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Designing a compliant and robust PROD process

Follow our simple steps to help you design your PROD process and take a look at the material we’ve created to support you.

Understanding PROD

Introduced in January 2018, the FCA’s Product Intervention and Product Governance Sourcebook (PROD) rules aim to make sure that the investment solutions and products being recommended to clients meet the needs of one or more identifiable target markets, are distributed appropriately and deliver good customer outcomes.

The regulator will be looking to see that you have a clear target market and, using a combination of provider material and your own client information, you can clearly define your distribution strategy.

Importantly, PROD also requires you to identify any groups of clients a product or service isn’t suitable for.

This set of rules and guidance isn’t new – they’re an evolution of the FCA’s sourcebook – and any breaches could result in enforcement action.

How we can support you

Here’s some simple steps to help you design your PROD process and links to the material we’ve created to support you.

Step 1: Understand the PROD rules

Things you need to do:

Be clear about what the PROD rules are and your firm’s specific requirements.

By the end of this step, you’ll:

Understand what your PROD requirements are as a ‘distributor’.
Understand the specific requirements for those described as ‘manufacturers’ in the PROD rules.

Support material

Read our insight paper Getting closer to your drawdown clients to learn more about how to put segmentation and the PROD rules into practice.

Step 2: Put the PROD rules into practice

Things you need to do:

Identify and document the individual needs of your clients.
Identify and document your target markets.
Map your target market analysis against your wider due diligence and client suitability framework to deliver consistent distribution strategies.

By the end of this step, you’ll:

Have an idea of how to implement a compliant and robust PROD process

Support material

Read our target market statements to help with your target market analysis.
Download our Putting segmentation and the PROD rules into practice sales aid.
Read our insight paper Getting closer to your drawdown clients to learn more about how to put segmentation and the PROD rules into practice.
Read our article De(CIP)hering CRPs to learn more about sub-segmenting clients who are in the decumulation phase.

Step 3: Implement a compliant and robust PROD process

Things you need to do:

Document your specific requirements and make sure this is regularly reviewed.

By the end of this step, you’ll:

Be able to demonstrate to the regulator that you have a compliant and robust PROD process.

Support material

Download our PROD checklist to help you design and implement a compliant and robust PROD process.

Find out more

To find out more about how we can help you with your target market analysis, download our product target market statements or speak to your usual Royal London sales contact.