European Institute of Management and Finance | Product Governance guidelines under MiFID II – ESMA Consultation paper
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Product Governance guidelines under MiFID II – ESMA Consultation paper

03 May Product Governance guidelines under MiFID II – ESMA Consultation paper

ESMA Product GovernanceOn 5 October 2016, ESMA published its Consultation Paper on its draft guidelines on MIFID II product governance requirements.  The consultation closed on 5 January 2017. You can read the feedback and the consultation paper at https://www.esma.europa.eu/press-news/consultations/draft-guidelines-mifid-ii-product-governance-requirements

The product governance requirements are laid down in Articles 16(3) and 24(2) of MiFID II as well as in Articles 9 and 10 of the MiFID II Delegated Directive, and cover a broad range of topics, both product and process related. However, ESMA’s guidelines mainly address the target market assessment, as this aspect was identified as the most important one for ensuring the common, uniform and consistent application of the above-mentioned articles.

The proposed guidelines for manufacturers address identification of the potential target market by the manufacturer: categories to be considered; identification of the potential target market: differentiation based on the nature of the product manufactured; and articulation between the distribution strategy of the manufacturer and its definition of the target market.

Manufacturers

The proposed guidelines for manufacturers address the following main topics:

  • Identification of the potential target market by the manufacturer: categories to be considered;
  • Identification of the potential target market: differentiation based on the nature of the product manufactured; and
  • Articulation between the distribution strategy of the manufacturer and its definition of the target market.

Distributors

The proposed guidelines for distributors address the following main topics:

  • Identification of the target market by the distributor: categories to be considered and differentiation based on the nature of the product distributed;
  • Identification and assessment of the target market by the distributor: interaction with the provision of different investment services;
  • Regular review by the manufacturer and distributor to respectively assess whether products and services are reaching the target market;
  • Distribution of products manufactured by entities not subject to the MiFID II product governance requirements; and
  • Application of product governance requirements to the distribution of financial instruments manufactured or issued before the entry into application of MIFID II.

Transversal issues applicable to both manufacturer and distributor

These address the following issues:

  • Identification of the negative target market by the manufacturer and distributor – clients for whom the investment products they manufacture and/or distribute are not compatible; and
  • Application of the target market requirements to investment firms dealing in wholesale markets (i.e. with professional clients and eligible counterparties).

EIMF is organizing a Seminar on the MIFID II Product Governance requirements with international expert Adam Samuel on the 15th of May more details at http://eimf.eu/product-governance/

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