Product oversight and governance refers to the systems and controls firms have in place to design, approve, market and manage products throughout the products’ lifecycle to ensure they meet legal and regulatory requirements.
branches of third country investment firms; with respect to:
manufacturing financial instruments and structured deposits; and
[Note: articles 1(3), 1(4), 16(3), 24(2) and 41(2) of MiFID]
The guidance in this chapter provides a general overview only and is not comprehensive.
When considering the impact of a directive on the territorial application of a rule, a firm will first need to consider whether the relevant situation involves a non-UK element. PROD 1.3.6R is unlikely to apply if a UK firm is doing business in a UK establishment for a client located in the United Kingdom in relation to a UK product, in other words PROD 3 will apply to the UK firm. However, if there is a non-UK element, the firm should consider whether:
the business it is performing is subject to the directive; and
the particular rule is within the scope of the directive.
If the answer to all three questions is ‘yes’, PROD 1.3.6R may change the application of the rules in this sourcebook.
When considering a particular situation, a firm should also consider whether two or more directives apply.
For a UKMiFID investment firm, rules in this sourcebook that are within the scope of MiFID generally apply to its MiFID business carried on from an establishment in the United Kingdom. They also generally apply to its MiFID business carried on from an establishment in another EEA State, although in the case of rules that implement article 24(2) MiFID only where that business is not carried on within the territory of that EEA State. Where a MiFID investment firm carries on MiFID business from a branch in another EEA State, organisational requirements, including rules implementing product manufacture obligations under article 16 MiFID are home state requirements and therefore FCA responsibility (see SUP 13A Annex 1G).
[Note: see articles 34(1) and 35(1) and (8) of MiFID]
For an EEA MiFID investment firm, rules in this sourcebook that are within the scope of MiFID generally apply only to its MiFID business if that business is carried on from an establishment in, and within the territory of, the United Kingdom and only to the extent that the rules implement article 24(2) of MiFID.
[Note: see articles 35(1) and (8) of MiFID]
13(1) For the purposes of Article 25(1) of Directive (EU) 2016/97, insurance intermediaries shall be considered manufacturers where an overall analysis of their activity shows that they have a decision-making role in designing and developing an insurance product for the market.
3(2) A decision-making role shall be assumed, in particular, where insurance intermediaries autonomously determine the essential features and main elements of an insurance product, including its coverage, price, costs, risk, target market and compensation and guarantee rights, which are not substantially modified by the insurance undertaking providing coverage for the insurance product.
3(3) Personalisation of and adaptation of existing insurance products in the context of insurance distribution activities for individual customers, as well as the design of tailor-made contracts at the request of a single customer, shall not be considered manufacturing.
[Note: article 3 of the IDD POG Regulation]
1Subject to (2) and PROD 1.4.3R, provisions in this section and in PROD 4 marked “EU” apply to firms manufacturing or distributing insurance products, but to whom the IDD POG Regulation does not apply, as if they were rules.
For the purposes of (1), a word or phrase used in the IDD POG Regulation and referred to in column (A) has the meaning indicated in Column (B) of the table below:
“Article 17(1) of Directive (EU) 2016/97”
“Article 25(1) of Directive (EU) 2016/97”
“customer” and “potential customer”
“Directive (EU) 2016/97”
“insurance-based investment products”
“insurance distribution activities” and “distribution activities”
“manufacturer” and “manufacturers within the meaning of Article 2 of this Delegated Regulation”
In this sourcebook, where a reproduced provision of an article of the IDD POG Regulation refers to another part of the IDD POG Regulation, that other provision must also be read with reference to the table in (2).