Product Governance Arrangements under MiFID II and IDD Inez De Meuleneere & Hugo Verschaetse
Overview Aim of POG-Arrangements, their legal basis and scope of application Who are manufacturers and distributors and what are their obligations The Potential and Identified Target Market Guidelines contained in the Final EIOPA report Liability regimes for info in product documentation IDD vs Assur-MiFID Inez De Meuleneere & Hugo Verschaetse 2
Aim of new EU Product Oversight and governance (POG) arrangements regime POG arrangements are considered to be fundamental for investor protection purposes Specific oversight, control and governance obligations must insure due consideration given to interests of investors during whole life cycle of product Avoid and reduce from the start, potential mis-selling risks and help ensure that products and services are provided to the right customers Intended to reduce need for product intervention Pro-active approach from the start of design phase, instead of only reaction when detriment becomes apparent Inez De Meuleneere & Hugo Verschaetse 3
Conflicts of interest management Conflicts of interest managing role of the product approval process (see MiFID II Art. 16 (3) sub 1) makes it a key process, especially on the distribution side (because MiFID duty of care requirements rely on the MiFID service provider) Potential conflict areas: correct pricing of illiquid financial instruments self placements (cf. bail-inable instruments) distribution of financial instruments issued by corporates to which a closely related entity or department provided advisory services cost and charges (structure) Inez De Meuleneere & Hugo Verschaetse 4
POG- arrangements under MiFID II Level 1 EU Directive 2015/65 (MiFID II) Organisational requirements: Rec. (54), (71) to (73) and Art. 9 (3) sub b, Art. 16 (3) Investor protection: Rec. (86), (87) and Art. 24 (2) Application date = 3 Jan 2017 but Commission proposal to postpone with 1 year Commission Delegated Directive adopted on 7 April 2016 - C (2016) 2031 final (Del. Dir.) Rec (15) (20) Articles 9 and 10 ESMA Technical Advice - Final Report 2014/1569 of 19 Dec 2014 (ESMA FR) Inez De Meuleneere & Hugo Verschaetse 5
Broad scope of application of POG-arrangements under MiFID II Investment firms authorised under MiFID II Other supervised entities subject to MiFID II, such as UCITS management companies and AIF managers, when authorised to perform MiFID investment services and only in the connection of the performance of such services cf. Rec. (16) Del. Dir. All products sold on primary and secondary market, irrespective of type of product or service provided or point of sale requirements (incl. Shares, bonds, structured deposits) cf. Rec. (18) Del. Dir. All investment services (not only advice, also RTO, XO brokerage platforms) Proportionality rule, ie. depending on complexity of product and degree to which public available info can be obtained and taking into account nature of instrument or service and target market cf. Rec. (18) Del. Dir. Detailed requirements re insurance-based investment products in Insurance Distribution Directive (IDD) cf. Rec. (87) MiFID II Inez De Meuleneere & Hugo Verschaetse 6
POG-arrangements for insurance products Solvency II: requirement for firms to put in place organisational arrangements which aim to ensure a correct design, development and monitoring of insurance products and customer protection Rec. (16), Art. 27, 40 and 41 (1) sub 1 Implementation deadline = 1 January 2016 IDD: customer protection and adding requirements for distributors which are not in scope of Solvency II: Art. 25 Implementation deadline = 23 February 2018 EIOPA Preparatory Guidelines on POG arrangements by insurance undertakings and distributors Final report of 6 April 2016 EIOPA s Board of Supervisors adopted the Guidelines Guidelines are addressed to competent authorities: how to proceed in the preparatory period leading up to transposition of IDD and Delegated Acts principle of comply or explain. Inez De Meuleneere & Hugo Verschaetse 7
with again a broad scope of application Manufacturers: insurance undertakings and intermediaries who manufacture products ( design of products by intermediaries for a group of (potential) clients, setting-proposing coverage requirements, limits of indemnity, exclusions, ). Distributors: involved in insurance distribution activities; must have in place adequate arrangements to obtain the info from the manufacturer and to understand the identified target market. All types of distribution channels are in scope: (tied) agents, brokers, direct channels (online sales included), full and ancillary insurance intermediaries. The EIOPA Guidelines specify a separate adapted set of rules for distributors. For all customers : natural-legal persons (SME included, large risks excluded). All insurance products ie. life (including insurance-based investment products, 2nd pillar pension products) and non-life exempted for insurance of large risks; Exempted for the services and products on an ancillary basis as defined in art 1,3 IDD; proportionality rule depending on nature of product. For products newly designed or substantially modified as of date of entry into force. For products still being distributed or brought to the market prior, authorities may consider requiring compliance with Product monitoring and Remedial action (Guideline 8-9). Inez De Meuleneere & Hugo Verschaetse 8
