Mifid II 

What you need to do to make data Mifid II compliant

  • To understand what steps are needed before Mifid II comes into force.
  • To learn how product governance will work under the new directive.
  • To understand whose responsibility various aspects of Mifid II compliance will be.
CPD
30min
What you need to do to make data Mifid II compliant

The Markets in Financial Instruments Directive II (Mifid II) is one of the most far reaching and demanding pieces of regulation yet for the wealth and investment management industries.

A failure to achieve its product-governance standards could disrupt the sales process for the entire distribution chain, from the asset manager product manufacturer firms, right down through platforms and to the end advisers who serve individual investors.

However, worryingly, there are still quite a few steps to be taken (and therefore opportunities for failure) before the rules come into force. 

Without doubt, the mandatory repapering of agreements throughout the distribution chain to ensure end-to-end product governance will be a challenge for most firms, regardless of their size and scale.

However, this should, for the most part, be a one-off requirement, within reasonably well-bound parameters – albeit with a very high volume of legal work to get through in a very limited time frame.

The Mifid II directive effectively forces the product manufacturer to engage with all parties in the chain to ensure end-to-end oversight is achieved, leaving those non-Mifid firms little choice but to engage and facilitate the request.

The implication here is that non-Mifid firms, such as pure Ucits management companies and alternative investment fund managers (AIFMs), who sit outside the general thrust of the Mifid II directive will still find themselves drawn into the Mifid II product-governance regime.

That is because distributors in the chain who are Mifid II bound will be forced into an exercise to ensure all their product manufacturers adhere to the product governance principles.

Additionally many regulators are indicating that MiFID II product governance will be considered a best practice approach to the governance of investment products, regardless of the MiFID designation of the entity in question.

So a firm would need very good, and indeed well documented reasons as to why they would not follow said guidance in order to stay on the right side of the regulator.

Product governance

Of even more concern to firms are the hurdles presented by product governance when it comes to communication of target market data from point of manufacture to the point of investment/discretion.

As part of the product governance process, a manufacturer must assess each product and assign it a target market that clearly defines the type of investors the product is aimed at, and the allowable distribution strategies for that product.

This data then needs to be communicated throughout the chain right down to the adviser community, thus ensuring each point of distribution/redistribution has a clear view on how the product should be sold, and to whom it can be sold. 

Each distributor in the chain, including the end adviser, is in turn obliged to operate their own product governance process and to set out and document their own specific views on the applicable target market and distribution strategy for each of the products in their arsenal.

Comments

CPD
30min
  1. Who might find themselves drawn into the Mifid II product governance regime, according to Mr Brennan?

  2. How will most regulators consider Mifid II product governance?

  3. What do firms 'really need' when it comes to data, according to Mr Brennan?

  4. Who will be obliged to monitor all investment placement, according to Mr Brennan?

  5. Which of these trade bodies is not listed by Mr Brennan as one working together on an industry standard?

  6. Whose responsibility is it to send product governance information down the chain?

Nearly There…

You have successfully answered all the questions correctly, well done! To bank your CPD please complete the form below.

What did you learn from undertaking this CPD exercise?

Why did you undertake this piece of learning?

Banked!

Congratulations, you have successfully completed and banked this piece of CPD

Already Banked!

You have already banked for this article.

To bank your CPD you must or

Register

One or more questions have been incorrectly answered,
 please review your answers and try again.

Please enter what you have learnt and why you completed this CPD.

More Investments CPDSee my completed CPDSee all CPD