Since our last newsletter on the topic, ESMA updated a number of its Q&A regarding the Markets in Financial Instruments Directive – Directive 2014/65/EU of 15 May 2014 (“MiFID II”) and the Markets in Financial Instruments Regulation – Regulation No. 600/2014 of 15 May 2014 (“MiFIR”) on the following topics:
- Q&A on investor protection and intermediaries;
- Q&A on MiFID II and MiFIR transparency topics;
- Q&A on MifID II and MiFIR commodity derivatives products;
- Q&A on MiFIR data reporting, and
- Q&A on MiFID II and MiFIR market structures topics
We will focus here on just a couple of the updates to the Q&A on investor protection and intermediaries topics in respect of inducements and in respect of provision of investment services and activities by third country firms.
Pursuant to Article 24(8) of MiFID II, “when providing portfolio management the investment firm shall not accept and retain fees, commissions or any monetary or non-monetary benefits paid or provided by any third party or a person acting on behalf of a third party in relation to the provision of the service to clients…”
ESMA has confirmed in this latest update to the relevant Q&A that only ongoing inducements accrued until January 2nd 2018 (subject to being compliant with MiFID I) may be received by investment firms. Furthermore, such investment firms must be in a position to clearly show that such ongoing inducements do in fact relate to that period.
As regards the provision of investment services and activities by third country firms, pursuant to Article 42 of MiFID II, “Member States shall ensure that where a retail client or professional client within the meaning of Section II of Annex II established or situated in the Union initiates at its own exclusive initiative the provision of an investment service or activity by a third-country firm, the requirement for authorisation under Article 39 shall not apply to the provision of that service or activity by the third country firm to that person including a relationship specifically relating to the provision of that service or activity. An initiative by such clients shall not entitle the third-country firm to market otherwise than through the branch, where one is required in accordance with national law, new categories of investment products or investment services to that client”. ESMA has clarified that this reverse solicitation exemption does not mean that a firm that, within the context of a one-off service to the client, has sold/had the chance to sell a product or service under this rule, may, at a future point in time, offer products or services from the same category (unless this is done through a branch).