The duty of care is monitored by the financial supervisory authorities. If the duty of care is not adequately met, the authorities can take enforcement actions. It is therefore important to comply with the duty of care to avoid fines and reputational damage. Projective Group’s legal experts can assist you with this. We can advise you on the application or interpretation of specific financial regulatory legislation, including the duty of care.
Duty of Care also applies to the development and distribution of products and services. Financial organisations that develop products (product developers) must, among other things, indicate the type of client for whom the product is suitable. Financial organisations that offer or advise clients on these products (product distributors) must ensure that they are sold to the right target group. This is known as product governance.
In 2013, European supervisory authorities started to supervise product governance. From January 2018, the requirements for product development and distribution have been further tightened for institutions covered by MiFID II legislation.
We help organisations shape product governance processes by:
If you are a financial institution offering a service other than investment advice or personal asset management, you must obtain information about the client’s knowledge and experience. This is known as the suitability test. If you conclude that the service or product is not suitable for the client, you are obliged to warn them. Ultimately, it is up to the client to decide whether or not to buy the service or product.
If your financial institution provides investment advice or manages individual assets, you do not have to carry out a separate suitability test. However, you will then be required to conduct an appropriateness test. In addition to the client’s knowledge and experience, you must obtain information about their financial situation, objectives and risk appetite. You must then tailor your advice or management to the information you have gathered.
Our specialists can help you design these tests. We can work with you to develop a new suitability or appropriateness test. We can also assess whether the existing test is compliant and adapt it where necessary.
