European Union: Adopted ESMA statement regarding the rising risks from the provision of unregulated products and services

On 25 May 2023, the European Securities and Markets Authority (ESMA) and National Competent Authorities issued a statement regarding the arising risks from the provision of unregulated products and services by investment firms. The report notes that investment firms are offering unregulated products and services as investment alternatives to regulated financial instruments, such as crypto assets, real estate, and raw materials, which are not regulated in every jurisdiction, leading to potential risks for investors. Further, the ESMA notes that the Markets in Crypto-Assets Regulation (MiCA) would not regulate all the products and services mentioned. The ESMA raises concerns over the investor protection risks associated with unregulated offerings, emphasising the need for firms to be aware of such risks when offering these products and services. ESMA also stresses the potential risks investors face when investing in unregulated products. In order to mitigate the identified risks, ESMA advises that investment firms operate in the best interest of their clients, acting fairly and professionally. The report also states that investment firms should ensure that all client communication is clear, accurate, and non-misleading, particularly in relation to the regulatory status and protections associated with the product or service.