manufacturers vs. distributors Manufacturer = investment firm that creates, develops, issues and/or designs financial instruments - including advising corporate issuers on the launch of new financial instruments Rec. (15) and Art. 9 (1) Del. Dir. ESMA TA referred to investment products (ie financial instruments and structured deposits) Distributor = investment firm that offers and/or recommends, and/or sells products & services to clients including when financial instrument manufacturerd by entities not subject to MiFID Rec. (15) and Art. 10 (1) Del. Dir. ESMA TA: Offering is broader then providing investment advice and includes also providing execution-only brokerage platforms When involved in both activities, both set of rules apply - Rec. (17) Del. Dir. Ultimate distributor in chain is responsible to meet product governance obligations but intermediate distributors must pass on information through the chain Art. 10 (10) Del. Dir. Inez De Meuleneere & Hugo Verschaetse 9
manufacturer s obligations Install a product approval process to ensure that product design complies with proper management of conflicts of interest manufacturing staff posses the necessary expertise or receive the appropriate training to understand characteristics and risks of manufactured products management body has effective control over the product governance process; info and strategy re products to be included in compliance reports When manufacturing a new product identify a Potential Target Market of end clients (PTM) assess the risks of the product consider whether product meets identified needs, characteristics and objectives of the PTM consider the charging structure proposed for the product Information flows and reviews inform any distributor about all appropriate information on the product and the PTM regularly review the products and the PTM Best effort to identify crucial events that would affect the potential risk or return of the product and take appropriate action Inez De Meuleneere & Hugo Verschaetse 10
and distributor s obligations Install and maintain a product governance process to ensure Effective management control over determined range of investment products compliance with MiFID requirements (disclosure, AT/ST, inducements, COI mngt) oversight by compliance function; info and strategy re products in compliance reports When considering distribution of a new product or service define the target market (when product is manufactured by non-mifid manufacturer) check compatibility with needs, characteristics and objectives of the Identified Target Market (ITM) arrange to obtain info to gain necessary understanding and knowledge of products ensure that relevant staff posses necessary expertise, or receive appropriate training to understand characteristics of the products and the needs, characteristics and objectives of the ITM Sales aftercare undertake regularly review of the product and services, assessing whether product remains consistent with needs of ITM Reconsider the distribution of a product when becoming aware to have mis-judged the target market or that the product does not longer meet the circumstances of the ITM provide the manufacturer with sales information Inez De Meuleneere & Hugo Verschaetse 11
Criteria to identify the target market in MiFID level 1 and level 2 MiFID II Art 16 (3) sub 3: identify for each financial instrument the ITM of end clients within the relevant category of clients Art. 9 (9) Del. Dir. and ESMA FR (2.7 Product Governance) TA Nos 10 & 11: Manufacturer shall identify the PTM for each financial instrument and be able to identify the type(s) of clients whose needs, characteristics and objectives are compatible with the financial instrument. Target market must be identified at sufficient granular level to avoid inclusion of groups of investors for whom the financial instrument is inappropriate. Art. 10 (2) Del. Dir. and ESMA FR (2.7 Product Governance) TA No 21: Distributor shall determine the ITM for a financial instrument or service and its distribution strategy on basis of the needs, characteristics and objectives of group of potential target clients. Ensure that clients interests are not compromised as a result of commercial or funding pressures. To that end it uses (1) info on its own clients and (2) the info obtained from manufacturer At ESMA level: inconsistent use of terms investment products and products although intended to capture both financial instruments and structured deposits Art. 1 (2) Del. Dir.: reference to financial instruments includes structured deposits Inez De Meuleneere & Hugo Verschaetse 12
