Product governance is probably the most important new subject area for financial services professionals in the EU. It finally entered the regulatory vocabulary at European level with the implementation of MiFID 2, closely followed by that of the Insurance Distribution Directive’s own provisions on the subject. ESMA has already intervened in the marketing and promotion to retail customers of binary options and contracts for differences and Cyprus has responded to the ending of the ESMA measures by implementing its own intervention in September 2019.
The subject has two sides to it. First, there is the process of carrying out product governance, the structures that businesses need to have in place to meet the regulators’ objectives. Then, there are the various tasks that manufacturers and distributors must undertake when launching products and on an ongoing basis.
In a turbulent compliance environment, regulators around the world are increasingly turning towards product governance, its processes and activities as a key to avoiding future miss-selling scandals. Yet, problems in this area keep emerging as businesses try to promote products using inappropriate distribution or without properly defined target markets or business controls.
By the end of the programme, participants will be able to:
- Understand the key MiFID and MiFID-related provisions on product governance
- Appreciate the goals of product governance and the risks of not achieving them
- Identify strengths and weaknesses in product governance structures
- Identify the positive and negative target markets of investment products and services
- Piece together the key elements in designing a product or service
- Determine the types of distribution that would not be suitable for certain types of products
- Gather key management information about the success or otherwise of the governance process
- MiFID 2, ESMA guidelines, Art. 9 MiFID Delegated Directive, PROD 3
- TCF and the 6 outcomes and their application to products
- EU powers to issue product intervention rules and intervene generally
- Defining terms – distributors and manufacturers – differences in their duties
Systems and controls and governance
- Core risk management for products and their governance
- Joined up independent review & challenge
- Developing a governance structure for products generally and stress testing
Who, what, when?
- Ongoing review of products and their MI
- The roles of compliance and the board
The tasks of product governance
- Identifying the target market
- Working with distributors and others on target markets – research, focus groups
- Different roles of providers and distributors
- Core design issues
- Drafting the terms and conditions
- Common fund and wrapper issues – investment content, charges
- Ensuring that service infrastructure is in place
- Stress testing
- Purpose & method – what is there to test against?
- Resilience – technologically, financially and other elements
- Distribution channels
- Selection – internally and externally, technologically, advised or execution-only
- Monitoring distributor behaviour
- Working with IFAs and others
- Changing or blocking distribution channels
- Know your product
- Assess compatibility of product with customers
- Best interests rule
- Obligation to obtain material from manufacturers
- Handling distribution chains
- Identify target market and distribution strategy suitable for its clients’ needs, characteristics & objectives
- Periodic review
- Information sharing with manufacturers
- Sales outside target market
- Clear, fair and not misleading
- Material for distributors
- Key features and other mandatory material
- ESMA and CYSEC measures on contracts for differences
- MI on customer types and distribution sources – lapses, complaints and claims
- Researching the product and how it is being used
- Distributors’ role in amending target markets
- Ongoing review and acting on information
- Managing failures – communication, withdrawal and compensation
The training style is interactive involving a combination of discussions and presentation, group work and case studies (taken from real-live examples). Participants are encouraged to share their opinions from their different perspectives.
This programme may be approved for up to 5 CPD units in Financial Regulation. Eligibility criteria and CPD Units are verified directly by your association, regulator or other bodies which you hold membership.
Professionals requiring CPD units to meet the education requirements for CySEC licence renewal, and/or for maintaining other professional memberships/certifications which accept CPD in Financial Regulation, are advised to consider training subjects in categories that indicate CPD training in Financial Regulation.
Who should attend
The programme is ideal for:
- Board directors and chief executives
- Compliance officers and managers
- Product governance staff
- Risk managers