Product governance

Subscribe to Product governance via RSS
Abstract view of a skyscraper

The proposed amendment seeks to modify the existing framework of FINRA Rule 2210 to accommodate the use of certain projections and targeted returns.

By Stephen P. Wink, Marlon Paz, Gail Neely, Naim Culhaci, Matthew Lee, and Deric Behar

On November 13, 2023, the Financial Industry Regulatory Authority (FINRA) filed a proposed rule change with the Securities and Exchange Commission (SEC) to amend FINRA Rule 2210. If adopted, the amendment would permit FINRA-regulated firms to include certain performance projections or targeted returns with respect to a security or asset allocation or other investment strategy in their communications with certain recipients.

As the “most ambitious legislative proposal since the inception of EU financial regulation”, the changes would make significant amendments to MiFID II and PRIIPs.

By Rob Moulton, Nicola Higgs, Becky Critchley, Gary Whitehead, and Charlotte Collins

On 24 May 2023, the European Commission (Commission) published a package of proposals to strengthen protections for retail investors within the European Union (EU) and place “consumers’ interests at the centre of retail investing”. The proposals significantly amend the protections afforded to retail clients under MiFID II, and also impact the institutional markets, as discussed below.

FCA found instances of non-compliance with the product governance rules which, in its view, increases the risk of investor harm.

By Nicola Higgs, Anne Mainwaring, and Jonathan Ritson-Candler

Background

On 26 February 2021, the FCA published a webpage setting out eight asset management firms’ implementation of the UK MiFID II product governance requirements. The sample reviewed consisted of asset managers with group assets under management ranging from £2 billion to over £100 billion, and looked at product governance compliance across the life cycle of one case study product at each firm. The products reviewed either launched after January 2018 (when the UK MiFID II product governance rules came into effect) or before this date but had subsequently undergone significant changes (which would also trigger compliance with the rules).