MiFID II / MiFIR's third country access: New reporting requirements introduced has been saved
MiFID II / MiFIR's third country access: New reporting requirements introduced
4 February 2020
Regulatory News Alert
Context and objectives
On 31 January 2020, the European Securities and Markets Authority (ESMA) published a consultation on draft technical standards on the provision of investment services and activities in the Union by third country firms under Directive 2014/65/EU on markets in financial instruments (MiFID II) and Regulation 600/2014 on markets in financial instruments (MiFIR).
These technical standards specify the content and format requirements for information that third country firms have to provide to ESMA and the Member State competent authorities (where the branch is established) in order to provide services throughout the European Union.
Legal basis for the proposed amendments
Regulation 2019/2033 on the prudential requirements of investment firms (“IFR”) introduces changes to, inter alia, the existing MiFIR regime for third country firms that intend to provide investment services and activities to eligible counterparties and per se professional clients.
Furthermore, Directive 2019/2034 on the prudential supervision of investment firms (IFD) amends MiFID II requirements for third country firms’ provision of investment services and activities to retail clients and professional clients within the meaning of Section II of Annex II of MiFID II.
Changes for third country firms providing investment services to eligible counterparties and per se professional clients (without any establishment in the Union)
Currently, a third country firm applying for the provision of investment services or activities throughout the Union under Article 46 of MiFIR should be registered in the ESMA register where certain conditions are met (among others, adoption of an equivalence decision by the European Commission).
The IFR introduced additional requirements for third country firms to report granular information on such services and activities to ESMA, on an annual basis, and to provide ESMA with access to relevant data.
Changes for third country firms providing investment services to retail clients and professional clients through a branch
The IFD amends MiFID II in order to introduce new obligations for third country firms where a Member State requires such firms to establish a branch in their jurisdiction to provide investment services to retail clients and professional clients (as it is the case in Luxembourg).
In this context, the branch of a third country firm should report annually to the competent authorities of the Member State where it is established. It should provide information about, inter alia, the scale and scope of the services carried out by the branch, a detailed description of the investor protection arrangements, risk management policy and governance arrangements, including key function holders for the activities of the branch.
ESMA will consider the responses it receives to this consultation paper in Q2 2020 and expects to publish the draft technical standards and send the final report to the European Commission for endorsement in Q3 2020.
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