In the 2019/2020 financial year, in the context of providing investment services, the German branch of BNP Paribas S.A failed, in some cases, to inform its clients about all costs and associated charges for specific financial instruments in good time and in accordance with the applicable requirements. These requirements have been in force since the transposition of the recast Markets in Financial Instruments Directive (MiFID II).

Furthermore, in some cases, the German branch provided investment services without first adequately assessing relevant information obtained from its clients regarding their financial situation in accordance with the requirements in force since the transposition of MiFID II on 3 January 2018. This should have formed part of the suitability assessment.

The administrative fine order is final and binding. 

Background information: 

Cost transparency 

Investment services enterprises such as the German branch of BNP Paribas S.A. must comply with general information requirements towards their existing and potential clients. This information is intended to help clients understand the nature and scope of the risks associated with the financial instruments or investment services they are being offered or are requesting. This is necessary in order for clients to make sound investment decisions. 

Investment services enterprises must provide appropriate information to clients in good time, i.e. before performing the services in question. The information must be easily comprehensible. The information must relate to the company, its services, the financial instrument, the proposed investment strategies, the execution venues and all costs and associated charges. 

Since the entry into force of the German Second Act Amending Financial Markets Regulations (Zweites Finanzmarktnovellierungsgesetz), investment services enterprises have been required to ensure comprehensive cost transparency. The legislature expects that clients are given an estimate of costs prior to receiving investment advice and a statement of costs once the advice has been provided. 

The ex ante cost information must disclose all costs and associated charges for investment services and ancillary investment services. This allows clients to understand the costs of a transaction before executing an order.

Suitability assessment

Before providing investment services, investment services enterprises must assess whether a product is suitable and appropriate for their clients. In order to perform this assessment, they must obtain information from their clients. For example, they must ask about the client’s knowledge and experience of the financial instrument or investment service. They must also ask about their investment objectives, risk tolerance and financial situation, in addition to their capacity to sustain losses.

Investment services enterprises that fail to comply with these information requirements are in breach of the German Securities Trading Act and Commission Delegated Regulation (EU) 2017/565. The same applies to investment services enterprises that fail to carry out a proper suitability assessment with regard to their clients. BaFin may impose administrative fines on companies that breach these requirements. The maximum amount for this fine is 5 million euros or up to 10% of total revenue.