MiFID II Target Market Assessment Template (Product Governance)

Product governance record: firm role, product, five-category target market, negative target market, distribution, scenarios, charges, conflicts, feedback

ISO 与合规完整MiFID II Art. 16(3), 16a, 24(2); Delegated Dir (EU) 2017/593 Art. 9-10 (as amended by 2021/1269); ESMA35-43-3448mifid target market assessment math更新于 2026年10月24日

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使用方法: Use it when a MiFID firm manufactures a financial instrument or decides to distribute one. Fill the firm role, product description and the five target market categories first, then the negative target market and distribution channels. The main pitfall is a generic target market such as 'retail, all' and a distributor copying the manufacturer's assessment without checking its own clients.

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Target Market Assessment: [Product name]

Product governance record that an investment firm keeps when it manufactures or distributes a financial instrument: product description, the identified target market in the five categories used in EU practice (client type, knowledge and experience, financial situation with focus on ability to bear losses, risk tolerance and compatibility of the risk and reward profile, objectives and needs including sustainability-related objectives), the negative target market, distribution strategy, scenario analysis, charges review, conflicts, approval, distributor feedback and periodic review. Based on MiFID II (Directive 2014/65/EU) Articles 16(3), 16a and 24(2), as amended by Directive (EU) 2021/338, Commission Delegated Directive (EU) 2017/593 Articles 9 and 10, as amended by Delegated Directive (EU) 2021/1269 (sustainability factors, applied from 2022-11-22), and the ESMA Guidelines on MiFID II product governance requirements (ESMA35-43-3448, applied from 2023-10-03). Replace every [bracketed] value and every row marked Example. This is a document format, not financial, investment or legal advice. Obtain the directive, the delegated act, national transposing rules and the guidelines for the normative text.

Document control

Field	Value
Document ID	[TMA-YYYY-NNN]
Version	[1.0]
Status	[Draft / Approved by product committee / In distribution / Under review / Withdrawn]
Owner	[@product-owner]
Approvers/reviewers	[@product-committee], [@compliance], [@risk], [@distribution-head]
Last updated	YYYY-MM-DD
Classification	[Internal; distributor summary shareable]
Product identifier	[ISIN / internal code]
Firm role	[Manufacturer / Co-manufacturer / Distributor / Manufacturer and distributor]
Other manufacturers or distributors	[Names, agreement reference]
Exemption under MiFID II Art. 16a	[Not applicable / Applies: reason]
Next scheduled review	YYYY-MM-DD

Example: TMA-2026-007 for the Kestrel Bay Euro Equity Participation Note 2031 (fictional), co-manufactured by Kestrel Bay Capital Europe (fictional MiFID investment firm, product design) and Fernhollow Bank (fictional EU credit institution, issuer). One target market is set for both co-manufacturers.

Approvals

Body or role	Name	Decision	Date
Product approval committee	[Chair]	[Approved / Approved with conditions / Rejected]	YYYY-MM-DD
Compliance function	[Name]	[Opinion]	YYYY-MM-DD
Risk function	[Name]	[Opinion]	YYYY-MM-DD
Management body (report noted)	[Name]	[Noted]	YYYY-MM-DD

Revision history

Version	Date	Author	Change
0.1	YYYY-MM-DD	[@product-owner]	First draft for committee
1.0	YYYY-MM-DD	[@product-owner]	Approved for launch
[x.y]	YYYY-MM-DD	[@author]	[Periodic review outcome or change]

Scope and firm role
Product description
Target market in five categories
Negative target market
Distribution strategy
Scenario analysis
Charges and value review
Conflicts of interest and market integrity
Information to distributors
Distributor feedback and sales monitoring
Periodic review and trigger events
Governance and traceability
Glossary and references
Standard and licence note

1. Scope and firm role

Explain whether the firm creates, develops, issues or designs the instrument (manufacturer, Delegated Directive 2017/593 Article 9(1)) or decides to offer or recommend it (distributor, Article 10(1)). Where several firms work together, record the written agreement that sets out their responsibilities (Article 9(8)) and which firm holds the direct client relationship (Article 10(10)).

