Investments | Central Bank of Ireland

Part 5: Investments

Chapter 1: Preliminary

369. Interpretation (Part 5)

In this Part -

“compound annual rate” means the equivalent annual rate of interest, where interest is paid on previously earned interest as well as on the principal, payable at the end of the year, on a deposit;

“Key Features Document” means the document referred to in Regulation 376;

“PRSA” has the meaning given to it in Part X of the Pensions Act 1990;

“Standard PRSA” has the meaning given to it in Part X of the Pensions Act 1990;

“target market” for an investment product means the profile of the group of consumers at which the regulated entity aims a particular investment product.

Chapter 2: Additional suitability requirements

370. Assessing and determining suitability of investment product transaction or series of such transactions

(1) For the purposes of Regulation 17, when assessing the suitability of an investment product transaction or series of investment product transactions, should a regulated entity determine that the investment product transaction or series is not aligned with a consumer’s attitude to risk, or financial situation, because of the frequency of such transactions or their amount, it shall determine that the investment product transaction or series is not suitable.

(2) A regulated entity shall advise a consumer of the determination referred to in paragraph (1) on paper or on another durable medium and shall advise the consumer not to proceed with the relevant investment product transaction or series.

(3) If a regulated entity has advised the consumer as referred to in paragraph (2), and the consumer instructs the regulated entity to proceed with the relevant transaction or series, the regulated entity shall make a contemporaneous record that it has advised the consumer of its determination.

Chapter 3: Information about investment products

371. Information to be provided to consumers

Prior to offering, recommending, arranging or providing an investment product, a regulated entity shall provide a consumer with information on, or in relation to, the following, where relevant:

capital security;
the risk that some or all of the investment may be lost;
leverage and its effects;
any limitation on the sale or disposal of the investment product;
any restriction on access to funds invested;
any restriction on the redemption of the investment product;
the impact, including the cost, of exiting the investment product early;
the minimum recommended investment period;
the risk that the estimated or anticipated return on the investment product may not be achieved;
the potential effects of volatility in price, fluctuation in interest rates, and movements in exchange rates on the value of the investment;
the identity of any guarantor and the level, nature, extent and limitations of its guarantee.

(2) The information referred to in paragraph (1) shall be provided in a stand-alone document, except where such information is already required to be disclosed in accordance with the Life Assurance (Provision of Information) Regulations 2001 (S.I. No. 15 of 2001) or any other regulations made under Section 43D of the Insurance Act 1989 (No. 3 of 1989) concerning provision of information for life assurance policies and where such information is disclosed to the consumer in a manner which complies with such Regulations.

(3) This Regulation does not apply to a tracker bond.

372. Warning statement to be provided with illustrations of figures on performance of investment product

(1) A regulated entity shall include the following warning statement with all illustrations of figures in relation to performance of an investment product, including graphs and other visual representations:

“Warning: These figures are estimates only. They are not a reliable guide to the future performance of your investment.”

(2) This Regulation does not apply to illustrations included in the key information document to be drawn up and provided to retail investors in accordance with the PRIIPs Regulation.

373. Prospectus to state where representing or containing terms of contract

(1) Where a prospectus represents or contains the terms of a contract between a regulated entity and one or more of its consumers, this fact must be clearly stated in the prospectus.

(2) This Regulation does not apply to a prospectus within the scope of the Prospectus Regulation.

374. Information on periodic suitability assessments to be provided

(1) Where a regulated entity recommends an investment product falling within paragraph (a) of the definition of “investment product” to a consumer, the regulated entity shall, prior to the conclusion of a contract for that investment product, inform the consumer -

whether the regulated entity will provide the consumer with a periodic assessment of the suitability of the investment product recommended to that consumer,
where applicable, the steps that the regulated entity will take to periodically assess whether the investment product remains suitable for the consumer and the frequency with which that assessment will be carried out, and
any services that the regulated entity will provide to the consumer relating to the management of the investment product.

(2) Where a regulated entity recommends an investment product falling within paragraph (a) or (b) of the definition of “investment product” to a consumer, and where the regulated entity will not provide the consumer with a periodic assessment of the suitability of the investment product recommended to that consumer, the regulated entity shall, prior to the conclusion of a contract for that investment product, provide the consumer with an explanation why such periodic assessment will not be done.

(3) The information referred to in paragraphs (1) and (2) shall be provided to the consumer on paper or on another durable medium.

(4) A regulated entity shall include a warning statement in the following format on any application form for an investment product falling within paragraph (a) or (b) of the definition of “investment product” other than an insurance-based investment product:

“Warning: Due to the nature of this product, it is important to ensure that it remains suitable for you. We recommend that you engage with your financial advisor on a regular basis to ensure its ongoing suitability.”

