Product Intervention Powers and Design and Distribution Obligations in Financial Services: A Cross-Border Perspective

Authors: Hannah Cassidy, Clive Cunningham, Natalie Curtis, Javier de Carlos, Katherine Dillon, Matthias Gippert, Leopoldo Gonzalez Echenique, Vincent Hatton, Patricia Horton, Pierre Le Ninivin, Kai Liebrich, Natasha Mir, Stuart Paterson, Fiona Smedley, Jenny Stainsby, Jennifer Xue

Many regulators view their ability to intervene as one of their key supervisory tools to reduce harm in cases where there is a risk of significant consumer detriment or threat to financial markets.

At the same time, many jurisdictions have put in place product governance regimes for financial services firms which aim to avoid, or at least mitigate from an early stage, any potential risks of failure to comply with investor protection rules. In particular, the design and distribution obligations under these product governance regimes aim to overcome the limitations of disclosure and ensure that firms which manufacture and distribute financial products take some responsibility and adopt a more targeted customer-centric approach.

The stages of development, level of detail, scope and coverage of regulators’ product intervention powers, and the product design and distribution obligations under product governance regimes, vary across jurisdictions.

Our guide (which can be found here) summarises the frameworks in selected jurisdictions, allowing a high-level comparison of the different regimes and offering a glimpse of the direction of travel.

KEY CONTACTS

Clive Cunningham
Clive Cunningham
Partner, London
+44 20 7466 2278
Fiona Smedley
Fiona Smedley
Partner, Sydney
+61 2 9225 5828
Hannah Cassidy
Hannah Cassidy
Partner, Hong Kong
+852 21014133
Natalie Curtis
Natalie Curtis
Partner, Singapore
+65 6868 9805

UK: FCA and HM Treasury publish approach to UK implementation of MIFID II

The FCA and HM Treasury have published the first set of papers on the UK implementation of MiFID II:

  • FCA discussion paper “Developing our approach to implementing MiFID II conduct of business and organisational requirements” (DP15/3); and
  • HM Treasury consultation paper “Transposition of the Markets in Financial Instruments Directive II” (HMT consultation paper).

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EU: MiFID Review – phase two begins

The European Securities and Markets Authority (ESMA) is consulting on the implementation of the revised Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR).  MiFID II and MiFIR are expected to come into application by end 2016/early 2017, and will apply across the European Union, extending also to member states of the European Economic Area under the European Economic Area Agreement.    For a more detailed briefing, click here.

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MiFID II: European Commission publishes legislative proposals to amend MiFID

The European Commission finally published its legislative proposals to revise the Markets in Financial Instruments Directive (MiFID) on 20 October, nearly 4 years after the MiFID implementation date of 1 November 2007. The proposed changes to MiFID will result in a significant overhaul of the way in which financial markets operate in Europe.

The proposed legislation is divided in two: a new Directive and a new Regulation:

  • MiFID Level 1 Directive (2004/39/EC) will be recast, with a new directive amending the following provisions:

    • Specific requirements regarding the provision of investment services
    • Scope of exemptions from the current Directive
    • Organisational and conduct of business requirements for investment firms
    • Organisational requirements for trading venues
    • Authorisation and on-going obligations applicable to providers of data services
    • Powers available to competent authorities
    • Sanctions
    • Rules applicable to third-country firms operating via a branch
  • Regulation on the Markets in Financial Instruments (MiFIR), which establishes uniform and directly applicable requirements in relation to:

    • Disclosure of trade transparency data to the public and transaction data to competent authorities
    • Removing barriers to non-discriminatory access to clearing facilities
    • Mandatory trading of derivatives on organised venues
    • Specific supervisory actions regarding financial instruments and positions in derivatives
    • Provision of services by third-country firms without a branch

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