Every instrument you manufacture or distribute needs a defined target market, a consistent distribution strategy and a periodic review that actually works. We help you set up the full cycle and evidence it.
Would your product cycle stand up to the supervisor’s questions?
Tell us whether you manufacture, distribute or both, and what product range you handle: we will send you back a diagnosis of your product governance framework.
Six workstreams with fund managers, banks and investment firms: approving products with sound judgment, distributing them where they belong and being able to prove both.
We draft or review your product governance policy: approval committee, target market methodology (positive and negative), distribution strategy by channel, scenarios, periodic review and the information loop with distributors.
Product governance does not work in isolation: it feeds into suitability, appropriateness, costs disclosure and marketing communications. We align all the pieces so they tell the CNMV the same story.
The product’s target market and the client’s profile must match. We connect product governance with your suitability assessment.
If the product is a packaged retail product, the KID comes on top of the target market. We coordinate both documents so they do not contradict each other.
The 2023 ESMA guidelines integrate sustainability factors into the target market. Make sure your methodology is not stuck in 2018.
The Retail Investment Strategy, still under negotiation, takes direct aim at product value. Prepare the ground without rushing ahead.
Manufacturers, distributors and firms with a dual role: four situations where this framework decides supervisory cases.
"Every launch goes through the committee, but the periodic review of our live funds ends up as a formality. We need sales data to genuinely feed back into the target market."
"We distribute products from dozens of manufacturers. The challenge is to industrialize how we receive the target market, match it against our clients and send back sales feedback without doing it by hand."
"We design structured products and we also place them. Being manufacturer and distributor at the same time doubles the obligations, and the supervisor expects to see us meet both sides with separate evidence."
"We don’t manufacture anything, but we recommend specific instruments. The target market of each product has to be built into our suitability tool, not left in a forgotten PDF."
When a product ends up in the wrong hands, the supervisor reconstructs the cycle backward. These are the cracks it usually finds.
Copy-paste target markets: identical generic definitions for very different products, with no granularity by knowledge, financial situation, risk tolerance or objectives. They segment nothing and protect no one.
Deaf distribution: the manufacturer defines the target market, but the distributor neither builds it into its systems nor sends back sales information. The cycle breaks exactly where the client appears.
Decorative periodic review: products whose risk or behavior has changed are still sold with the target market set on launch day, without any event having triggered a review.
| Role | Key obligations | What is at stake |
|---|---|---|
| Manufacturer | Approval process for each product; positive and negative target market; scenario and cost analysis; consistent distribution strategy; periodic and event-driven review. | Granular definitions per product and a review that reacts to sales data, not a file that is archived after launch. |
| Distributor | Obtain the product information and its target market from the manufacturer; refine it for its own client base; distribute in line with it; send sales feedback to the manufacturer. | Building the target market into sales and advisory systems, and justifying and reporting transactions outside it. |
| Both (dual role) | Meet both sets of obligations at the same time when it manufactures and distributes, with governance that prevents one function from covering for the other; full consistency between approval, channel and sale. | Separate evidence for each role: the supervisor does not accept the manufacturer’s self-checks as a substitute for the distributor’s controls. |
We build your complete product governance framework: policy, committee, target market methodology including sustainability, distribution strategy, agreements with manufacturers or distributors and the feedback loop. With the evidence the CNMV expects to find.
It is the set of MiFID II obligations (Articles 16(3) and 24(2) of Directive 2014/65/EU) requiring financial instruments to be designed for a defined target market and distributed consistently with it, with reviews throughout their life.
The underlying idea: investor protection does not start at the point of sale; it starts with product design.
A manufacturer is the firm that creates, develops, issues or designs the instrument (a fund manager with its funds, an issuer of structured products). A distributor is the firm that offers, recommends or sells it to clients: banks, investment firms, and EAFs that advise on specific products.
Many firms are both at the same time and must meet both sets of obligations, with evidence kept separately for each role.
The positive target market describes the type of client for whom the product is appropriate: client category, knowledge and experience, financial situation, risk tolerance, objectives and needs, including, following the 2023 ESMA guidelines, sustainability preferences. The negative target market identifies who the product must not reach.
Both must be granular and product-specific: a one-size-fits-all target market is the first red flag in a review.
Outside the positive target market there may be transactions justified case by case (for example, for diversification or hedging within a portfolio), always reasoned, recorded and reported through the information loop. Selling into the negative target market is the critical scenario: it must be exceptional and especially well justified and documented.
What cannot be defended is a pattern: recurring sales outside the target market show that the definition or the distribution is wrong.
Four things: obtain the product information and its target market from the manufacturer (or build it itself when the manufacturer is not subject to MiFID II), refine it for its own client base and channels, respect it in sales and advice, and send sales information back to the manufacturer, including transactions outside the target market.
The practical lever: build the target market into sales systems and into the suitability test, rather than managing it in scattered documents.
The update of the product governance guidelines integrated sustainability factors into the definition of the target market, in line with the inclusion of sustainability preferences in the suitability assessment.
In practice: your methodology must cover the product’s ESG dimension and how it fits client preferences, and your product range must be reclassified under the updated framework, consistently with SFDR.
They are complementary layers: product governance filters who the instrument can reach in the abstract; suitability or appropriateness validates the transaction with the specific client; and the PRIIPs KID informs the retail investor about the packaged product.
The supervisor reads all three layers together: contradictions between the target market, the client assessment and the product documentation are ammunition for an enforcement case.
Minutes of the approval committee with the analysis of each product, a written target market methodology, product sheets (positive and negative), agreements and information flows with manufacturers or distributors, sales data matched against the target market, justification of transactions outside it, and periodic reviews with real consequences.
