CIF new product governance

CySEC Directive DI87-01(A) on CIF new Product Governance obligations

On the 25th of July 2022, the Cyprus Securities and Exchange Commission (CySEC) published Directive DI87-01(A) amending Directive DI87-01 for the Safeguarding of Client Assets, Product Governance Obligations and Inducements.

Directive DI87-01(A) mandates the incorporation of sustainability factors within the Cyprus Investment Firms (CIF) product governance obligations. In this respect, sustainability factors are

  • environmental,
  • social,
  • employee related,
  • with respect to human rights,
  • on anti-corruption,
  • on anti-bribery.

The importance of Directive DI87-01(A) is that it commands sustainability factors to be taken into consideration when a CIF is acting as a manufacturer and/or distributor. In doing so, CIF must:

  1. identify in detail the potential target market of each financial instrument,
  2. identify potential clients for whom the product is not compatible with their needs – negative target market,
  3. determine whether the financial instrument meets the characteristics of the target market,
  4. review the financial instrument regularly to ensure that it remains consistent with target market needs, characteristics and objectives.

The manufacturer of the financial instrument shall consider the client’s characteristics and the products that may benefit the client. The product offered should not be designed for the benefit of the Company, and against the benefit of the client.

Furthermore, manufacturers must ensure that the sustainability factors of a financial product are clearly presented and information relevant to the appropriate distribution channels, the product approval process, and the target market assessment, are provided to the distributors.

The Directive DI87-01(A) will enter into force on the 22nd of November 2022.

The SALVUS Regulatory Compliance team carries extensive experience on all Markets in Financial Instruments Directive II (MiFID II) requirements and can support you in the establishment and implementation of the appropriate Product Governance arrangements.

Please contact us via email at [email protected] or call us at +357 7000 7898 if you require additional information about your Product Governance obligations or other MiFID II matters.

#StayAhead

Share this post