Manufacturers and distributors have different roles in identification of TM Manufacturers identify the TM on a theoretical basis, ie with general view of how specificities of products would be compatible for certain types of investors considering their knowledge of financial markets their past experience with similar products and investors needs, characteristics and objectives of potential investors Distributors should refine this general TM assessment and their distribution strategy based on assessment of the info obtained from manufacturer their info on their own clients who should define the appropriate sales channels? Inez De Meuleneere & Hugo Verschaetse 13
Which criteria define the TM? ESMA refused to clarify the level of granularity required when identifying the TM > to be determined on a case by case basis. Different other texts may help: IOSCO Regulation of Retail Structured Products Final Report 14/13 of December 2013 ESMA opinion 2014/332 of 27 March 2014 Good practices for products governance arrangements for Structured Retail Products EBA Final Report 2015/18 of 15 July 2015 Guidelines on product oversight and governance arrangements for retail banking products PRIIPs Regulation Inez De Meuleneere & Hugo Verschaetse 14
IOSCO-criteria re. TM of Retail Structured Products IOSCO Regulation of Retail Structured Products Final Report 14/13 of December 2013 (IOSCO FR) Regulatory tool No 3 (Intended investor identification and assessment): consider placing a responsibility on or encouraging manufacturers to identify and assess the type, class or features of investors that they intend to focus on for a structured retail product This analysis could involve: Investor risk profile Tolerance for capital loss Investment objectives Investment timeframe (cost of early redemption, implications of early knock-out provisons) Financial knowledge, experience and education of the target market Common demographic characteristics (eg tax status, age of retirement) Inez De Meuleneere & Hugo Verschaetse 15
ESMA-criteria re. TM of Structured Retail Products (SRP) ESMA opinion 2014/332 of 27 March 2014 Good practices for products governance arrangements for Structured Retail Products (SRPs) Define target market via assessment of which investors are most appropriate to invest in SRPs, based on To which market does this SRP provide exposure What is the needed investment horizon of a prospective investor to this SRP Limits of secondary markets for SRPs Risk absorbing capacity of potential investors Inez De Meuleneere & Hugo Verschaetse 16
EBA-criteria re. TM of retail banking products EBA Final Report 2015/18 of 15 July 2015 Guidelines on product oversight and governance arrangements for retail banking products (EBA FR) Good practice examples re. target market, manufacturers could consider: Tax status implications for different products Level of risk of the product to be designed Liquidity accessibility that the customer is expected to get Level of risk that the customer is willing to bear Demographic factors Level of knowledge and understanding of the complexity of the product, or Potential creditworthiness of the consumer or financial capability of the consumer Inez De Meuleneere & Hugo Verschaetse 17
TM-criteria in the KID (PRIIPS) PRIIPS Art. 8 (3) sub c, point (iii): KID shall contain a description of the type of retail customer to whom the PRIIP is intended to be marketed, in particular in terms of the ability to bear investment loss and the investment horizon Inez De Meuleneere & Hugo Verschaetse 18
Relation to product info disclosure and to other MiFID requirements? Manufacturer must make available to distributors all appropriate info on the product and on the product approval process, including the identified TM (MiFID Art. 16 (3) sub 3) Criteria to define TM and appropriate distribution channels overlap with or rely on (at least to a large extent) the characteristics and risks of the product or MiFID client categories, which are disclosed in the product documentation and marketing material Definition of target market does not affect other COB requirements of distributor (MiFID Art. 16 (3) sub 7), eg appropriateness test needed when complex products or suitability test in case of investment advise Distribution of products to clients outside TM is possible but only on a justified and exceptional basis (ESMA FR No 14 and 18, EBA FR p. 21) Inez De Meuleneere & Hugo Verschaetse 19
Insurance - Final EIOPA Report 6 April 2016 highlights Guidelines Guideline 1 Establishment of POG arrangements appropriate measures and procedures aimed at designing, monitoring, reviewing and distributing products for customers avoid that products may lead to detriment to customers Guideline 4 Regular review of POG arrangements The manufacturer should not bring a product to the market if the product testing results show that the product is not aligned with the interests, objectives and characteristics of the target market. The manufacturer should set out the POG arrangements in a written document (sufficient to refer to existing documents) and make it available to relevant staff, who should have knowledge of and observe these arrangements. Inez De Meuleneere & Hugo Verschaetse 20