We build that repository with firms as part of our MiFID II compliance service.
The standard is demanding but can be systematized: approve with sound judgment, distribute with data and review with consequences. This is the sequence we implement.
Product governance policy, a committee with defined membership and quorum, target market methodology (including sustainability) and a map of roles: which products you manufacture, which you distribute and where you have a dual role.
Positive and negative target market sheets for each instrument, distribution strategy by channel, integration into sales and suitability systems, and information-exchange agreements with manufacturers and distributors.
Periodic matching of sales against the target market, reporting of deviations, feedback to the manufacturer, event-driven review triggers and documented decisions: keep, adjust or withdraw the product.
To fit this cycle with the rest of your conduct obligations, see our MiFID II compliance service and the MiFID II overview.
The 10 conduct controls the CNMV expects to see working in an EAF or investment firm, with the typical evidence for each. Ideal as a quarterly self-assessment with your team.
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The concepts that shape policies, distribution agreements and supervisory requests for information in this area.
Obligations covering the design, approval, distribution and review of financial instruments under MiFID II Arts. 16(3) and 24(2).
Firm that designs, issues or develops instruments: it defines the target market, scenarios, distribution strategy and review.
Firm that offers, recommends or sells the product: it refines the target market, respects it and sends back sales data.
Client profile the product is aimed at: category, knowledge, financial situation, risk, objectives and sustainability.
Client profile incompatible with the product. Selling in this zone requires exceptional justification and enhanced record-keeping.
Definition of the channels and services suited to the product: advised, non-advised, execution-only, with or without restrictions.
Internal body that validates each new product or significant change before it is manufactured or distributed.
Information the distributor sends back to the manufacturer: volumes, profiles reached and transactions outside the target market.
Update of the product governance guidelines that integrates sustainability factors into the target market.
No instrument is manufactured or added to the catalog without going through the approval process with a documented analysis.
Approved policy, committee minutes with the analysis for each product, and a log of decisions and conditions.
Granular positive and negative target markets for each product, using the categories of the 2023 ESMA guidelines, sustainability included.
Written methodology and versioned target market sheets for each instrument.
Each product assigned to channels and services consistent with its complexity, with blocks or alerts in the sales systems.
Product-channel matrix, system configuration and samples of blocks or alerts triggered.
A working two-way flow: the distributor receives the target market and product data; the manufacturer receives sales and deviations.
Exchange agreements or protocols, periodic reports sent and received, and their traceability.
Scheduled reviews and event triggers (changes in risk, complaints, unusual sales) with decisions that follow through.
Review calendar, reports with matched sales data, and decisions to keep, adjust or withdraw.
If any of these sounds familiar, the cycle is broken somewhere and should be fixed before the next supervisory review.
The target market coexists with the client assessment, the product documentation and the marketing with which the product reaches the market. These pages cover the layers the supervisor reads alongside product governance.
In non-advised distribution of complex products, the target market meets the assessment of knowledge and experience.
The product cost analysis at approval must square with what you later disclose to the client ex ante and ex post.
Marketing communications are part of the distribution strategy: CNMV Circular 2/2020 sets the rules.
The reformed ELTIFs open illiquid assets to retail investors: a textbook case where target market and suitability come under strain.
Complete the framework with the suitability test, the PRIIPs KID and the MiFID II overview. And if you want to get ahead of the regulatory debate on product value, follow the Retail Investment Strategy.
Tell us which products you manufacture or distribute and through which channels: we review your product governance framework, from the approval committee to sales feedback.
Product governance is MiFID II’s response to a lesson learned the hard way: harm to investors does not originate when the order is signed; it originates earlier, when a poorly designed or poorly targeted product enters the sales channel. Articles 16(3) and 24(2) of Directive 2014/65/EU, transposed in Spain by Law 6/2023, require manufacturers and distributors to define a target market for each instrument, to distribute it consistently with that target market and to review it throughout its life. For fund managers, banks, investment firms and EAFs, it is one of the frameworks where the CNMV draws the sharpest line between written policies and cycles that actually work.
Whoever designs or issues the product must put it through a prior approval process, define its positive and negative target market with granularity (type of client, knowledge and experience, financial situation, risk tolerance, objectives and, following the 2023 ESMA guidelines, sustainability factors), analyze scenarios and costs, set a distribution strategy consistent with the instrument’s complexity and establish a periodic review, also triggered by events, that may lead to recalibration or withdrawal. The key evidence is the approval committee minutes and the versioned product sheets.
Whoever offers, recommends or sells must obtain the product information and its target market from the manufacturer, refine it for its client base and channels, respect it in sales and advice (building it into its systems and into the suitability test) and send back sales feedback, including transactions outside the target market with their justification. When the manufacturer is not subject to MiFID II, the distributor builds the target market itself with the information available. Sales in the negative target market are the most sensitive ground: they must be exceptional, reasoned and recorded.
The 2023 update of the product governance guidelines integrated sustainability factors into the definition and review of the target market, in parallel with their inclusion in the suitability assessment. For firms, this means reclassifying the product range, aligning product information with SFDR and ensuring that clients’ ESG preferences are matched with correctly characterized products. A catalog whose target market sheets lack a sustainability dimension is working today with an outdated methodology.
Scrutiny of product value is increasing: the Retail Investment Strategy, still under negotiation, revolves around value for money and benchmarks, and the PRIIPs KID already requires packaged products to be presented transparently. Our work with firms covers the entire cycle: policy and committee, target market methodology, information-exchange agreements, systems integration, deviation management and preparation of evidence for the CNMV, as part of our MiFID II compliance service and the general MiFID II framework.
Key legislation, linked to the official text:
Legislation and links reviewed in .