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[Answer Published]\"\nanswer_id: ESMA_QA_1126\ntopic: \"Product governance\"\nstatus: \"Answer Published\"\ntype: qa\ninstrument_type: qa\nauthority: ESMA\nbinding: false\nbinding_character: non_binding\nlegal_status: in_force\nregulation: \"MiFID II\"\nmifid_level3: true\nmica_level2: false\nlegal_basis: \"MiFID II\"\ndate: 19 November 2021\nsource_link: https://www.esma.europa.eu/publications-data/questions-answers/1126\nlifecycle: \"Answer Published\"\ntext_version: \"ESMA Q&A register, 19 November 2021\"\nsource_url: \"https://www.esma.europa.eu/publications-data/questions-answers/1126\"\ncheck_status: matched\nverified: true\nlast_checked: 2026-10-26\nchecked_against: \"the ESMA publication\"\nsource:\n  prepared_by: \"ESMA\"\n  published_by: \"ESMA\"\n  published_in: \"ESMA Q&A tool\"\n  evidence:\n    prepared_by: \"ESMA Answer\"\n    locator: \"ESMA Q&A entry ESMA_QA_1126: field 'ESMA Answer', no 'Answer provided by' line\"\ndocument_type: \"qa_answer\"\nlegal_nature: \"not_legislation\"\naddressees: \"not stated in the document\"\ndates:\n  published_on: \"2021-11-19\"\n  question_submitted_on: \"2021-11-19\"\n  locators:\n    published_on: \"ESMA Q&A Excel export ESMA_QA_1126, column 'Esma responses', date line\"\n    question_submitted_on: \"ESMA Q&A Excel export ESMA_QA_1126, column 'Date of submission'\"\nlifecycle_label: \"Answer Published\"\n---\n\n**Answer by ESMA, published in its Q&A tool · not legislation · published 19 Nov 2021 [Answer Published]**\n\n*Answer Published · ESMA Q&A register, 19 November 2021 · Checked against the ESMA publication on 26 Oct 2026 · [Official source](https://www.esma.europa.eu/publications-data/questions-answers/1126)*\n\n| | |\n|---|---|\n| **Full title** | ESMA Q&A 1126 — Q&A — Product governance \\[Answer Published\\] |\n| **Prepared by** | ESMA |\n| **Published by** | ESMA, in the ESMA Q&A tool |\n| **Reference** | ESMA_QA_1126 |\n| **Document type** | Q&A |\n| **Legal nature** | Not legislation |\n| **Addressees** | Not stated in the document |\n| **Dates** | Published 19 November 2021; question submitted 19 November 2021 |\n| **Legal basis** | MiFID II |\n| **Related instruments** | None recorded |\n| **Text on this page** | Word for word — the full text of the ESMA publication |\n\n**Product governance**\n\n### Question\n\nAre all bonds embedding a make-whole clause exempt from the MiFID II product governance requirements?\n\n***\n\n### Answer\n\n\\[ESMA35-43-439 Investor protection Product governance According to Article 16a of MiFID II, “an investment firm shall be exempted from the requirements set out in the second to fifth subparagraphs of Article 16(3) and in Article 24(2), where the investment service it provides relates to bonds with no other embedded derivative than a make-whole clause or where the financial instruments are marketed or distributed exclusively to eligible counterparties”. This means that the mere presence of a make-whole clause is not sufficient for a financial instrument to be exempt from the MiFID II product governance requirements.\n\nBelow is a list of practical examples based on Article 16a of MiFID II.\n\nExample\n\nTarget market (type of clients category)\n\nSubject to MiFID II product governance requirements?\n\nBonds without embedded derivatives (i.e. ‘plain vanilla’ bonds)\n\nRetail and/or professional clients\n\nYes\n\nBonds with one or more embedded derivatives without a make-whole clause\n\nRetail and/or professional clients\n\nYes\n\nBonds with a make-whole clause and no other embedded derivative\n\nRetail and/or professional clients\n\nNo\n\nBonds with one or more embedded derivatives AND a make-whole clause\n\nRetail and/or professional clients\n\nYes\n\nAll bonds\n\nOnly eligible counterparties (as final clients)\n\nNo\n\n***\n\n**Source:** [ESMA original document](https://www.esma.europa.eu/publications-data/questions-answers/1126)\n"}