Learn Marketing Communication & MiFID II Investor Protection in 2025

1. Investor Protection under MiFID II 

Under MiFID II, Investment Firms must act fairly, honestly, and professionally, always in the best interests of their clients. Firms must design and distribute financial instruments aligned with a defined target market and ensure compatibility between products and the needs, characteristics, and objectives of their clients. 

CySEC has repeatedly highlighted failures linked to investor protection, often arising from misleading or poorly targeted communication, inadequate disclosures, or insufficient client assessments.   

Before providing services, CIFs must inform clients of their categorisation as Retail, Professional, or Eligible Counterparty, notify them of their right to request reclassification, and provide the terms and conditions governing the business relationship.  

CIFs are also required to communicate, in clear and understandable language, accurate information on the firm, its services, client funds or assets, and the financial instruments offered. Advisors must possess the necessary knowledge and competence to ensure information is delivered effectively and appropriately.  

When providing investment advice or portfolio management, CIFs must obtain sufficient information regarding the client’s knowledge and experience, financial situation, investment objectives, and risk tolerance to assess suitability. For execution-only and certain non-advised services, CIFs must perform appropriateness assessments. 

Since 2022, firms providing investment advice must also assess clients’ sustainability preferences, evaluate whether products meet these preferences, and reflect this in the suitability report. 

Best Execution forms another core component of investor protection. Firms must take all sufficient steps to obtain the best possible result for client orders. They must implement a clear and detailed Order Execution Policy, continuously monitor its effectiveness, and regularly assess the fairness of prices offered to clients. 

2. Product Intervention Measures 

Contracts for Difference (CFDs) are highly leveraged, complex financial instruments often traded speculatively. ESMA and national regulators observed a sharp increase in the marketing and sale of CFDs to retail clients, accompanied by high loss rates, lack of transparency, and unclear disclosures regarding fees, spreads, leverage, and financing charges. 

In response, ESMA introduced the Product Intervention measures to protect retail clients. Initial Margin Protection, restricting leverage to reduce losses and improve client outcomes. 

• Margin Close-Out Rules, requiring positions to be closed when funds fall below a set percentage. 
• Negative Balance Protection, ensuring retail clients cannot lose more than the funds deposited in their CFD account. 
• Restrictions on Bonuses and Incentives used to promote trading activity. 

These measures target conflicts of interest arising from business models where firms may profit from client losses. ESMA also coordinated EU-wide marketing restrictions, with most Member States adopting them, and some implementing additional protective measures or prohibiting CFD marketing altogether. 

3. Marketing Communication 

Marketing Communication refers to any information disseminated by CIFs that promotes financial services or products. Under MiFID II, all marketing materials, including advertisements, online content, social media posts, and third-party promotions must be fair, clear, and not misleading.  

In 2023, ESMA published its Final Report on the Common Supervisory Action (CSA) and Mystery Shopping Exercise on marketing communications. NCAs assessed firms’ arrangements around the production, approval, review, and monitoring of marketing materials. Within the Report, key supervisory findings included:  

• Production processes, where NCAs noted general similarities in how firs produce marketing materials, but also inconsistencies in terms of firm size, distribution channels and financial instruments offered.  
• Approval processes, it was identified that certain firms lacked a documented approval process or did not involve compliance and legal teams consistently across communication channels. 
• Review processes, where NCAs observed that some firms did not conduct sufficient review to ensure marketing materials remained aligned with approved content.  
• Sustainability claims shortcomings including limited internal guidance and insufficient controls to prevent greenwashing.  
• Outsourcing Risks, where NCAs noted failures in reviewing third-party content, reliance on sampling methodologies that missed non-compliant materials. 
• Record-Keeping and Complaints, including shortcomings on lack of written procedures for storing marketing data, as firms could not provide evidence of the approval of specific marketing communications or earlier versions. 

4. Business Development and Remuneration Practices 

CIFs must ensure that all communications with clients comply with MiFID II principles. In essence, Firms must clearly state the company’s name and its authorisation by CySEC, must provide accurate information about investment services, present both benefits and risks in a balanced manner and by using clear and simple language suitable for the average retail investor.  

During sales calls, employees must not provide unauthorised investment advice including personal recommendations, promise profits or engage in misleading sales. The implementation of a Call Monitoring Manual is vital, in ensuring recorded calls are reviewed on a daily basis and must be maintained call records for at least five years.

In addition, under MiFID II, remuneration structures must align with clients’ best interests. ESMA introduced certain remuneration guidelines in designing remuneration policies aligned with clients interests, qualitative criteria, avoiding creating incentives that prioritise firm interests over client welfare and mitigating short-term performance targets that will not benefit clients.  

Final Thoughts

In conclusion, investor protection and marketing communication under MiFID II continue to evolve as regulators intensify their supervisory focus in 2025. Transparent communication, robust governance frameworks, and responsible marketing practices are crucial to safeguarding clients, particularly retail and vulnerable investors. 

In response to this demand, SALVUS Funds, in collaboration with the Institute for Professional Excellence (IforPE), presents a self-study course titled “ Learn Marketing Communication & MiFID II Investor Protection in 2025.” This program outlines the necessary knowledge about the information provided to investors, marketing restrictions, as well as the Product Governance regulatory requirements in accordance with the European Directive on Markets in Financial Instruments (MiFID II).

The SALVUS Regulatory Compliance team can support CIF regulated entities obliged under the MiFID regulatory framework, to fulfill their annual regulatory reporting obligations and prepare your Annual Compliance Report through our Compliance Consulting service. 

For more information, contact us at compliance@salvusfunds.com.

#StayAhead

Should you be interested to read more about relevant topics, feel free to visit other SALVUS related authored articles:

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• Understand the services of Investment Advice and portfolio management in 2024 – SALVUS Funds
• Sustainable Finance: EU Regulatory framework & ESG Investing Strategies – SALVUS Funds

The information provided in this article is for general information purposes only. You should always seek professional advice suitable to your needs.