Financial Services Regulation and Compliance - Investment Firms August 2023

European

ESMA publishes 2023 Guidelines on MiFID II product governance requirements 

On 3 August 2023, the ESMA published guidelines on MiFID II product governance requirements. The Guidelines replace the 2017 version of the guidelines issued by ESMA, which applied from 3 January 2018 and take into account recent regulatory and supervisory developments. The objectives of the Guidelines are to ensure a consistent and harmonised application of the product governance requirements, and to ensure the common, uniform and consistent application of the MiFID II requirements on product governance requirements.

While the Guidelines are addressed to national competent authorities (NCAs), market participants will be indirectly affected by the revised supervisory expectations of these NCAs.  

The principal revisions to the 2018 version of the guidelines concern:

  • the specification of any sustainability-related objectives in respect of the product.
  • the practice of identifying a target market per cluster of products instead of per individual product (i.e. a clustering approach).
  • the determination of a compatible distribution strategy where a distributor considers that a more complex product can be distributed under non-advised sales.
  • the periodic review of products, including the application of the proportionality principle.

The Guidelines will apply from 3 October 2023 and are expected to be supplemented by supervisory Q&A publications.

RTS for specific liquidity measurement of investment firms is published in the Official Journal

On 23 August 2023, the Commission Delegated Regulation 2023/1651, which sets out the RTS on the specific liquidity measurement of investment firms under the Investment Firms Directive (IFD) was published in the Official Journal. The RTS set out the main elements that could affect the liquidity risk of an investment firm such as external factors, operational risks and reputational risks.

The Delegated Regulation will enter into force on 12 September 2023.

RTS on Pillar 2 add-ons for investment firms under IFD are published in the Official Journal

On 31 August 2023, the Commission Delegated Regulation 2023/1668 (the Delegated Regulation) was published in the Official Journal. The Delegated Regulation supplement the IFD with regard to RTS specifying the measurement of risks or elements of risks not covered or not sufficiently covered by the own funds requirements set out in Parts Three and Four of the IFD and the indicative qualitative metrics for the amounts of additional own funds.

The Delegated Regulation will enter into force on 20 September 2023 and will be directly applicable in all Member States.

For more information on these topics please contact any member of A&L Goodbody's Asset Management & Investment Funds team.

Date published: 21 September 2023