Final EIOPA Report 6 April 2016 highlights Guidelines Guideline 4 - Regular review: By establishing a minimum frequency for review-update frequency not determined by EIOPA; By identifying relevant factors triggering review as significant changes in retail strategy and changes in complexity of product lines and distribution channels; To be appropriately documented. counterpart Gl1 Distributor - Guideline 13 and 19 - Establishment (and review) of Product Distribution arrangements to: Consider the product and services range to offer to its customers, Obtain all necessary information on the product. POG arrangements again in written and made available to its staff. Review in particular wrt the distribution strategy for each insurance poduct considering the target market may be redefined in the course of time due to external factors as market developments. Inez De Meuleneere & Hugo Verschaetse 21
Final EIOPA Report 6 April 2016 highlights Guidelines Guideline 2 Objectives of the POG arrangements - in line with the MiFID II approach. Principle: The POG arrangements should aim to prevent and mitigate customer detriment, support a proper management of Conflicts of interest, and should ensure that the objectives, interests and characteristics of the customers are duly taken into account. Customer detriment when not acting in accordance to the best interests of the customers ; broader than a strict tick-box approach for compliance with regulation. Concrete cases due to poor product design and insufficient product governance, in Cz, ES, NL, IT, UK, in life and non-life (payment protection insurance), products with limited coverage excluding main risks. Conflicts of Interest: Specific chapter IDD for specific product scope: Insurance based investment products; but in BE -due to AssurMiFID- CoI already in force for life and non-life. Principle of proportionality, taking into consideration the complexity of the product and the business of the manufacturer. Principle of appropriateness to account for the risks borne by policyholders for a product, both individual and collective policyholders interest. Inez De Meuleneere & Hugo Verschaetse 22
Final EIOPA Report 6 April 2016 highlights Guidelines Counterpart Gl2 - Distributor Gl 14 Objectives of product distribution arrangements same principle, but other focus: Not on product design and review, but on preparation of the distribution of the products, obtaining all relevant information from the manufacturer, and defining a distribution strategy. Important check of Conflicts of Interest and the best interest of the customer : this may imply that distributors abstain from distributing specific insurance products, for example in cases where products do not offer any value to the customer, but only a high commission. Distributor is not intended to make his own target market. For all distributors, even on ancillary basis, but competent authorities need to take a proportionate and risk-based approach when applying these Guidelines. Authorities have to take into account also whether the distributor is acting as a tied agent or as an independent broker. Insurers with tied agents are anyhow responsible for insurance mediation activities of tied agents (based on AssurMiFID). Inez De Meuleneere & Hugo Verschaetse 23
Final EIOPA Report 6 April 2016 highlights Guidelines Guideline 3 Role of Management the ultimate responsibility for the procedures and measures lies with the top management of an entity. Any relevant key function of the manufacturer can be involved in the establishment and reviews of the POG arrangements. No EIOPA-rules regarding the role of the key functions, while MiFID II is more explicit: the compliance function monitors the development and periodic review of product governance arrangements. Compliance also reports systematically to the Board about products offered and services provided (MiFID II). In practice similar important role for compliance function in insurance? Counterpart Distributor Gl 15. Guideline 5 Target market (positive and negative) the manufacturer has to include suitable steps in order to identify the relevant target market (positive and negative). The good practice -examples (on slide 17) listed in the EBA Report 2015/ 18 of 15/7/2015 are taken over in the EIOPA Report of 6/4/2016. Is added in the EIOPA report and typical for insurance products: insurance coverage and exclusions. The negative target market is helpful in order to get a clear picture of the boundaries of a product. Example given: a life insurance policy running for 30 y for a 97 y old lady. What about the target market group for a lot of non-life products? The target market group is very broad for most of these products mass retail market. Inez De Meuleneere & Hugo Verschaetse 24
