Article 21
Criteria and factors to be taken into account by competent authorities for the purposes of product intervention powers
1. For the purposes of Article 42(2)(a) of Regulation (EU) No 600/2014, competent authorities shall assess the relevance of all factors and criteria listed in paragraph 2, and take into consideration all relevant factors and criteria in determining when the marketing, distribution or sale of certain financial instruments or structured deposits or financial instruments or structured deposits with certain specified features or a type of financial activity or practice creates a significant investor protection concern or a threat to the orderly functioning and integrity of financial markets or commodity markets or to the stability of the whole or part of the financial system within at least one Member State.
For the purposes of the first subparagraph, competent authorities may determine the existence of a significant investor protection concern or a threat to the orderly functioning and integrity of financial markets or commodity markets or to the stability of the whole or part of the financial system within at least one Member State based on one or more of those factors and criteria.
2. The factors and criteria to be assessed by competent authorities to determine whether there is a significant investor protection concern or a threat to the orderly functioning and integrity of financial markets or commodity markets or to the stability of the whole or part of the financial system within at least one Member State shall include the following:
(a) |
the degree of complexity of the financial instrument or type of financial activity or practice in relation to the type of clients, as assessed in accordance with point (c), involved in the financial activity or financial practice, or to whom the financial instrument or structured deposit is marketed or sold, taking into account, in particular:
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(b) |
the size of potential detrimental consequences, considering in particular:
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(c) |
the type of clients involved in a financial activity or financial practice or to whom a financial instrument or structured deposit is marketed or sold, taking into account, in particular:
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(d) |
the degree of transparency of the financial instrument, structured deposit or type of financial activity or practice, taking into account, in particular:
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(e) |
the particular features or components of the structured deposit, financial instrument, financial activity or financial practice, including any embedded leverage, taking into account, in particular:
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(f) |
the existence and degree of disparity between the expected return or profit for investors and the risk of loss in relation to the financial instrument, structured deposit, financial activity or financial practice, taking into account, in particular:
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(g) |
the costs and ease with which investors are able to sell the relevant financial instrument or switch to another financial instrument, or exit a structured deposit, taking into account, in particular, where applicable depending on whether the product is a financial instrument or structured deposit:
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(h) |
the pricing and associated costs of the structured deposit, financial instrument, financial activity or financial practice, taking into account, in particular:
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(i) |
the degree of innovation of a financial instrument or structured deposit, a financial activity or financial practice, taking into account, in particular:
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(j) |
the selling practices associated with the financial instrument or structured deposit, taking into account, in particular:
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(k) |
the financial and business situation of the issuer of a financial instrument or structured deposit, taking into account, in particular:
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(l) |
whether there is insufficient, or unreliable, information about a financial instrument or structured deposit, provided either by the manufacturer or the distributors, to enable market participants at whom it is targeted to make an informed decision, taking into account the nature and type of the financial instrument or the structured deposit; |
(m) |
whether the financial instrument, structured deposit, financial activity or financial practice poses a high risk to the performance of transactions entered into by participants or investors in the relevant market; |
(n) |
whether the financial activity or financial practice would significantly compromise the integrity of the price formation process in the market concerned such that the price or value of the financial instrument or structured deposit in question is no longer determined according to legitimate market forces of supply and demand, or such that market participants are no longer able to rely on the prices formed in that market or in the volumes of trading as a basis for their investment decisions; |
(o) |
whether a financial instrument, structured deposit, financial activity or practice would leave the national economy vulnerable to risks; |
(p) |
whether the characteristics of a financial instrument or structured deposit make it particularly susceptible to being used for the purposes of financial crime and, in particular whether the characteristics could potentially encourage the use of the financial instrument or structured deposit for:
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(q) |
whether a financial activity or a financial practice poses a particularly high risk to the resilience or smooth operation of markets and their infrastructure; |
(r) |
whether a financial instrument, structured deposit, financial activity or financial practice could lead to a significant and artificial disparity between prices of a derivative and those in the underlying market; |
(s) |
whether the financial instrument, structured deposit, financial activity or financial practice poses a high risk of disruption to financial institutions deemed to be important to the financial system of the Member State of the relevant competent authority, in particular considering the hedging strategy pursued by financial institutions in relation to the issuance of the structured deposit, including the mispricing of the capital guarantee at maturity or the reputational risks posed by the structured deposit or practice or activity to the financial institutions; |
(t) |
the relevance of the distribution of the financial instrument or structured deposit as a funding source for the issuer or financial institutions; |
(u) |
whether a financial instrument, structured deposit, financial activity or financial practice poses particular risks to the market or payment systems infrastructure, including trading, clearing and settlement systems; or |
(v) |
whether a financial instrument, structured deposit, financial activity or financial practice would threaten investors' confidence in the financial system. |