Design your own portfolios? Did you know you’re a product manufacturer?
The Product Intervention and Product Governance Sourcebook, or PROD, came into force on 3 January 2018 as part of the new MiFID II requirements.
PROD places new requirements on both ‘distributors’ and ‘manufacturers’ in relation to the systems and controls that firms must have in place for the design, approval, marketing and ongoing management of products throughout their lifecycle to ensure they meet legal and regulatory requirements.
Of interest for this article is the requirement that investment firms that manufacture financial instruments are required to comply with the product governance requirements for product manufacturers.
A firm is considered to manufacture when it “creates, develops, issues and/or designs financial instruments”.
TISA are aware that many financial advice firms ‘create’, ‘design’, ‘develop’ and ‘issue’ their own in-house portfolios, in an advisory capacity, to their clients. Under the PROD rules, such a firm is a manufacturer and therefore needs to comply with both the distributor and manufacturer rules.