Compliance

Ongoing MiFID compliance spans several core obligation areas defined in MiFID II (Directive 2014/65/EU) and its delegated legislation. These include continuous suitability and appropriateness assessments under Articles 25(2)–(3), best execution monitoring under Article 27 with regular review of execution venues, record-keeping obligations under Article 16(6)–(7) including telephone recording, cost transparency requirements under Article 24(4), and product governance obligations with ongoing target market monitoring under the Delegated Directive (EU) 2017/593. Additionally, ESMA guidelines on the compliance function (ESMA/2012/388) require a structured risk assessment, compliance monitoring plan, and regular reporting to senior management. Each of these areas demands ongoing attention, not just initial implementation.

An effective MiFID compliance monitoring programme starts with an annual risk assessment that determines the scope and focus of monitoring activities based on the firm’s business model, product range, and client base. The monitoring plan should combine routine reviews (e.g., sample-based review of suitability reports and cost disclosures), event-driven reviews (e.g., triggered by client complaints or regulatory changes), and automated controls (e.g., target market matching, limit monitoring, trade surveillance). Results feed into a compliance report to senior management. Critical success factors include a clear documentation chain where every finding is recorded, escalated, and tracked to resolution, and sufficient resources for the compliance function as required under MiFID II Article 16(2).

ESMA guidelines provide detailed interpretations of MiFID II requirements and are adopted by national competent authorities through a comply-or-explain mechanism. Key guidelines for ongoing compliance include the guidelines on suitability (ESMA35‑43-3172, updated 2023 with ESG preference integration), product governance guidelines (ESMA35‑43-3448), compliance function guidelines (ESMA/2012/388), and remuneration guidelines (ESMA35‑43-3565). When ESMA updates or issues new guidelines, investment firms must assess the impact on their internal policies and procedures and implement changes within the specified timeline. ADVISORI supports firms with regulatory change management to ensure new ESMA requirements are systematically identified and incorporated.

Best execution monitoring under MiFID II Article 27 requires investment firms to continuously assess whether they achieve the best possible result for client orders. This involves regular evaluation of selected execution venues against the factors of price, costs, speed, likelihood of execution, and settlement. The MiFID II Delegated Regulation mandates at least an annual formal review of execution policies, with more frequent reviews when material market changes occur. Firms must also conduct transaction cost analysis (TCA) and benchmark comparisons using metrics such as VWAP and TWAP. Following the RTS 27/28 phase-out under MiFIR II, firms should rely on internal data and third-party TCA tools for execution quality evidence. All monitoring results must be documented and reported to senior management.

Preparing for regulatory examinations requires a systematic audit-readiness strategy. Key elements include complete and current documentation of all MiFID-relevant processes (suitability reports, cost disclosures, trade records, telephone recordings under Article 16(7)), a demonstrable trail of compliance monitoring activities with findings and remediation, current results from the annual risk assessment and compliance report, evidence of timely implementation of regulatory changes (ESMA guidelines, national supervisory interpretations), and documentation of staff training and competence assessments. ADVISORI supports with pre-audit assessments that anticipate typical regulatory focus areas and identify documentation gaps before the examination.

Product governance requirements under MiFID II Article 16(3) and Delegated Directive (EU) 2017/593 impose ongoing obligations on both manufacturers and distributors. Manufacturers must regularly review whether products continue to meet the needs of the defined target market, whether the distribution strategy remains appropriate, and whether any adverse effects on the target market are identifiable. Distributors must compare their actual client base against the defined target market and report deviations to the manufacturer. Material changes in market conditions, product performance, or client complaints trigger extraordinary reviews. The 2023 ESMA product governance guidelines further clarify expectations around pricing processes, value-for-money assessments, and ESG factor integration in target market definitions.

Several regulatory developments impact ongoing MiFID compliance: The MiFID III/MiFIR II reform (Regulation 2024/791 and Directive 2024/790) introduces phased changes from 2025, including revised cost transparency rules (relief for professional and eligible counterparty clients), the payment for order flow (PFOF) ban effective 30 June 2026 with a transition for existing arrangements, and the consolidated tape provider (CTP) framework. The updated ESMA suitability guidelines (2023) require stronger integration of ESG preferences into the suitability assessment. Additionally, the EU Retail Investment Strategy (RIS) proposes stricter rules on inducements and value-for-money requirements. Investment firms should factor these changes into their compliance planning and monitoring frameworks now.