EBF Response to ESMA Consultation on Product Governance

07 October 2022

The EBF submitted its response to the ESMA Consultation on the review of the Guidelines on MiFID II product governance requirements: timing; Avoid additional complexity; more flexibility; clustering approach

• On timing: as ESMA guidelines will start to apply several months after the MiFID II delegated directive, investment firms will not have access to all necessary information when implementing the binding level-2 rules. To avoid legal uncertainty and compliance risks, it is therefore important that ESMA clarifies does not expect NCAs to prioritize supervision of the level rules until ESMA GLs on suitability and product governance have become applicable.
• Avoid additional complexity: it is important to keep the level of detail at a reasonable level and avoid the creation of additional complexity of the MiFID framework. In case of uncertainty on the consequences for retail investors or the EU capital market as a whole, ESMA should take a cautious approach and refrain from proposing the guideline in question.
• More flexibility: Guidelines should allow for more flexibility for distributors when defining the Target Market in the secondary market if they believe the instrument is consistent with the needs of retail investors. Moreover, while the EBF is supportive of the proposal to align “sustainability objectives” with “sustainability preferences” as proposed by ESMA, it calls for more flexibility with regards to sustainability preferences in the short to medium run.
• On the clustering approach: the clustering approach is generally supported as it support operational ability. However, the principle must be applied with proportionality, avoiding too granular requirements. Moreover, the EBF is also supportive of the fact that the clustering approach is also made available for distributors

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