Regulatory review into MiFID II product governance


Scrutiny of the Asset Management sector has arguably never been more intense, with continued low interest rates and the expectation that Asset Managers will fill the investment void after the financial crash. This scrutiny has introduced a raft of new expectations of Asset Managers, many of whom believed the wholesale manufacturing world was ring fenced from but instead many are still running to catch up with MiFID II requirements, Asset Management Market Study and SMCR requirements.

To be fair it is not just the Asset Managers that need to be paying attention to where the regulator is going.  Okay, so we can expect the FCA to overhaul MiFID II requirements considering Brexit, but anyone thinking there will be a lighter touch applied may be in for a rude awakening. Do not forget that the FCA need to evidence equivalence with their European counterparts and remain committed to their statutory duties to protect customers.

With this in mind it was disappointing to read the regulators review of Product Governance arrangements implemented in Jan 2018 – their finding are here:

Regulatory review on MIFiD II Product Governance 

In summary they have found manufacturers are not conducting due diligence on their distributors as the regulator expected and the FCA are concerned commercial interest and thus COI are getting in way. They have also expressed concern that there appears to be a fundamental disjoint between the understanding of delivering customer outcomes against… well in my opinion putting some of these issues into the “just too difficult” box.

At FSTP, we have been running Product Governance and Management courses for various firms since the new rules were introduced and making the point this is not just collectives (and other products) but also about services for underlying customers. We have heard about the difficulties with nominee holding and dealing with platforms. However, just because it is in the “difficult” box does not mean we can ignore it. Governance and TCF are critical elements to building a robust product governance framework and ask reference in the FCA review training is an important part.

If you don’t think you have this right for your product or service development (let’s be commercial here – why create something which can’t sell!!) do take a look at what we cover and have a chat about how we can increase awareness within your relevant teams and elevate your thinking about how to tackle this obviously thorny topic.

Product Management and Governance

Julia Kirkland

Senior Partner