The European Securities and Markets Authority (ESMA) on Monday published new guidelines on complex debt instruments and structured deposits.

The guidelines aim to enhance investor protection by identifying the sorts of financial instruments that are considered too complex to be sold to investors without assessing suitability.

Under European rules, firms can only provide execution-only services on products that are considered “non-complex”. When dealing in complex instruments, firms must assess the client’s knowledge and competence “in order to carry out an appropriateness test,” ESMA says.

Back in March, ESMA launched a consultation on draft guidelines for defining complex instruments. The final guidelines published today were developed for assessing bonds, and other forms of securitized debt and money market instruments, that make it difficult for the client to understand the risk involved; and, structured deposits that make it hard for clients to understand the risk of return, or the cost of exiting the product. They also cover debt instruments that use embedded derivatives.