"People are struggling with the categorizations of complex and non-complex instruments," says Anders Malm, a partner with Stockholm-based law firm Oreum, which provides legal advice and services to structured note issuers.
Mifid attempts to simplify the product market into two basic types: complex and non-complex. Products that fall into the former category can only be sold on an advisory basis, with the advice provided by a qualified professional adviser. "Mifid says you may not sell complex products on an execution-only basis. If you want to sell a complex product then you have to give advice of one form or another, and of course that takes time and money," says Simon Gleeson, a partner at the Clifford Chance law firm in London.
Products regarded as complex lead to a much greater regulatory burden for the seller because products can only be offered using "appropriateness and suitability" tests, which puts the onus on the company that is in direct contact with the retail investor to establish whether the customer should be investing. The investment firm has to obtain information about the customer’s knowledge and experience of the specific type of product, their financial situation and investment objectives.