375. Tracker bonds - Product brochure and application form

A regulated entity shall give the following information prominently in any tracker bond product brochure and tracker bond application form, inserting the appropriate information in place of any related instruction in square brackets:

for an investment in a product that does not commit to provide a 100% return of a consumer’s capital on maturity, the following warning:

“Warning: The value of your investment may go down as well as up. You may get back less than you invest.”;

where there is a promised return which is known but is less than the initial 100% invested by a consumer, the following warning:

“Warning: If you invest in this product you could lose [insert figure]% of the money you invest.”;

if a consumer’s return on capital only becomes payable on a specific date, the following warning:

“Warning: If you cash in your investment before [specify the particular date] you may lose some or all of the money you invest.”;

if there is no access to funds for the term of the product, the following warning:

“Warning: If you invest in this product you will not have any access to your money for [insert time required before the product matures].”;

the identity of any guarantor and the nature, extent and limitations of its guarantee.

376. Tracker bonds - Key Features Document

(1) A product producer of a tracker bond shall provide a document (referred to in this Regulation as a “Key Features Document”), in the form prescribed in Schedule 7 to these Regulations, to any intermediary that offers that tracker bond to consumers, for provision to those consumers.

(2) Where the information required by the Key Features Document referred to in paragraph (1) is otherwise already provided to a consumer as required pursuant to the Life Assurance (Provision of Information) Regulations 2001 or any other regulations made under Section 43D of the Insurance Act 1989 requiring the provision of information to consumers regarding life assurance policies, the regulated entity is not required to include that information in the Key Features Document.

(3) A regulated entity shall provide a Key Features Document to a consumer prior to them signing an application form for a tracker bond.

(4) Where the terms of the tracker bond provide that return on investment is limited, the Key Features Document shall include an explanation in relation to this limitation.

377. Tracker bonds - Illustration to be provided where facility to borrow funds to invest

(1) Where a regulated entity offers a consumer the facility to borrow funds to invest in a tracker bond, the regulated entity shall provide an illustration to the consumer showing the following:

the year-by-year and total interest payments the consumer is likely to be required to pay in respect of the borrowed funds, until the date the product matures;
the equivalent compound annual rate of the return payable under the relevant tracker bond shown prominently;
the difference between the return payable under the tracker bond and the total projected outgoings of the consumer over the period to the maturity date of the tracker bond.

(2) For the purposes of the illustration referred to in paragraph (1)(a), the fixed interest rate offered by the lender for the period to the date of the promised payment under the tracker bond shall be used or, if the lender does not offer a fixed interest rate over this period, an equivalent open market fixed interest rate shall be used.

(3) For the purposes of paragraph (1)(c), “total projected outgoings” means any borrowed funds, any capital repayments related to such borrowings and any capital investment by the consumer other than the borrowed funds.

378. PRSAs – information to be provided

(1) Prior to offering, recommending, arranging or providing a PRSA, a regulated entity shall provide to a consumer the information referred to in Schedule 8 to these Regulations in the prescribed form.

(2) If a non-standard PRSA is offered or recommended to a consumer, the regulated entity shall, in addition to the requirement referred to in paragraph (1) complete the declaration in Schedule 9 to these Regulations in the prescribed form.

379. Product producers to provide statement on investment products

(1) For each investment product held with it, a product producer shall, at least once every 12 months, provide to a consumer, on paper or on another durable medium, a statement in respect of the previous 12 month period, which includes, where applicable, the following:

the opening balance or statement of value at the beginning of the relevant 12 month period;
any additions, including additional amounts invested;
any withdrawals;
the total sum invested;
the number of units held;
any interest charged or accrued;
any charges and deductions affecting the investment product including any charges associated with the management, sale, set up and ongoing administration of the investment product;
the aggregate amount, expressed as a monetary amount, of the charges and deductions referred to in subparagraph (g);
the closing balance or statement of value at the end of the relevant 12 month period.

(2) In the case of an investment product falling within paragraph (b) of the definition of “investment product” and for which the policy terms and conditions provide for periodic premium reviews, the statement referred to in paragraph (1) shall include the following warning statement:

“Warning: You hold a policy for which your existing premiums may not be sufficient to maintain existing protection benefits in the future. You should ask your insurance company for an assessment of the projected increases in premiums. You should seek financial advice on the choices available to you.”

(3) A product producer shall include the following warning statement in the statement referred to in paragraph (1):

(4) Where a product producer is required to provide a consumer with a statement pursuant to this Regulation, the product producer shall, where the statement has not already been provided on paper, inform the consumer that he or she may request the statement to be provided on paper, and, if requested by the consumer, the product producer shall provide the statement on paper to the consumer.

