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MiFID II Product Governance: Challenges and Solutions for Manufacturers and Distributors

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In recent months we’ve seen the publication of key findings from both the FCA and ESMA about the ongoing oversight, monitoring, and exchange of information in relation to MiFID products. Based on these publications and ESMA’s launch of a common supervisory action (CSA) that the continued direction of travel for regulators and overarching authorities is to ensure transparency and consistency concerning information gathered and shared by Manufacturers and Distributors.

Based on the FCA findings, it has also become apparent that this area continues to be a challenge for the parties involved in the creation and distribution of all manner of financial instruments. The FCA states “that some asset managers are not undertaking activities in line with MiFID II’s PROD regime”. The complexities of adhering to these requirements are compounded by the distribution channels’ diversity, available Management Information, and spectrum of due diligence standards activity across the industry. 

  • How can Manufacturers be confident their products are reaching the correct end consumer? 
  • How can Distributors ensure they are feeding back information effectively to their counterparties, supporting the best interests of their clients?

Delta Capita inSPire Due Diligence, launched in 2019 and now spanning EMEA, AMER, and APAC, is a service designed to support firms in the distribution chain to fulfil their regulatory requirements and meet their clients needs robustly and efficiently. inSPire’s centralised team independently supports a broad range of services, including:

  1. Industry-standard inSPire Due Diligence Questionnaires (DDQs) to accelerate Distributor onboarding and support annual refreshes of Due Diligence information and MI.
  2. Standardised Distribution Activity Reports, capturing distributor and end investor feedback on customer needs, product performance, Target Market assessment and information provided by Manufacturers.
  3. Consumer needs research to inform product design, governance and Target Market determination.
  4. Bespoke Distribution Activity reporting, allowing firms in the distribution chain to gather the detailed insight required to support their overall governance requirements.
  5. Single distributor outreach and platform to securely and efficiently collect and exchange all relevant information between Manufacturers and Distributors.

This unique, holistic approach and focus on independent quality and consistency are powerful tools for firms to ensure adherence to regulations and good practice guidance crucial for authorities moving forward. 

Contact us to understand how Delta Capita inSPire Due Diligence can help you comply with product design, distributor governance and communication obligations.

Authors:

Alex Berry is a Due Diligence Analyst within inSPire Due Diligence at Delta Capita. Alex has extensive experience supporting a wide array of financial services market participants across Structured Products, Funds, secured and unsecured debt, and regulatory reporting. Alex currently services client requests across EMEA, AMER and APAC client base.

Oliver Perry is Head of Due Diligence, responsible for the design, launch, and growth of the service. Before joining Delta Capita, he was an Equity Derivatives COO in Hong Kong and London, where amongst other things, he was responsible for transforming the product approval and distribution governance frameworks before becoming Delta Capita’s Head of Due Diligence.