Malta Investment Firms Must Comply with Revised ESMA Guidelines on MiFID II Product Governance Requirements
The European Securities and Markets Authority (ESMA) has published a final report outlining revised guidelines on MiFID II product governance requirements, aimed at strengthening investor protection in the financial sector.
Overview of the New Guidelines
The new guidelines come into effect two months after their publication on ESMA’s website in all EU official languages. According to the ESMA guidelines, investment firms must ensure that financial products are manufactured and distributed in the best interests of clients at all times.
Key Requirements for Investment Firms
To achieve this, manufacturers and distributors must:
- Specify any sustainability-related objectives for the product
- Identify a target market per cluster of products instead of individual products
- Determine a compatible distribution strategy
- Periodically review products
The revised guidelines also introduce a clustering approach to identifying target markets, where possible, and emphasize the importance of applying the proportionality principle in product governance.
Background and Context
ESMA’s final report builds on its 2017 guidelines on MiFID II product governance requirements, following recent regulatory and supervisory developments.
Impact on Investment Firms in Malta
Investment firms in Malta are encouraged to review their existing product governance policies and processes in line with the new guidelines, which will apply across the European Union. The full text of the revised guidelines is set out in Annex V of ESMA’s final report, including general and service/client-specific guidelines for manufacturers and distributors.
Compliance Requirements
With the revised guidelines now being translated into EU official languages, investment firms must be prepared to comply with the new requirements to ensure compliance with MiFID II regulations. Failure to do so may result in regulatory action and potential penalties.