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Version date: 6 November 2020 - onwards

Question 2 Assessment of products' costs and charges (1) [Last updated 6 November 2020]

Article 9(12)(a) of the MiFID II Delegated Directive

How should firms manufacturing financial instruments ensure that these financial instruments’ costs and charges are compatible with the needs, objectives and characteristics of the target market, as required by Article 9(12)(a) of the MiFID II Delegated Directive?

Answer 2

As part of the product approval process, firms should have clear and robust policies and procedures to identify and quantify all product related costs and charges. This encompasses all implicit and explicit product costs but also service costs likely to be incurred by the client (e.g. inducements).

These policies and procedures should be approved by the management body and should be assessed and monitored by the compliance function aspart of the general obligation to “monitor the development and periodic review of product governance arrangements” [On this topic see also ESMA Guidelines on certain aspects of the MiFID II compliance function requirements [Re

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