Product Governance requirements have been introduced initially by the European Directive on Markets in Financial Instruments II (MiFID II). The objective is to ensure that financial instruments will be offered or recommended, by investment firms, only when in the interest of the client.
Throughout this blog post, the team at the Institute for Professional Excellence (IforPE) aims to outline key information regarding product governance requirements and discuss information to be provided to clients. In this regard, a comprehensive online course is available through the IforPE platform titled Investors Information – PRIIPs, KID & MiFID Product Governance.
At the end of this post, we inform you about the knowledge and competencies you will gain upon completing the Investors Information – PRIIPs, KID & MIFID Product Governance course and how you can use them to establish the necessary procedures relating to your product governance requirements.
Product Governance requirements
To fulfil its product governance regulatory obligations, an investment firm is required to establish at least the specific policies and procedures below:
- Client assessment – a suitability or appropriateness assessment is required to be conducted before onboarding a client and before the distribution of any products.
- Client categorisation – upon registration clients shall be categorised under one of the eligible counterparties, professional or retail client categories.
- Information provided – appropriate information shall be provided in good time and in a comprehensive form to existing or potential clients.
- Target market identification – identify the clients to whom products should be distributed by specifying the characteristics they shall fulfil, including experience, financial situation, and risk tolerance.
- Product Governance Policy – establish and maintain a policy outlining the product approval procedure and the assessment and monitoring of products, manufacturers, and distributors.
- Product Governance Committee – compose a committee responsible for the review and assessment of existing and new products in regards to their distribution strategy, the identified target market and existing or potential conflicts of interest.
Information provided to clients
Any investment firm subject to the provisions of MiFID II, including Cyprus Investment Firms (CIF), is obliged to ensure that any information addressed to clients is fair, clear, and not misleading. Existing and potential clients shall be provided in good time with information concerning:
- the CIF and its services,
- the financial instruments offered,
- the proposed investment strategies,
- execution venues used,
- costs and related charges applied.
It is important for the information disseminated to include warnings, provide guidance regarding the associated risks and clarify for which type of clients each product is suitable.
What is the Investors Information – PRIIPs, KID & MiFID Product Governance course and what does it include?
Professionals completing this course will be equipped with competencies to enhance company policies and procedures, and investors provided information through practical examples, as well as implement the required assessment and monitoring procedures to ensure compliance with product governance.
The syllabus of the Investor Information – PRIIPs, KID & MiFID Product Governance course includes:
- The Lamfalussy process, the EU Commission & ESMA
- Lamfalussy process, Level 1 & Framework Acts, Level 2 & Delegated Acts, Level 2 & Implementing Acts, Level 3 & ESMA Guidelines, Level 4 & Supervision of the member states by ESMA, EU Legal Framework
- Investor Information
- Provisions of Law 87(I)/2017, Pre-trade information, Marketing of products and services, Product Intervention Measures, Cost & Charges, Legal documents
- Packaged Retail and Insurance-based Investment Products (PRIIPs)
- PRIIPs – Definitions, PRIIPs – Scope of application, PRIIPs – Manufacturer, Products exempt from the PRIIPs Regulation, Competent Authorities & Infringements
- Key Information Document (KID)
- Key Information Document (KID), Client Assessment, Target Market Identification, Construct a Key Information Document (KID)
- MiFID II Product Governance, Client Categories & the Target Market
- Client Assessment & Categorisation, MiFID II & Investment Protection, Manufacturer & Target Market Identification, Distributor & Target Market Identification, Negative Target Market Identification, Product Review
- Product Governance Policy
- Product Governance Committee, Product Governance Policy – Indicative Structure, Product Assessment Form – Practical Example
- Product Governance Monitoring
- Responsible function for monitoring, Required information, Monitoring procedure
The material of the Investor Information – PRIIPs, KID & MiFID Product Governance course is delivered both in PDF slides and online video recordings, ideally suited for self-paced learning. In this way, learners registering for this course have the flexibility to learn wherever and whenever.
Additionally, learners have the opportunity to test their knowledge upon completion of the course through a compilation of questions based on the material.
Lastly, the completion of this course counts toward Continuous Professional Development (CPD) annual requirements for CySEC Advanced and Basic Certifications.
If you have any questions about the Investor Information – PRIIPs, KID & MiFID Product Governance course or any other questions related to your training requirements, please contact us - we would love to help.
From all of us at IforPE, the Institute for Professional Excellence,