380. Tracker bonds - Product producers to issue information document following sale

(1) A product producer of a tracker bond shall issue a document to a consumer to whom it has sold its tracker bond, or to an intermediary that has sold its tracker bond (to be provided to the consumer), within 5 working days of the start date of the term of the tracker bond with the following information:

the name and address of the consumer;
the start date of the term of the tracker bond;
the amount of investment;
the date or dates on which any right to a minimum payment amount becomes payable;
disclosure of the key features of the investment, if those features differ from those shown in the Key Features Document provided in accordance with Regulation 376;
the date that the investment will mature;
the number of days from the commencement of the investment date or date of receipt of the policy document a consumer has available to cancel the tracker bond, if such a right is available in respect of the investment.

(2) An intermediary shall, within 5 working days of receiving the document from a product producer in accordance with paragraph (1), provide that document to the consumer that purchased the tracker bond.

Chapter 4: Advertisements

381. Scope and application (Chapter 4)

This Part applies to advertisements for an investment product which refer, or relate, to a regulated activity which can be provided, or is available, to a consumer.

382. Warning statement regarding return on investment

A regulated entity shall ensure that an advertisement for an investment product where a consumer’s return on their investment may not include the full amount of their capital invested contains the following warning statement:

“Warning: If you invest in this product, you may lose some, or all, of the money you invest.”

383. Warning statement where return on capital applicable on or from a specific date

A regulated entity shall ensure that an advertisement for an investment product where the advertised return of capital applies on, or from, a specific date, contains the following warning statement, inserting the appropriate information in place of the instruction in square brackets for that purpose:

“Warning: If you seek to realise your investment before [specify the particular date], you may lose some, or all, of the money you invest.”

384. Warning statement where no access to funds invested for product term

A regulated entity shall ensure that an advertisement for an investment product where there is no access to the funds invested for the term of the investment product contains the following warning statement, inserting the appropriate information in place of the instruction in square brackets for that purpose:

“Warning: If you invest in this product you will not have any access to your money for [insert time required before the product matures].”

385. Provision of information on past performance to meet certain conditions

Where a regulated entity provides information about the past performance of an advertised financial service or of the regulated entity, this information shall -

be based on a financial service similar to that being advertised,
not be selected so as to exaggerate the success or disguise the lack of success of the advertised financial service,
state the source of the information,
be based on actual performance,
state clearly the period chosen, which must cover the preceding 5 years, or the whole period for which the advertised financial service has been provided, where less than 5 years,
include the most recent period where more than one period of past performance may be used,
specify, where applicable, details of transaction costs, interest and taxation, and take these details into account in the calculations outlining past performance, and
disclose the effect of commissions, fees or other charges, where the indication is based on gross performance.

386. Warning statement to be provided regarding past performance

A regulated entity shall ensure that an advertisement which contains information on past performance contains the following warning statement:

“Warning: Past performance is not a reliable guide to future performance.”

387. Statement to be included where position or holding in a financial service

(1) Where a regulated entity has a position or holding in the financial service that is the subject of an advertisement by that regulated entity, it shall include a statement to this effect in accordance with paragraph (2) in the advertisement.

(2) For the purposes of paragraph (1), a regulated entity shall be deemed to have a position or holding in a financial service where it has an interest in the financial service in respect of which it may be subject to a financial gain or loss, and the statement required in accordance with paragraph (1) shall detail this possibility.

388. Information on simulated performance to meet certain conditions

Where a regulated entity provides information in an advertisement about the simulated performance of the advertised financial service or of a regulated entity, this information shall -

in relation to an advertised financial service, be based on the actual past performance of one or more investment products which are the same as or substantially the same as the advertised financial service, and the information relating to the past performance used for this purpose shall comply with Regulation 385,
not be selected so as to exaggerate the success or disguise the lack of success of the advertised financial service or of the regulated entity,
state the source, and
indicate whether, and to what extent, transaction costs, interest and taxation have been taken into account.

389. Warning statement to be provided where illustrations or information on simulated performance

A regulated entity shall ensure that an advertisement which contains illustrations or information on simulated performance contains the following warning statement:

“Warning: These figures are estimates only. They are not a reliable guide to the future performance of this investment.”

