MiFID II Product Governance -
Proportionality: Rules of the road -
The product governance rules in MiFID II represent a fundamental change in the way firms design and distribute financial instruments. The rules largely replicate the existing UK regime applicable to retail structured products. However, in extending the rules to all financial instruments, the regulators have done nothing to tailor them to financial instruments that may be vastly different in terms of risk profile or complexity. Nor have they been express in confirming how the rules might apply in wholesale markets. Instead, the regulators have introduced the concept of proportionality and have left it up to individual firms to define how proportionality should be applied in the context of their business.
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