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CMVM identifies opportunities for improving product governance

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The CMVM’s supervision has identified several practices that show opportunities for improving the governance of products that are offered or recommended to investors, aimed at ensuring that they are suitable for investors (target market) for which they are intended.
The conclusion stems from the results of a thematic supervision carried out by the CMVM, as part of a common supervisory action (Common Supervisory Action) at European level, promoted by the European Securities and Markets Authority (ESMA). The shares were aimed at financial intermediaries, investment fund management companies and branches supervised by the CMVM that produce or sell financial products aimed at retail investors.

The points identified in the circular note show improvement opportunities, namely as to the:

  • identification of the products’ target market, in order to avoid the inclusion of investors groups whose needs, characteristics and objectives are not compatible with the product;
  • formalising the internal approval of the target market and product distribution strategy, in order to demonstrate that the products have been approved by competent bodies;
  • analysis of the cost and fee structure of the products and, particularly, the rationale on how the respective cost structures and components are adequate to the needs, objectives and characteristics of the target market for which they are intended;
  • revision and monitoring of the products, with a view to clearly showing the result of the analysis carried out and the respective rationale of the assessment on whether the product continues to satisfy the needs, characteristics and objectives of the target market for which it is intended and whether the distribution strategy is still adequate;
  • clarity and completeness of the procedures defined in internal regulations so as to ease the understanding of the adopted policies, particularly in the analysis of the cost and fee structure of the products and in the periodic assessment of the target market and their distribution strategy.

The common supervisory action took place during 2021.

This news item was originally published by the Portuguese Securities Market Commission (CMVM PT). For more information, please see the Source Link.

Regulator Information

Abbreviation: CMVM
Jurisdiction: Portugal

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