What does this mean for Product Manufacturers?

Product manufacturers are for the first time impacted by MiFID rules and guidelines. These guidelines are not replacing or 'over writing' the product specific regulations such as UCITS or AIFMD. Hence the MiFID II requirements are to be complied in conjunction with the product requirements but going forward, ESMA considers that the European Commission should consider the possibility to align the relevant UCITS and AIFMD articles with the product governance obligations for manufacturers.

Product Development

Set-up a product approval process:

  • Process Design (initial, ongoing and ad-hoc)
  • Involved Parties/Functions
  • Approval/Sign-off
  • Statistical Analysis/Backtesting
  • Use of outcome (best interest to investor), e.g. redesign, product freeze
  • Retail vs. Professional Investors
  • Knowledge/Experience & Investment Objective/Horizon
  • General or limited/dedicated distribution
  • Definition of distribution strategy in line with target market
  • Information transfer to distributors
  • Actions for different distribution scenarios and actual outcome
  • Retail vs. Professional Investors
  • Knowledge/Experience & Investment Objective/Horizon
  • General or limited/dedicated distribution
  • Actual Investors
  • Knowledge/Experience & Investment Objective/Horizon
  • General or limited/dedicated distribution


Art. 16(3) & 24 MiFID II (considering ESMA Opinion 2014/332

MiFID II requirements are focused on the governance and transparency of the 'product manufacturing process'. As such, the importance lies not with what product is produced, but instead how it is produced (i.e. as long as it is distributed within the EU).
For each financial product the manufacturer needs to determine the 'target market' (i.e. target clients) as well as the key characteristics prior to the distribution of the product. This information needs to be documented and ‘put at disposal’ of the distributors.
These product governance requirements apply to MiFID firms as well as to UCITS Management Companies and AIFMs with "extended scope" but only in connection to the MiFID service they perform. Nonetheless, product manufacturers who are non-MiFID firms or third country firms, including UCITS Management Companies and AIFMs, may also be impacted as they will have to conclude an agreement with the distributor to ensure to provide the product information when such information will not be publicly or otherwise available to the distributor.
Since the requirements target mostly the so-called 'new products process' and set out an obligation of means to match the target market for each product, it is most likely the management company or the securitisation agent which will take the role as gatekeepers and information hosts.

Contact us

Olivier Carré

Partner Regulatory Advisory - MiFID II Leader

Tel: +352 49 48 48 4174

Cécile Liégeois

Regulatory & Compliance Advisory Services - Banking - Partner, PwC Luxembourg

Tel: +352 49 48 48 2245

Rima Adas

Partner Audit - Financial Services Leader

Tel: +352 49 48 48 2101

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