The primary aim of the Guidelines is to harmonise and improve suitability assessments and to ensure sound governance arrangements in investment firms, in line with CRD IV and MiFID II.

The Guidelines establish common criteria for the assessment of the suitability of Board members and key function holders, and describe good assessment processes as part of firms' governance arrangements. For more details, see our Monthly Update article.

This is another example of regulators continuing to focus on firms' governance, culture and conduct, not just within Europe, but around the globe. Outside Europe, there is little standardisation about how corporate governance is defined and implemented, with each jurisdiction focusing on areas of concern to local investors and political classes. There are a number of emerging themes, though, which chime with developments in Europe, such as increasing focus on named individuals and clarity of roles, and on risk and compliance functions. We provide a global overview in Chapter 2 of our Evolving Investment Management Report 2017.

Topics such as best execution and trade allocation, and payments for investment research are at the forefront of regulators' and firms' minds as the implementation date for MiFID II looms large.

Also, asset managers are being held to account for stewardship of their clients' assets. Some countries, such as the Netherlands, have issued or enhanced their corporate governance code. The codes are designed to encourage long-term value creation and high-quality corporate culture within investment firms. They usually cover relations between the management and supervisory boards and the shareholders. They might be prescriptive in some areas, such as appointment periods, board composition, independence of directors, and reporting.

The governance of investment funds is, too, receiving special attention. The obligations imposed on fund distributors by MiFID II - in particular, on securing information from product providers on their product governance process and on each product's costs and charges - is requiring a number of fund managers to review their current product governance processes and structure. National regulators are intensifying the spotlight on fund governance with their own reviews of management company effectiveness. For example, Ireland, Luxembourg and the UK have all conducted reviews and have imposed or are imposing new requirements or are enhancing their authorisation processes or supervisory activities.

The highly-charged subject of costs and charges continues to gain momentum, with ESMA releasing a paper on the impact of charges on mutual fund returns - more on that in a future edition of Regulatory Insights. And the debate on delegation of key functions (such as portfolio management) out of the EU is causing both the industry and regulators to make public their views.

All these developments point to the need for firms to review their governance arrangements in the round, and to ask themselves challenging questions about what their culture and conduct look like in practice.

1. Have we considered the significance of the new EBA/ESMA guidelines for our current governance arrangements?
2. Are we paying sufficient attention to the enhanced governance requirements in MiFID II, for example in relation to our management body?
3. Are we considering the new European requirements and national developments in the round, to ensure our overall governance structure and processes are coherent, compliant, robust and customer-centric?
4. Have we thoroughly reviewed and, where necessary, enhanced our product governance structure and processes?
5. In particular, in relation to costs and charges, are we actively open to independent challenge and are we seeking to make full and meaningful disclosures?