Final EIOPA Report 6 April 2016 highlights Guidelines Counterpart Distributor Gl 16-17: obtaining all necessary information on the target market / product from the manufacturer. The target market info is needed for setting up a distribution strategy, and to assess to which customers to advertise the product. When acting as manufacturer and distributor (eg insurer with tied agents), only one target market assessment is required (MiFID II-based statement). The product info includes info on the main product characteristics, its risks and costs, and circumstances which may cause a conflict of interest. Counterpart Distributor Guideline 18 the distribution strategy should not contradict or has to be consistent with the distribution strategy and the target market defined by the manufacturer. Circumstances may be outlined defining under which distribution of products outside the target market is permitted exceptionnally; In case of sale outside the target market, the distributor has to be able to justify that the product fits with the best interest of the customer, and this has to be documented. Inez De Meuleneere & Hugo Verschaetse 25
Final EIOPA Report 6 April 2016 highlights Guidelines Guideline 6 Skills, knowledge and expertise of personnel involved in designing products ao via appropriate professional training. Requirement derived from the general principle of good governance in art 258 of the Solvency II Delegated Regulation. Gl 7 Product testing (including if relevant- scenario analyses) The manufacturer should not bring a product to the market if the product testing results show that the product is not aligned with the interests, objectives and characteristics of the target market. The manufacturer should carry out product testing in qualitative and, where appropriate, in quantifiable manner depending on the type and nature of the product and the related risk of detriment to the customer. Some criteria in general: When testing, you have to consider all significant risks to which customers would be subject to; The assessment may consider if the price of the policy is in balance with the worth of the underlying. Eg is it possible to close a Casco policy for an old car? Inez De Meuleneere & Hugo Verschaetse 26
Final EIOPA Report 6 April 2016 highlights Guidelines Gl 7 Product testing Examples for insurance based investment products: - inspired by suitable advice Impact on the risk and reward profile of the product following changes to the value and liquidity of underlying assets; What happens in case of changes in the tax environment? What happens in case the manufacturer has financial problems? What in case of surrender by the policy holder? How is the risk-reward profile of the product balanced taking into account its cost structure? Examples for non-life of topics to be considered : concerns going from clear information to the customer to value for money for the customer what s in it for me? How to balance? Do the expected claims ratio and claims payment policy suggest that the product is of monetary benefit for customers? Value for money ; Does the coverage of one product potentially overlap with the coverage of another product? This ha been one of the main points of attention for the need analysis within the AssurMiFID legislation. Does the coverage reflects sufficiently the future needs of the target group? Does the customer understand the terms and limitations of the policy? Introduction of a general price control - how far in theory and in practice? Different EIOPA point of view in Summary of responses to online survey in preparation of. the delegated acts under IDD of 2/3/2016 : There should be no interference in a market process for price determination. Subjective terms as fairly priced should be avoided. Inez De Meuleneere & Hugo Verschaetse 27
Final EIOPA Report 6 April 2016 highlights Guidelines Product monitoring (guideline 8) and 9 Remedial action - Once the product is distributed, the manufacturer should monitor on an ongoing basis that the product continues to be in line with the interests, objectives and characteristics of the target market. Examples in general related to: is the customer getting a fair deal value for money The manufacturer takes into account the level of the claims ratio as well as the claims policy; The manufacturer takes into account the causes of customer complaints; Pricing seems to become an essential part of the POG. Remedial action Should the manufacturer identify, during the lifetime of the product, circumstances related to the product and giving rise to the risk of customer detriment, he should take appropriate action to mitigate the situation. If relevant, he should notify any relevant remedial action promptly to the distributors involved and to the customers. The product lifetime is understood as capturing the entire life cycle of a product from product design over distribution of the product until withdrawal of the last policy-product from the market. Examples given are very general just a more concrete example: in case the risk profile risk score of a product has changed due to market developments. Inez De Meuleneere & Hugo Verschaetse 28
