Amendments to ESMA/EBA guidelines are slowly tightening the screws on non-financial misconduct

ESMA and the EBA have had guidelines on assessing the suitability of members of the management body and key function holders pursuant to CRD V and MiFID II in place for several years.

But recent amendments (applying from 31 December 2021) take things up a notch.

The guidelines apply to all subsidiaries and group members with EMEA coverage - whether or not headquartered in the EU, so some multinational firms may need to factor the guidelines into their firmwide policies.

EU regulators (like various other regulators) currently tend not to introduce new rules specifically on non-financial misconduct but instead to flex and expand the application of pre-existing rules and guidance. The amended guidelines retain provisions allowing EU regulators to do this and some of the recent amendments may make this even easier. For example, they encourage firms and National Competent Authorities to consider credible "adverse reports" about an indivdiual's behaviour - not just criminal convictions - when assessing reputation, honesty and integrity.

Despite these amendments, there remains much ambiguity and wiggle-room in the guidelines, and this may cause problems when different firms and regulators inteerpret the guidelines differently with respect to a given situation or individual.

Want to know more? Listen to our podcast episode on the subject in which we do a deeper dive into these amendments and other specific changes addressing AML/CFT and diversity and inclusion within the framework of suitability assessments.

 And for our review of the approach to non-financial misconduct and whistleblowing in 12 key jurisdictions - as well as our other podcast episodes on these topics - click here.