4 Legal and Regulatory Duties to Protect the Client’s Interest
Lodewijk van Setten
- Regulation of banks — Capital markets — Investment business
This chapter provides an overview of key legal and regulatory concepts that operate to control the conduct of investment firms who provide financial advisory, portfolio management, brokerage, or dealer services, including the regulatory duty to act fairly and in the best interest of the client, the duty to provide information or to advise, and duties to manage conflicts. Drawing in particular on the relevant provisions of Markets in Financial Instruments Directive (MiFID) II, the chapter first explains the scope of the investment firm’s responsibility with respect to the provision of information on a certain investment service or investment product. It then considers caveat emptor versus duty to protect the interest of the investor, with emphasis on best interest and conflict rules in MiFID II. Finally, it examines the regulatory control framework for conflicts of interest, with a focus on inducements and remuneration policies in the financial services sector.