390. Conditions for describing product as guaranteed or conveying the same meaning or impression

A regulated entity shall ensure that an advertisement does not describe an investment product as guaranteed, either fully or partially, or by using descriptive terms that convey such a meaning or impression, unless -

there is a legally enforceable guarantee agreement in place in which a guarantor undertakes to meet, to whatever extent is stated in the advertisement, a consumer’s claim under the guarantee,
the regulated entity has made, and can demonstrate that it has made, an assessment of the amount of the guarantee,
it clearly states the nature and extent of limitations of the guarantee and the name of the guarantor, and
the advertisement states that the guarantee is provided by a connected party of the regulated entity, if applicable.

391. Reference to the impact of taxation

A regulated entity shall ensure that where an advertisement contains a reference to the impact of taxation, it shall -

state the assumed rate of taxation,
where tax reliefs are applied, reference the reliefs that apply as of the date of publication of the advertisement,
specify the person to which the tax reliefs referred to in the advertisement are available,
state, where applicable, if the taxation impacts referenced are limited in their application to a particular class of consumer with particular tax liabilities, identifying the class of consumer and the type of liabilities concerned,
identify the party that is responsible for applying for the tax benefits advertised,
identify, where applicable, if income payable from an investment product is subject to income tax that is deducted at source, and
identify, where applicable, if the value of the advertised financial service is linked to a product which is liable to capital taxation.

392. Warning on value of investment that can fluctuate

A regulated entity shall ensure that if the value or price of the advertised financial service can fluctuate, an advertisement contains the following warning statement:

“Warning: The value of your investment may go down as well as up.”

393. Statement to be made if return determined on a particular date

A regulated entity shall ensure that where the return on an advertised financial service is determined on a particular date, this information is stated in the advertisement and the relevant date identified.

394. Warning statement where income can fluctuate

A regulated entity shall ensure that where an investment product is described in an advertisement as potentially yielding income or as suitable for a consumer seeking income, and the income arising with respect to that investment product may fluctuate, the advertisement contains the following warning statement:

“Warning: The income you earn from this investment may go down as well as up.”

395. Effect of withdrawal of amount from capital amount invested as income equivalent to be explained

Where an investment product that is the subject of an advertisement includes an option to withdraw an amount from the capital amount invested in the product as an income equivalent, a regulated entity shall ensure that the effect of that withdrawal upon the investment product is explained in the advertisement.

396. Warning statement where financial service may be affected by change in currency exchange rates

A regulated entity shall ensure that where an advertised financial service is denominated or priced in a currency other than euro, or where the value of an advertised financial service may be directly affected by changes in currency exchange rates, the advertisement contains the following warning statement, inserting the appropriate information in place of the instruction in square brackets for that purpose:

“Warning: This [insert “product” or “service” as appropriate] may be affected by changes in currency exchange rates.”

397. Required warning where investment product not readily realisable

A regulated entity shall ensure that an advertisement for an investment product, which is not readily realisable, states that it may be difficult for consumers to do either or both of the following:

sell or exit the investment product;
obtain reliable information about its value or the extent of the risks to which it is exposed.

398. Statement to be provided if investment product cannot be encashed prior to maturity date or early redemption charge

A regulated entity shall ensure that an advertisement for an investment product states if the relevant investment product cannot be encashed prior to its maturity date, or if a consumer incurs an early redemption charge if encashed prior to its maturity date.

399. Statement to be provided where deductions for charges and expenses not made uniformly

A regulated entity shall ensure that an advertisement for an investment product subject to deductions for charges and expenses that are not made uniformly throughout the term of the investment product, and are applied earlier in the investment product’s term, states that -

deductions for charges and expenses are applied in this manner,
if a consumer withdraws from the investment product prior to its maturity date, the practice of applying deductions for charges and expenses in this manner will impact on the amount of the consumer’s return, and
if applicable, that a consumer may not get back the full amount they invested on the maturity date of the product.

400. Information on deposit interest rate on investment represented by tracker bond or component thereof

(1) Where a regulated entity advertises a deposit interest rate in respect of an investment represented by a tracker bond, or a component of that investment, the advertisement shall state the following:

whether the interest rate quoted is fixed or variable;
if the interest rate quoted is fixed, the period for which it is fixed and, where relevant, an indication of the rate that will apply after that fixed period if the term of the tracker bond is longer than the applicable fixed period;
the relevant compound annual rate calculated in respect of the term of the tracker bond that is applicable to the investment, or a component of that investment, to be placed on deposit;
whether any tax is payable on the interest earned on the investment, or a component of that investment, placed on deposit.

(2) Each rate provided to a consumer in accordance with this Regulation shall be of equal font size and prominence.

401. Information on projected return on investment for tracker bond

(1) Where a regulated entity advertises a projected return on investment for a tracker bond, the regulated entity shall ensure that the equivalent compound annual rate is expressed and shown as prominently in the advertisement as the projected return of that tracker bond.

