The ESMA guidelines, referenced ESMA35-43-620 then ESMA35-43-3448 in their revised version of August 2023, specify the practical arrangements for product governance. These guidelines are essential for understanding how to apply the principles of MiFID 2.

The AMF's 2021 SPOT inspection summary revealed several inadequate practices. Among these were a passive approach by distributors towards manufacturers and an incomplete definition of the target market for ten to twenty percent of products. These shortcomings highlight the importance of active collaboration between manufacturers and distributors.

Article 9 of Delegated Directive 2017/593 details the manufacturer's obligations. Among these, the definition of the positive target market must include five mandatory categories: the type of target client, the required knowledge and experience, the financial situation, risk tolerance and objectives and needs. These elements are further specified by the 2023 ESMA guidelines.

According to the text, the distributor may refine the target market defined by the manufacturer but may not broaden it. This clarification is provided in the context of distributor obligations, which require understanding the product and adapting their target market to their own clientele without inappropriately modifying it.

The text states that the distribution strategy must be consistent with the target market defined by the manufacturer. This is one of the founding principles set out in MiFID 2 and is essential to ensure that financial instruments meet the needs of end clients.

The text clearly distinguishes between manufacturer and distributor obligations. Manufacturers must define the target market, carry out scenario testing and conduct periodic reviews. Distributors must obtain product information, understand the product and refine the target market without broadening it.

The five mandatory criteria for defining the positive target market according to the 2023 ESMA guidelines are: the type of target client (retail, professional, eligible counterparty), the required knowledge and experience, the financial situation (ability to bear losses), risk tolerance (conservative, balanced or risk-oriented profile) and objectives and needs (investment horizon and sustainability preferences since 2022).

The text mentions that the European MiFID Template, developed by AMAFI, is a standardised format that facilitates information exchanges between manufacturers and distributors. This document is essential for reporting information on out-of-target-market sales, complaints and other useful information for product reviews.