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ESMA Launches CSA on MiFID II Product Governance Rules

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The European Securities and Markets Authority (ESMA) is launching a common supervisory action (CSA) with national competent authorities (NCAs) looking at the application of MiFID II product governance rules across the EU, the regulator announced earlier this week.

The CSA will be conducted this year and will ‘allow ESMA and the NCAs to assess the progress made by manufacturers and distributors of financial products in the application of the key requirements’ of the MiFID II governance rules.

It will focus on three main components of the guidelines:

  1. How manufacturers ensure financial products’ costs and charges are compatible with the needs, objectives and characteristics of their target market;
  2. How manufacturers and distributors identify and periodically review the target market and distribution strategy of financial products; and
  3. What information is exchanged between manufacturers and distributors and how frequently this is done.

Issued in 2018, the MiFID II suitability guidelines remain a key focus for ESMA, which recently issued a series of Q&As in a bid to reach further harmonisation across the bloc.

‘ESMA believes this initiative, and the related sharing of practices across NCAs, will help ensure consistent implementation and application of EU rules and enhance the protection of investors in line with ESMA’s objective,’ the Pan-European regulator said.

Costs and suitability, in particular, have become a major priority for ESMA, which launched a similar CSA on the costs and fees of UCITS funds. 

AQMetrics will be watching the CSA’s closely and will report any updates to clients and readers.

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