Where would regulators be without their acronyms? Nevertheless, PROD has potentially far-reaching consequences for your business. Understanding your shared responsibilities with product providers and fund platforms is critical.
What is PROD?
Designed by the UK Financial Conduct Authority (“FCA”) to ensure compliance with MiFID II, PROD – or ‘Product Intervention and Product Governance Sourcebook’ to give it its full name – is part rulebook, part template, and is aimed at ensuring full compliance under MiFID II, as well as tightening the design and sale of other products, such as Centralised Investment Propositions (“CIPs”).
Its priority is ‘good product governance’ which can be further divided into three main areas:
1 Products should clearly meet the needs of one (or more) identifiable target market/s.
2 Products should be sold to those identifiable target markets via the appropriate distribution channels.
3 Products should deliver appropriate client outcomes.
These guidelines affect two groups within the financial sector: product manufacturers (providers) and product distributors (advisers), or possibly three if we include platforms – and require that there is a clear and auditable dialogue between at least the two primary groups.