Item	Detail
Role and legal basis	[Manufacturer: Art. 9 / Distributor: Art. 10 / Both]
Co-manufacturing agreement	[Reference, date, allocation of tasks]
Products in scope	[ISIN list or product family]
Services through which it is distributed	[Portfolio management / Advice / Non-advised / Execution-only]
Manufacturer not subject to MiFID II	[Name; information obtained from public documents and direct requests]
Proportionality applied	[Simple product: reduced depth, reason]

Example: Kestrel Bay Capital Europe designed the payoff, the target market and the distribution plan; Fernhollow Bank issues the notes, hedges the payoff and runs the secondary market. The co-manufacturing agreement CMA-2026-03 assigns target market and review tasks to Kestrel Bay Capital Europe and pricing, hedging and issuer disclosures to Fernhollow Bank. Both firms also distribute the note to their own clients and act as distributors under Article 10 for that activity.

2. Product description

Feature	Detail
Legal form and issuer	[Note / fund unit / share], issuer [name, rating]
Underlying	[Index, basket, reference rate]
Currency and denomination	[EUR], [1,000]
Issue and maturity dates	YYYY-MM-DD to YYYY-MM-DD
Payoff at maturity	[Formula]
Capital protection	[Level], [conditions], [subject to issuer credit]
Liquidity	[Secondary market terms, bid-offer spread]
Complexity	[Complex / Non-complex], basis [MiFID II Art. 25(4)]
Key information document	[PRIIPs KID reference, summary risk indicator]
Sustainability factors	[Considered: how / Not considered]

Example payoff of the note, per EUR 1,000 nominal, with $I_0$ the index level at the strike date and $I_T$ the level at the final valuation date:

R = 1{,}000 \times \max\left(0.90,\ 1 + 0.70 \times \frac{I_T - I_0}{I_0}\right)

Other Example features: EUR denomination of 1,000, issue 2026-12-15, maturity 2031-12-15 (five years), underlying a European large-cap equity price index [index name], 90% capital floor at maturity only, unsecured senior preferred debt of Fernhollow Bank and subject to bail-in under the EU bank resolution framework, daily secondary bid by the issuer under normal market conditions with a target spread of 1%, PRIIPs summary risk indicator 3 on the 1 to 7 scale, sustainability factors not considered. The note embeds a derivative and is therefore treated as complex.

3. Target market in five categories

For each category describe the clients for whose needs, characteristics and objectives the product is compatible (Delegated Directive 2017/593 Article 9(9), as amended), and the reasoning from the product features in section 2.

Category	Positive target market	Reasoning
TM-1 Client type	[Retail / Professional / Eligible counterparty]	[Why]
TM-2 Knowledge and experience	[Basic / Informed / Advanced, by channel]	[Why]
TM-3 Financial situation and ability to bear losses	[Loss the client can bear]	[Why]
TM-4 Risk tolerance and risk/reward compatibility	[Risk indicator range, risk band]	[Why]
TM-5 Objectives and needs	[Purpose, horizon, sustainability-related objectives]	[Why]

Example for the note:

Category	Positive target market (Example)	Reasoning (Example)
TM-1 Client type	Retail and professional clients	Denomination and disclosures designed for retail; no restriction for professionals
TM-2 Knowledge and experience	Informed investors (knowledge of capital-floor notes or at least one similar product held); basic investors only when advised or in portfolio management	Payoff has a floor, a participation rate and issuer risk that need explanation
TM-3 Ability to bear losses	Can bear a loss of up to 10% of the amount invested at maturity, and understands that an issuer default or bail-in could cause a loss of up to 100%	Floor at 90% applies only at maturity and only if the issuer pays
TM-4 Risk tolerance	Risk tolerance consistent with a summary risk indicator of at least 3 (medium band); medium risk band in the distributor's scale	Market risk limited by the floor, credit risk not limited
TM-5 Objectives and needs	Seeks growth linked to European equities with a partial floor over a 5-year horizon and intends to hold to maturity; no sustainability-related objectives addressed	Participation of 70% and the floor match a cautious growth need; early exit price is not protected

Map the categories to the client profile used by distributors, so that an adviser can test a client against the target market. For example, TM-3 maps to the capacity for loss in the Client Risk Profile (finance/client-risk-profile) section 5.2 and TM-5 to sections 3 and 6.

