On 6 November 2020, the European Securities and Markets Authority (ESMA) updated its Q&As on MiFID II and MiFIR investor protection and intermediaries’ topics by adding three new Q&As on product governance (section 16 of the Q&As). The new Q&As provide answers to the following questions:
- How should firms manufacturing financial instruments ensure that these financial instruments’ costs and charges are compatible with the needs, objectives and characteristics of the target market, as required by Article 9(12)(a) of the MiFID II Delegated Directive?
- How should firms manufacturing financial instruments ensure that costs and charges do not undermine the financial instrument’s return expectations, as required by Article 9(12)(b) of the MiFID II Delegated Directive?
- How should firms manufacturing financial instruments ensure that the charging structure of the financial instrument is appropriately transparent for the target market, such as that it does not disguise charges or is too complex to understand as required by Article 9(12)(c) of the MiFID II Delegated Directive?