Any investment firm that provides services relating to investment for third party clients or handles investment activities relating to certain financial institutions could fall under the MiFID scope and therefore require authorisation from the Central Bank of Ireland.
The MiFID initially came into effect on November 1st, 2007. It serves as a critical element in the EU's Financial Services Action Plan, which are vital EU legislative measures intended to produce an effective unified financial services market in the EU. MiFID provides a regulatory framework for investment firms that offer investment services and puts into effect rules for both conduct and business/organisational structure.
Read on to discover our essential guide MIFID investment regulation in Ireland and get started on the process.
Who falls under the MiFID category?
Any investment firm that provides services relating to investment for third party clients or handles investment activities relating to certain financial institutions could fall under the MiFID scope. These types of firms include:
- Retail and investment banks
- Portfolio managers
- Stockbrokers and brokerage dealers
- Corporate finance organisations
- Options and futures firms
- Wholesale market brokerages
- Regulated Market and Multilateral Trading Facility operators
- Custody service providers
- Venture capital and commodity firms
- Fintech businesses with investment options for clients
Application for MiFID in Ireland
MiFID was transposed into Irish law and came into effect on November 1st, 2007. Any applications for MiFID must be made through the Central Bank of Ireland, recognised as the competent Irish authority for MiFID authorisation.
These authorisations are at the Central Bank's discretion concerning whether they are subject to specific requirements and conditions or whether they are unconditional. The Central Bank may also suspend or otherwise withdraw authorisation if certain circumstances present themselves. They may also appeal for High Court intervention to revoke investment firm authorisation.
A publicly accessible register is made available by the Central Bank as a requirement, containing both investment firms that are authorised and those authorised in member states that passport into Ireland. You can find the register on the Central Bank's website.
Does your business fall under the MiFID scope?
Before applying for MiFID authorisation, it is essential to determine whether or not your business falls under the required categorisation.
Certain businesses are exempt from MiFID regulation under Regulation 5. Those businesses include insurers, those providing exclusively group entity services, employee participation scheme administrators, public bodies, etc. Investment firms that meet the following criteria are also exempt under Regulation 5(3):
- Not allowed to hold client securities or funds, so unable to place themselves in debt with their clients
- No investment advice is administered, except for receiving or transmitting orders in collective investment transferable securities
- Concerning the above, the orders are only transmitted to specifically nominated entities
Is MiFID authorisation right for you?
Any investment firm thinking about the MiFID regulation scope and what that means for their appropriate course of action should consider the following :
- Does the investment firm actually require authorisation under MiFID regulations?
- Does the business require authorisation from the Central Bank of Ireland, or can it be passported by a Member State?
- If Irish authorisation is required, what are the specific conditions and requirements as laid out by Central Bank?
- Are there any operational or business conduct requirements that may be imposed?
The four steps above should be thoroughly considered before any investment firm considers making an application for MiFID Regulation authorisation.
The MiFID authorisation process
Getting authorised under MiFID regulations begins with an initial meeting at the Central Bank. This meeting will place focus on the Board of Directors, Organisational and Staffing Structure, and the Capital Requirements Directive. All preliminary enquiries by the Central Bank must be satisfied before the application can proceed.
After this, the firm must submit the appropriate documents. This includes the complete application form, a suitably detailed business plan, policy and procedures manual drafts, Memorandum of Articles and Association certified copy or equivalent, and the key individuals and director questionnaires. In addition to this, details of ownership, including all ownership chain entity account details and group structure charts, annual audited accounts for the previous three years (or since the business was established if under three years), and the management accounts quarterly since previous audited accounts.
The whole application process can usually take anywhere between 4 and 6 months from submitting a completed application as a guide. The better prepared you are, and the more detailed your submission documents, the faster the process will be.
Ongoing organisational conditions
MiFID authorisation regulations could demand organisational and business conduct conditions at a high level. These may include:
- Necessary procedures and policies must be established to meet compliance obligations
- Potential conflicts of interest must be identified and prevented, within reasonable means
- Business continuity and investment service performance must be maintained
- Reasonable steps must be taken to avoid any operational risk that's undue when relying on third parties
- Any outsourcing undertaken must not sacrifice service quality or Central Bank compliance monitoring
There are many more conditions. However, these will serve as an example of the kind of operational and service requirements that are put into effect. The conditions may change depending on an individual ruling of Central Bank.
Once authorisation is granted it is vital that an investment firm makes themselves familiar with every condition relating to their specific MiFID authorisation agreement and puts in place reasonable effort to achieve these conditions consistently in the future. Any investment firm that does not risks sanctions or even the suspension or withdrawal of their MiFID authorisation in extreme circumstances.
So it's vital to ensure essential preparation is undertaken before any application is made or documents are submitted to the Central Bank.
If you need any advice on some of the issues mentioned above contact a solicitor in Ireland or a Dublin Solicitor.
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