Final EIOPA Report 6 April 2016 highlights Guidelines Counterpart Distributor Guideline 20 Info from distributor to manuafacturer Obligation for distributor to inform the manufacturer without undue delay when he becomes aware that the product is not aligned (any longer) with the interest, objectives of the target market or there is a risk of customer detriment. This is info about the amount of sales made outside the target market, summary info on the customers or summary of the complaints related to a product -> allowing the manufacturer to monitor the product; This is not about regular reporting about all sales, or a confirmation that each transaction was distributed to the correct target market. Guideline 10 The manufacturer should select distribution channels that are appropriate for the target market considering the particular product characteristics. The manufacturer should provide information to distributors, including the details of the products. The information should be sufficient to enable the distributor to understand and place the product properly on the target market, and to identify the client target group in a positive and negative way. Manufacturers may eg survey a number of customers to find out if they understood the product features and to see if they fit into the target market. Manufacturers should monitor whether the product is distributed to customers belonging to the target market, and take remedial action to the distribution channel if this channel does not meet the objectives of the POG arrangements. This can mean to cease to make a product available for a distributor. Inez De Meuleneere & Hugo Verschaetse 29
Final EIOPA Report 6 April 2016 highlights Guidelines Guideline 11 In case of outsourcing of the product design, the manufacturer should retain full responsibility for compliance with the POF arrangements. Guideline 12 Documentation Actions taken by the manufacturer should be documented, kept for audit purposes and made available to competent authorities upon request. Recommended holding period of records: in a durable medium for a period of 5y, starting when the relevant action is taken... Or longer, eg due to the lifetime of a product. Counterpart Guideline 21 for Distributors same approach as for manufacturer The distributor also has to document all necessary target market and product related info from the manufacturer. IDD- Recital 55 related to POG quote versus the EIOPA Report: This Directive should not limit the variety and flexibility of the approaches which undertakings use to develop new products. Inez De Meuleneere & Hugo Verschaetse 30
Overview of liability regimes for product info in documentation PROSPECTUS DIRECTIVE - Art. 6 (2): no civil liability for summary unless it is misleading, inaccurate or inconsistent when read together with the other parts of the prospectus or it does not provide, when read together with other parts of the prospectus, key information in order to aid investors to make investment decision UCITS IV Art. 79: no civil liability solely on the basis of the KII unless it is misleading, inaccurate or inconcistent with the relevant parts of prospectus PRIIPS Art. 11 (1): manufacturer shall not incur civil liability solely on the basis of the KID unless it is misleading, inaccurate or inconsistent with the relevant parts of legally binding pre-contractual and contractual documents or with the requirements cf. Art. 8 (ie. the list of info to be contained in KID) MiFID II Art. 24: information duty of the distributor to provide (potential) clients with fair, clear and not misleading info re. the service, financial instruments, investment strategies, execution venues and costs & charges Inez De Meuleneere & Hugo Verschaetse 31
IDD Specific Conduct of Business rules for Insurance-based investment products going further than Twin Peaks II AssurMiFID? Hugo Verschaetse
IDD Product scope Insurance-based investment products same definition as in PRIIPS (Key Information Document) Product Scope IDD: out of scope are non life, pure protection life and pension products This means that are out of scope: Non-life insurance products, including health products; Life insurance contracts where benefits are only paid in case of death or incapacity (due to injury, sickness or incapacity); Pension Products: 3d pillar: pension products (and annuities) which under national law are recognized as having the primary purpose of providing the investor with an income in retirement; 2 nd pillar as group insurance: officially recognized as occupational pension schemes (and annuities) as far as officially falling under the scope of Directive 2003/41/EC (EIORP) or Directive 2009/138/EC (Solvency II). Conclusion: In scope are: all unit linked life products, and all with profit universal life and classic life products with savings component and with guarantee by the insurer, With regular and single premium payment options, except for pure protection life and pension products. Remark: 3d pillar pension products are within the scope of Twin Peaks II.
