Concerning the initiatives that protect retail customers, the communication released by CONSOB on the 22nd of December 2014 brought forward a number of MIFID 2 elements for early enactment. In particular, the CONSOB text strongly regulated the retailisation process, that is the distribution of investment products to retail customers that were previously intended only for institutional or professional investors.
The communication became fully effective on the 1st of July 2015 and forces financial intermediaries to make decisions at a top management level about how to set their commercial policies concerning complex financial products (as reported in the related CONSOB press release of July 1st).
The communication (together with the ESMA opinions) requires several interventions, including the immediate evolution of software platforms that support sales processes.
Software platforms have to adjust to support the financial intermediaries in managing complex products. In particular, it will be necessary to:
- Adjust customers’ disclosures, adding information about complex products classification and their associated risks.
- Define market targets for each complex product.
- Extend the adequacy of controls.
We will discuss product governance in an ad hoc article: this is an innovative topic because it covers the financial product’s initial development phase and the additional changes that software platforms will have to undergo to remain effective and, at the same time, comply with the new regulations.