Both execution only and non-advised, given properly, obviously involve less liability than an advised sale, but are not without some element of risk.
Firms must take care to ensure that business to be transacted under execution-only or on a non-advised basis satisfies the conditions indicated in this article and is processed as required by the rules. Under no circumstances, should business be processed on either basis on order to avoid the obligations of making a personal recommendation.
Simply using a disclaimer to say “this is not advice” is not enough to ensure a firm is not responsible for a client’s actions. This will be down to whether a client thinks they have received advice. If it looks and feels like advice, it probably is advice.
MiFID II introduced a specific requirement for firms to keep records of appropriateness assessments;
- These must include where a warning was given, whether the client decided to go ahead despite the warning and whether the firm accepted the client’s request to go ahead with the transaction;
- Where a bundle of services or products is envisaged, the firm must consider whether the overall package is appropriate;
- We recommend that firms ensure they have the appropriate systems and controls in place.