(2) For the purposes of paragraph (1), where the investment representing a tracker bond is invested in separate components, the requirement to express and show the equivalent compound annual rate as prominently shall apply in respect of each of those components over the term of the tracker bond.

Chapter 5: Product producer responsibilities

402. Information to be provided to intermediaries for consumers in relation to new investment products

A product producer shall provide the following information to an intermediary in relation to a new investment product designed by that product producer for sale by an intermediary to consumers:

the key characteristics and features of the product;
the target market of consumers for the product;
the nature and extent of the risks inherent in the product;
the level, nature, extent and limitations of any guarantee attaching to the product and the name of the guarantor.

403. Information on investment products to meet certain standards

A product producer using an intermediary to sell its investment product to consumers shall provide information about the investment product to the intermediary that is clear, accurate, up to date, and not misleading, and includes the information referred to in Regulations 371 and 402.

404. Facility to be given to intermediaries when seeking information on investment product

(1) A product producer shall provide an ongoing facility to an intermediary to raise questions and obtain information on an investment product that is the subject of Regulations 371 and 402.

(2) A product producer shall notify the intermediary of the availability of the facility referred to in paragraph (1) and shall provide it to the intermediary for the duration of the period in which that investment product is offered for sale by the product producer and sold to consumers through that intermediary.

405. Information on new investment product to be updated and provided to intermediary

(1) Subject to paragraph (2), within one year of providing the information referred to in Regulation 402 and within each year thereafter, or on a more frequent basis, a product producer shall update that information and shall provide the updated information to the intermediary.

(2) A product producer shall update the intermediary with respect to any additional material information, which the product producer has implemented or of which the product producer is aware, in relation to the matters referred to in Regulation 402(a) to Regulation 402(d), within 10 working days of implementation or of becoming aware.

Chapter 6: MiFID Article 3 services

406. Scope and application (Chapter 6)

This Chapter applies to a regulated entity when providing MiFID Article 3 Services.

407. Recording of telephone conversations or electronic communications

(1) A regulated entity shall either -

comply with Regulations 23(5) to (12) of the MiFID Regulations 2017 and Article 76(1)(b), 76(8) and 76(10) of the MiFID Delegated Regulation, or
where telephone conversations or electronic communications relating to the provision of client order services that relate to offering, arranging or providing an investment product are not recorded -
1. promptly follow up the telephone conversation with a written communication to the client which confirms the key details of the telephone conversation, and
2. provide the client with an opportunity to disagree with the content of the written communication or to otherwise stop the order being executed within a specified time-frame.

(2) The written confirmation referred to in paragraph (1)(b)(i) shall include, at a minimum, the order details and the details of any recommendation in connection with that order.

408. Disclosure of conflicts of interest

(1) A regulated entity shall ensure that disclosure to consumers includes a specific description of the conflicts of interest that arise in offering, recommending, arranging or providing an investment product.

(2) The description referred to in paragraph (1) shall explain -

the risks to the client that arise as a result of the conflicts of interest, and
the steps undertaken to mitigate those risks,

in sufficient detail to enable that client to take an informed decision with respect to the investment business service in the context of which the conflicts of interest arise.

409. Conflicts of interest policy

A regulated entity shall assess and periodically review, on at least an annual basis, its conflicts of interest policy and shall take all appropriate measures to address any deficiencies.

410. Target market and information on products

Where a regulated entity offers, recommends, arranges or provides an investment product, it shall have in place adequate arrangements to -

obtain all appropriate information on the investment product and the investment product approval process, including the identified target market of the investment product, and
understand the characteristics and identified target market of each investment product.

411. Independent advice - fees, commissions, etc.

A regulated entity shall comply with Regulation 32(13)(b) of the MiFID Regulations 2017, subject to Regulation 32(15) of those Regulations.

412. Independent advice – information

A regulated entity shall comply with Article 52(1) and 52(3) of the MiFID Delegated Regulation.

413. Independent advice – restriction on natural person providing both independent and non-independent advice

A regulated entity offering investment advice on both an independent basis and on a non-independent basis shall not allow a natural person to provide both independent and non-independent advice.

414. Information relating to execution of orders

A regulated entity shall ensure that Article 59 of the MiFID Delegated Regulation is complied with.

415. Information on costs and associated charges

A regulated entity shall comply with the following:

Regulations 32(4)(d) and 32(7) to (9) of the MiFID Regulations 2017;
Article 50(2), 50(5), 50(8), 50(9) (second subparagraph) and 50(10) of the MiFID Delegated Regulation.

416. Periodic suitability assessments