On 27th March 2023, the European Securities and Markets Authority (“ESMA”) published its Final Report on the Guidelines on Markets in Financial Instruments Directive (“MIFID II”) product governance requirements. The Final Report is mainly aimed at investment firms and credit institutions performing investment services and activities, especially firms which manufacture financial instruments or structured deposits as well as firms which distribute these financial instruments to clients.
This report builds on the text of the 2017 ESMA Guidelines on MIFID II product governance requirements following the review of the feedback which was provided for the scope of the Consultation. The aim of the MIFID II product governance requirements is to ensure that firms act in the best interests of their clients during all stages of the investment product’s life cycle and prevent mis-selling.
The main updates to the product governance guidelines include:
- The specification of any sustainability-related objectives with relation to a product;
- The practice of identifying a target market per cluster of products instead of per individual product (“clustering approach”);
- The determination of a compatible distribution strategy where a distributor considers that a more complex product can be distributed under non-advised sales; and
- The periodic review of products, including the application of the proportionality principle.
The Guidelines will apply as from two months from the date of publication on the ESMA website in all EU official languages.
The full version of the Final Report can be found here: ESMA35-43-3448 Final report on MiFID II guidelines on product governance (europa.eu).
The ESMA 2017 Guidelines on MIFID II product governance requirements can be found here: esma35-43-620_guidelines_on_mifid_ii_product_governance_requirements_0.pdf (europa.eu)
For further information about product governance requirements, kindly get in touch with Andrew Caruana Scicluna (andrew.caruanasicluna@camilleripreziosi.com) or Alexander Cachia Zammit (alexander.cachiazammit@camilleripreziosi.com).
