EFAMA wholeheartedly supports ESMA’s objective of ensuring a consistent and harmonised application of the MiFID II product governance requirements. In our response to their consultation on the topic, we raised the following points:
- We support the possibility to align the newly introduced sustainability concepts in the finalised suitability guidelines and the proposed product governance guidelines. We markedly appreciate ESMA’s flexible approach, as an investor’s sustainability-related objectives may encompass much more than products that only meet the MiFID II sustainability criteria.
- We wish to emphasize the importance of the proportionality principle which governs the existing MiFID II rules. This means any increased regulatory burden on manufacturers and distributors due to additional product governance requirements should be explicitly linked to increased investor protection.
- We highly value the ability to cluster products as a way to enhance operational capabilities while retaining investor protection. To avoid a situation in which the addition of sustainability in the characteristics to be considered makes it difficult to apply any clustering at all, we propose to allow clustering of products based on the five categories listed in paragraph 19 and define the sustainability characteristic separately, as well as requesting practical examples of how to group similar products based on their sustainability-related objectives.
- Importantly, for firms to be able to meaningfully implement the guidelines, ongoing sequencing issues need to be addressed. We therefore urge ESMA and the regulators to take a risk-based approach in terms of supervising the implementation of the amendments to MiFID product governance requirements which are coming into effect on 22 November 2022 until implementation instructions are clarified and finalised.