Dear CEO

The Central Bank of Ireland (Central Bank) has conducted a series of targeted reviews of Structured Retail Products (SRPs) manufactured and distributed by a sample of investment firms in the MiFID investment sector. The reviewswere undertaken in light of the increasing complexity of SRPs and investor trends in a rapidly changing retail investment market. In particular, the low interest rate environment has seen a move by investors away from traditional capital-protected products, to more complex, capital at risk SRPs in the retail market. As the complexity of financial instruments increases, so too does the need for robust governance and challenge, effective controls and transparent disclosures to mitigate risks to investor protection.

 In seeking to meet their investor protection obligations, firms must consider how the relevant MiFID II requirements directly apply to their role in the manufacture and/or distribution of SRPs. In accordance with MiFID II, firms must ensure that all information addressed to clients is fair, clear and not misleading [MiFID II, Regulation 32(3).]. MiFID II also requires firms that manufacture financial instruments to ensure those instruments are designed to meet the needs of an identified target market of end clients [MIFID II, Regulation 32(1).].