Product Governance Flashcards
What is the goal of product governance?
use structural measures to reduce miss-selling
References include Art. 16(3) and 24(2) MiFID; Art 9-10 Dir. 2017/593; ESMA Guidelines.
What are the two types of suitability in product governance?
Structural (ex ante) and case-by-case (ex post) suitability.
What is meant by ‘target market’ in product governance?
The type(s) of clients with whose needs, characteristics and objectives the product is compatible.
What criteria should be considered in defining the target market?
- Type of clients (retail, professional, eligible counterparty)
- Knowledge and experience
- Financial situation and ability to bear losses
- Risk tolerance
- Objectives and needs
What obligations do product manufacturers have regarding target markets?
Define potential target market and ensure products meet the needs of that market.
What is the role of a distributor in product governance?
Obtain product information and define actual and negative target markets.
True or False: The actual target market can be broader than the potential target market.
False.
What must be documented when selling outside the target market?
Reasons clearly documented in a suitability report.
What is the legal basis for product intervention?
- ESAs founding regulations
- MiFIR / PRIIPs Regulation
- Delegated Regulations (EU) 2017/577 and 2016/1904
What conditions must be met for NCAs to intervene?
- Significant investor protection concerns
- Threat to financial markets integrity
- Stability of the financial system
What is the last resort remedy in product intervention?
Ban or restriction of marketing, distribution, or sale of investment products.
What is the notification requirement for NCAs before a measure takes effect?
Notify all other NCAs and relevant ESA at least one month before restriction is put in place.
What is the duration of direct intervention by ESAs?
6 months, renewable for another 6 months, then annually.
Fill in the blank: ‘KYC at _______ level’ refers to knowing your clients at the product level.
product
What happens if there is insufficient information for a distributor?
The product cannot be included in the assortment.
What should be the nature of the evidence provided when NCAs take measures?
Evidence must justify the financial instrument, activity or practice being restricted.
What is the role of ESAs in ensuring consistency among different authorities?
Coordinate and ensure consistent approaches in product governance.
What are the first ESMA product intervention measures?
Binary options and CFDs.