4. Negative target market

Name the client groups to whom the product must not be distributed, and explain why. Distributors may sell to clients outside the positive target market in justified cases, such as diversification or hedging in a portfolio context under a suitability assessment, but sales into the negative target market should be rare, justified and reported.

ID	Negative target market (Example)	Reason (Example)
NTM-001	Clients who cannot accept any loss of capital	Floor is 90%, and issuer risk remains
NTM-002	Clients who need access to their money within five years	Secondary price may be below the floor before maturity
NTM-003	Clients seeking regular income	No coupons are paid
NTM-004	Basic investors buying without advice	Complex product; not suitable for non-advised sales to clients without relevant knowledge
NTM-005	Clients whose risk tolerance stops at indicator 1 or 2	Product indicator is 3
[NTM-NNN]	[Group]	[Reason]

5. Distribution strategy

Channel	Permitted?	Conditions	Rationale
Portfolio management	[Yes / No]	[Mandate limits]	[Why]
Investment advice	[Yes / No]	[Suitability assessment]	[Why]
Non-advised with appropriateness test	[Yes / No]	[Appropriateness outcome required]	[Why]
Execution-only	[Yes / No]	[Non-complex only]	[Why]
Marketing communications	[Channels]	[Review by `compliance/marketing-review-checklist`]	[Why]

Example: portfolio management, yes, for Balanced or higher mandates with a 5% position limit per structured note; investment advice, yes, for clients matching TM-1 to TM-5; non-advised with appropriateness, yes, for informed investors only; execution-only, no (complex product); online advertising aimed at the general public, no. Kestrel Bay Capital Europe's own Cautious model (Model C) does not use the note, because the model excludes structured products by design. Mandates for clients with no knowledge or experience of structured products, such as the sustainable variant of Model B used in the MiFID Suitability Report (compliance/mifid-suitability-report), also exclude the note, because those clients fall outside TM-2.

6. Scenario analysis

Show outcomes in money and as an annualised return so that clients and distributors can compare them with alternatives. State the assumptions and that scenarios are illustrations, not forecasts. The annualised return over $T$ years is:

r_{\text{ann}} = \left(\frac{R}{1{,}000}\right)^{1/T} - 1

Scenario ID	Situation (Example)	Index change at maturity	Payoff per EUR 1,000	Annualised over 5 years
SCN-001	Severe market fall	-30%	900 (floor applies; 1 + 0.70 x -0.30 = 0.79)	-2.09%
SCN-002	Moderate fall	-5%	965	-0.71%
SCN-003	Flat market	0%	1,000	0.00%
SCN-004	Market rise	+25%	1,175	+3.28%
SCN-005	Issuer default or bail-in	Any	Up to 0 (loss up to 100%)	Not meaningful
SCN-006	Early exit in year 2 after a fall	-15% at exit	Issuer bid, illustrated at 930	Not applicable

Article 9(10) adverse conditions (Example assessment):

Condition	Assessment
(a) Market environment deteriorates	Covered by SCN-001, SCN-002 and SCN-006; the floor protects only at maturity
(b) Manufacturer or third party in financial difficulty	SCN-005; issuer rating and resolution status monitored as a trigger in section 11
(c) Product fails to become commercially viable	Minimum issue size EUR 5,000,000; issue cancelled and subscriptions returned if not reached
(d) Demand much higher than expected	Maximum issue size EUR 50,000,000 to stay within the issuer's hedging capacity; allocation pro rata

7. Charges and value review

Cost component	% of nominal over the term (Example)	EUR per 10,000 invested
Structuring and hedging margin of the issuer	2.40%	240
Distribution fee paid to distributors	0.60%	60
Ongoing costs	0.00%	0
Total costs over five years	3.00%	300

The distribution fee is a third-party payment. Kestrel Bay Capital Europe does not keep it in portfolio management (MiFID II Article 24(8)); in non-independent advice it is disclosed and must meet the inducement conditions of Article 24(9). Record the treatment in the Conflicts of Interest Register (compliance/conflicts-of-interest-register).

