The Financial Conduct Authority is to hone in on product governance rules this year, its chief executive has said.
Speaking at a Treasury select committee accountability hearing yesterday (January 15), Andrew Bailey said the regulatory focus around the Markets in Financial Instruments Directive (Mifid II) had so far been centred on cost and charges.
But moving forward the regulator intends to examine how firms are implementing new rules around product governance and research, he said.
Mr Bailey told the MPs: "We will do work this year on new product governance and research unbundling, which has been also quite an issue as to how that is working.
"All that work is a product of our supervisory work as to how effective the application of Mifid II has been."
The product governance element of Mifid II is aimed at making sure advisers are offering their clients suitable solutions by requiring product manufacturers and distributors such as advisers to identify target markets.
The FCA had product governance requirements before the introduction of Mifid II in January last year, but they were narrower than the new rules in terms of the financial instruments they covered.
There is a concern that advisers are not complying with the regime, with some estimates suggesting only one in 10 advice firms is meeting the rules.
Advisers have been warned the client segmentation they carried out after the Retail Distribution Review would not be sufficient for Mifid II rules.
Meanwhile Mr Bailey confirmed the FCA is yet to take any enforcement action under Mifid II, stating the focus this year had been on supervisory work.
When asked by Nicky Morgan MP, chairman of the Treasury committee, if enforcement action was expected under Mifid II, Mr Bailey replied: "If we find things that meet the test, yes, if we don’t, no."
Mr Bailey had previously warned the regulator would begin holding firms to account for failing to comply with the Mifid II rules in a meeting with the committee in June last year.