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ESMA opinion on structured retail products – good practices for product governance arrangements

Hartmut T. Renz (Counsel, based at Kaye Scholer LLP, New York, New York, USA)
Ingrid Kalisch (Partner, based at Kaye Scholer LLP, New York, New York, USA)
Sandra Pfister (Partner, based at Kaye Scholer LLP, New York, New York, USA)
Stuart Axford (Partner, based at Kaye Scholer LLP, New York, New York, USA)
George M. Williams, Jr. (Special Counsel, based at Kaye Scholer LLP, New York, New York, USA)

Journal of Investment Compliance

ISSN: 1528-5812

Article publication date: 28 October 2014

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Abstract

Purpose

To explain the practices that ESMA (European Securities and Markets Authority) recommends for investment firms and national competent authorities to implement when it comes to structured retail products (SRPs), in order to ensure sound product governance arrangements and the consistency of supervisory practices needed for adequate investor protection across the European Union.

Design/methodology/approach

Lists the ESMA guidelines for the general organization of product governance arrangements, breaks down the aspects manufacturers should consider in the making of their SRPs, highlights the need to understand the target market, explains the appropriate structure of the distributor’s and manufacturer’s distribution strategy, details how manufacturers establish a SRP’s value, recommends how investment firms deal with SRPs on the secondary market, and explains how manufacturers review the performance of their SRPs.

Findings

The competent authorities are still focusing on improving and enforcing investor protection. This ESMA opinion is just one example of how product governance structures and arrangements should be developed and implemented by everyone involved. It will be important to attend carefully to what MiFID 2 (Markets in Financial Instruments Directive 2) product governance requirements bring regarding investor protection in addition to the described ESMA opinion, which is based on MiFID 1.

Originality/value

Practical guidance from experienced finance lawyers.

Keywords

Acknowledgements

© 2014 Kaye Scholer

Citation

T. Renz, H., Kalisch, I., Pfister, S., Axford, S. and M. Williams, Jr., G. (2014), "ESMA opinion on structured retail products – good practices for product governance arrangements", Journal of Investment Compliance, Vol. 15 No. 4, pp. 19-24. https://doi.org/10.1108/JOIC-09-2014-0043

Publisher

:

Emerald Group Publishing Limited

Copyright © 2014, Authors