Example value check: a five-year term deposit at an illustrative 2.0% a year would return EUR 1,104.08 per EUR 1,000 (1,000 x 1.02^5), with deposit protection up to the statutory limit. The note beats the deposit only if the index rises by more than about 14.9% over five years, because 1 + 0.70 x 0.149 = 1.104. The committee accepted the value case for clients who seek equity participation with a partial floor, and required the comparison to be shown in adviser training material.

Article 9(12) test	Result (Example)
(a) Costs compatible with needs and characteristics of the target market	Yes: total 3.0% over five years for a hold-to-maturity growth need
(b) Charges do not undermine return expectations	Yes, with the break-even disclosed
(c) Charging structure transparent for the target market	Yes: all costs embedded and stated in the KID and ex-ante cost disclosure

8. Conflicts of interest and market integrity

Check	Result
Does the product let the manufacturer reduce or dispose of its own risk to the detriment of clients?	[Yes / No: reason]
Do clients take an exposure opposite to the firm's current or intended position?	[Yes / No: reason]
Remuneration of staff linked to sales of the product?	[Yes / No: controls]
Threat to orderly functioning or stability of markets?	[Yes / No: reason]
Staff expertise to understand the product (Art. 9(5))	[Training records]

Example: Fernhollow Bank hedges the index exposure with external counterparties and holds no opposite position; no sales targets apply to advisers; issue size is small relative to index liquidity. Conflict COI-021 (group issuer, group distributor) is recorded with controls: independent pricing check by Kestrel Bay Capital Europe's valuation function and disclosure to clients.

9. Information to distributors

Item sent to distributors	Format	Date
Positive and negative target market	[Industry data template / PDF summary]	YYYY-MM-DD
Distribution strategy and channel restrictions	[Summary]	YYYY-MM-DD
Key information document and prospectus	[Links]	YYYY-MM-DD
Cost and charges data	[Ex-ante data feed]	YYYY-MM-DD
Sustainability factors	[Not considered / Detail]	YYYY-MM-DD
Training material for advisers	[Reference]	YYYY-MM-DD

Many firms exchange target market data through an industry template such as the European MiFID Template maintained by FinDatEx; record the version used and the mapping of its fields to sections 3 and 4.

10. Distributor feedback and sales monitoring

Metric ID	Metric	Source	Frequency	Threshold for review (Example)
FB-001	Sales by channel	Distributor reports	Quarterly	Any execution-only sale
FB-002	Sales outside positive target market, with reasons	Distributor reports	Quarterly	More than 5% of sales by value
FB-003	Sales into negative target market	Distributor reports	Quarterly	Any sale without documented justification
FB-004	Complaints about the product	Complaints log	Monthly	Two or more on the same theme
FB-005	Early redemptions	Issuer secondary market data	Quarterly	More than 10% of issue redeemed early
[FB-NNN]	[Metric]	[Source]	[Frequency]	[Threshold]

Example Q1 2027 report: sales EUR 18,400,000, of which 96.2% through advice and 3.8% through portfolio management; EUR 410,000 (2.2%) sold outside the positive target market for diversification within advised portfolios, each with a suitability justification; no sales into the negative target market; no complaints. Check: 96.2% + 3.8% = 100%; 410,000 / 18,400,000 = 2.2%.

11. Periodic review and trigger events

Trigger ID	Event (Example)	Action (Example)
TRG-001	Issuer rating falls by two notches or below investment grade	Suspend new sales; inform distributors; reassess TM-3
TRG-002	Index falls more than 30% from the strike level	Inform distributors that the floor is likely to apply; update secondary market information
TRG-003	Sales outside the target market above threshold FB-002	Contact distributor; review channel permissions
TRG-004	Complaints threshold FB-004 reached	Root cause review; update adviser training
TRG-005	Change in law affecting the product (for example, Retail Investment Strategy rules once in force)	Legal review and re-approval

Possible actions under Article 9(15) include informing clients or distributors, changing the approval process, stopping further issuance, changing the product terms, reconsidering the sales channels, contacting or terminating distributors and informing the competent authority.

Review	Date	Outcome	Next review
Launch approval (Example)	2026-11-20	Approved with 5% portfolio management position limit	2027-11-20
[Annual review]	YYYY-MM-DD	[Outcome]	YYYY-MM-DD

12. Governance and traceability

The compliance function reports to the management body on the products manufactured or distributed, including the distribution strategy, and these reports are available to the competent authority on request.

