The European Securities and Markets Authority published draft Guidelines on the target market assessment for the new product governance requirements in the revised Markets in Financial Instruments Directive. The product governance requirements require firms which manufacture and distribute financial instruments and structured deposits to act in their clients’ best interests during all the stages of the life-cycle of products or services. The requirements in MiFID II were further specified in secondary legislation which was adopted by the European Commission in April 2016. ESMA's proposed Guidelines focus on the ‘target market assessment’, which has been identified as the most important for achieving consistent application of the product governance requirements across the EU. 

The proposed Guidelines set out, amongst other things, the determination of the potential target market by the manufacturer or distributor in terms of categories to be considered and differentiation on the basis of the nature of the product manufactured or distributed, regular reviews to assess whether products and services are reaching the target market and the distribution of products manufactured by entities not subject to the MiFID II product governance requirements by MiFID II distributor firms. ESMA has also included practical examples and case studies on the application of certain aspects of the proposed Guidelines. The consultation closes on January 5, 2017. ESMA will consider the feedback it receives and intends to publish a final report in Q1 or Q2 2017. 

View the consultation paper.