Part II Investment Firms and Investment Services, 5 Product Governance and Product Intervention under MiFID II/MiFIR

Subject(s):

Conduct of business regulation — Enforcement — Investment business — Market abuse — Regulated activities — Supervision

This chapter analyses the product governance and product intervention rules introduced by MiFID II/MiFIR. It argues that the combination of these two approaches designed to exclude harmful products from the market is a major step forward in investor protection. However, complying with product governance rules will entail costs for the firms concerned. They will have to put in place the requisite internal procedures and there will be a statutory duty for the firm developing the product and the firm distributing it to exchange a considerable volume of information. All in all, the author believes that these extra costs are acceptable; and are dwarfed by the social costs of marketing harmful financial products. The author argues that MiFID II’s introduction of product governance rules and product intervention rules is common sense. It would be naive to think that product governance rules could in practice guarantee that harmful products are no longer marketed.