IDD Insurance-based investment products Conflicts of Interest (art 27-28 IDD) Duty of Care (art. 30 IDD) Conflicts of Interest (CoI) (art 27-28 IDD) - Identify, prevent and mitigate, have a CoI policy and disclose CoI TwinP eaks These topics are included in the AssurMiFID chapter about Conflicts of Interest, even for a broader product range including non-life products and most life products (2nd pillar pension excluded). Suitable advice and appropriateness for insurance-based investment products TwinP eaks. Suitable advice: When advising these products, a suitability test is obligatory: Knowledge & experience of the client is checked, mainly knowledge of the risks of the products offered to the customer; His investment objectives, his financial capacity and risk tolerance are checked; In case of no advice, appropriateness test about the knowledge and experience of the customer is obligatory. This is all included in the AssurMiFID chapter about Duty of Care Suitable Advice; feedback by FSMA about FSMA Inspections re the implementation of Duty of Care for Branch 21 and 23 products in the insurance sector. NEW The advice has to be specified with a statement in a durable medium (eg in writing), specifying the advice given and how that advice meets the preferences, objectives and other characteristics of the customer, and this before the conclusion of the contract. Entirely based on MiFID II Directive.
IDD Insurance-based investment products - Inform Your Customer full cost transparency (art. 29 IDD) copy paste MiFID II In good time prior to the conclusion of the contract, the insurance distributor has to inform the customer: NEW 1 when advice is provided, whether or not he will receive a periodic assessment of the suitability of the recommended products; 2 about appropriate guidance and warnings of the risks associated with the products /or particular investment strategies proposed; NEW 3 about all costs and associated charges, information related to the distribution of the product, including the cost of advice, where relevant, the cost of the product recommended or marketed to the customer and how the customer may pay for it, also encompassing any 3d party payments (art 29,1,c): In principle aggregated; Itemized breakdown on request of the customer; Recital 42 KID+ The IDD cost disclosure will have to be coordinated with the obligatory content of the Key Information Document (PRIIPS Regulation): In addition to the information required to be provided in the form of the key information document, distributors should provide additional information detailing any cost of distribution that is not already included in the costs specified in the KID, so as to enable the customer to understand the cumulative effect that aggregated costs have on the return of the investment. Info has to be given not only prior to the conclusion of the contract, but also where applicable, such information shall be provided to the customer on a regular basis, at least annually, during the life-cycle of the investment. This recurring obligation is even broader than in MiFID II (linked to ongoing advice with periodic suitability assessment).
IDD Insurance-based investment products - Rules Inducements (art. 29 IDD) IDD =/=MiFID II TwinP eaks Where inducements (fees, commissions, non-monetary benefits) are received/paid to or by any party except the customer (or a person on behalf of the customer), the inducements: May not have a detrimental impact on the quality of the relevant service to the customer and; May not impair with the MiFID principle (the insurance distributor has to act honestly, fairly and professionally in accordance with the best interest of its customers). Comment: In the MiFID Directive, the inducement has to contribute to the quality of the service while here the inducement may not have a detrimental impact -> a light enhancement check in IDD? In AssurMiFID the MiFID enhancement check has been included. The Commission is empowered to adopt Delegated Acts ao to determine the criteria for assessing whether inducements have a detrimental impact; EIOPA is to inspire the Commission. IDD =/=MiFID II IDD stimulates gold plating by Member States: in particular, MS may additionally prohibit or further restrict the offer or acceptance of fees,commissions or non-monetary benefits. The stricter rules for independent advice including interdiction of commission and (obligatory) fee payment (by customer directly to intermediary) in the IMD II Commission draft and MiFID II, are not included in IDD.