What information must clients receive, and when is an appropriateness test needed?

A firm must act honestly, fairly and professionally in its clients' best interests, and all information it gives clients, marketing included, must be fair, clear and not misleading; marketing communications must be clearly identifiable as such. In good time before providing services, it gives appropriate information about itself and its services, the instruments and strategies proposed with guidance and risk warnings, execution venues, and all costs and charges.

Information addressed to retail or professional clients, marketing included, must include the firm's name and be accurate and, whenever it mentions potential benefits, point out the relevant risks fairly and prominently. Risk warnings must be in a font at least as large as the predominant font and laid out prominently. The information must be understandable to the average member of the group it targets, must not disguise or play down important items, must use the same language throughout unless the client has accepted more than one, and must be up to date. Comparisons must be meaningful, fair and balanced, with sources and assumptions stated. Stating that the firm is authorised, and by which authority, is required, but no regulator's name may be used in a way that suggests endorsement.

Past performance must not be given the most prominence. It covers the preceding five years, or the whole period for which the instrument, index or service has existed if that is shorter, or a longer period the firm chooses, and always in complete 12-month periods. The period covered and the source must be stated, together with a prominent warning that past performance is not a reliable indicator of future results. Where figures are in a currency other than that of the retail client's Member State of residence, the currency is stated with a warning that returns may rise or fall with exchange rates, and gross figures show the effect of commissions and fees.

Simulated past performance must relate to an instrument or index, rest on the real past performance of instruments or indices that are the same as, substantially the same as, or underlie the one concerned, follow the same period and presentation rules, and carry a prominent warning. Forecasts of future performance may not rely on simulated past performance, must use reasonable assumptions backed by objective data, must show scenarios in different market conditions, both positive and negative, and must warn that forecasts are not a reliable indicator.

Since 28 February 2022 all information is provided electronically by default. A retail client may ask for paper, which is then free of charge, and must be told of that option; existing retail clients who receive paper are warned at least eight weeks before a switch to electronic delivery. Before then, the test in Delegated Regulation Article 3, which is still in its text, applied: a medium other than paper needed the client's specific choice, and electronic delivery was appropriate where there was evidence of regular internet access, such as an e-mail address given for the business.

For services other than investment advice and portfolio management, the firm asks about the client's knowledge and experience of the specific product or service and assesses whether it is appropriate. If it is not, or the client gives too little information, the firm warns the client, and the warning may be standardised. The test can be skipped only for execution or reception and transmission of orders in non-complex instruments, such as listed shares and bonds without embedded derivatives, money market instruments, non-structured UCITS and other non-complex instruments, provided the service is at the client's initiative, the client is clearly warned that appropriateness is not assessed, the firm complies with its conflicts rules and no new credit is granted. CFDs are derivatives, so they never qualify.