Req ID	Requirement (reference)	Section	Evidence
PG-REQ-001	Product approval process for each product and significant adaptation (MiFID II Art. 16(3))	1, 12	Committee minutes
PG-REQ-002	Granular target market and incompatible groups (Del. Dir. 2017/593 Art. 9(9))	3, 4	This record
PG-REQ-003	Scenario analysis (Art. 9(10))	6	Scenario workbook
PG-REQ-004	Risk/reward and design driven by client benefit (Art. 9(11))	3, 6	This record
PG-REQ-005	Charging structure review (Art. 9(12))	7	Cost workbook
PG-REQ-006	Conflicts and market integrity (Art. 9(2) to (4))	8	Register entry
PG-REQ-007	Information to distributors (Art. 9(13))	9	Distribution log
PG-REQ-008	Regular review and crucial events (Art. 9(14), (15))	11	Review minutes
PG-REQ-009	Distributor target market and sales feedback (Art. 10(2), 10(9))	3, 10	Feedback reports
PG-REQ-010	Distribution strategy consistent with target market (MiFID II Art. 24(2))	5	Channel matrix
PG-REQ-011	Management body control and compliance oversight (Art. 9(6), (7); Art. 10(6), (8))	12	Compliance report

Jurisdiction notes, as of 2026-10 (check local law):

Jurisdiction	Reference	Note
EU	MiFID II Art. 16(3), 16a, 24(2); Del. Dir. (EU) 2017/593 Art. 9, 10; ESMA35-43-3448	Transposed into national law; check national rules
EU (pending)	Retail Investment Strategy package	Expected to add value-for-money and peer benchmark requirements; not in force
UK	FCA Handbook PROD 3; PRIN 2A Consumer Duty (products and services outcome, price and value outcome)	Reference only; obtain the Handbook text
[Other]	[Reference]	[Note]

13. Glossary and references

Term	Meaning
Manufacturer	Firm that creates, develops, issues or designs a financial instrument
Distributor	Firm that offers, recommends or sells a financial instrument to clients
Positive target market	Clients whose needs, characteristics and objectives the product is compatible with
Negative target market	Clients for whom the product is not compatible
Summary risk indicator	The 1 to 7 risk scale shown in a PRIIPs key information document
Bail-in	Write-down or conversion of a bank's liabilities by a resolution authority
Capital floor	Minimum repayment at maturity, subject to the issuer paying
Sustainability factors	Environmental, social and employee matters, respect for human rights, anti-corruption and anti-bribery matters, as defined in Regulation (EU) 2019/2088 Article 2(24)

References (obtain the official texts):

Directive 2014/65/EU (MiFID II), Articles 16(3), 16a, 24(2), 24(8), 24(9) and 25(4), as amended by Directive (EU) 2021/338.
Commission Delegated Directive (EU) 2017/593, Articles 9 and 10, as amended by Delegated Directive (EU) 2021/1269.
ESMA Guidelines on MiFID II product governance requirements, ESMA35-43-3448.
Regulation (EU) No 1286/2014 (PRIIPs) and Commission Delegated Regulation (EU) 2017/653, for the key information document and the summary risk indicator.
FinDatEx European MiFID Template, cited by name only.
FCA Handbook PROD and PRIN 2A, cited by reference only.

Standard and licence note

Based on Directive 2014/65/EU (MiFID II), Directive (EU) 2021/338, Commission Delegated Directive (EU) 2017/593 and Delegated Directive (EU) 2021/1269 as published on EUR-Lex (reuse authorised with acknowledgement under Commission Decision 2011/833/EU), and on the category structure of the ESMA Guidelines on MiFID II product governance requirements, ESMA35-43-3448 (source: ESMA, esma.europa.eu; this template is not endorsed by ESMA, and the guidelines are free on the ESMA website). FCA Handbook modules and the FinDatEx template are cited by name only. All text is original; no legislative or guideline text is reproduced. The product, Kestrel Bay Capital Europe, Fernhollow Bank and all figures are fictional. Check the current consolidated texts, national transposition and any adopted Retail Investment Strategy changes before use. This is a document format, not financial, investment or legal advice. Template licence: MIT.