United Kingdom (and EU regulation)

ESMA consultation on draft technical standards on MiFID II third-country firm regime

On 31 January 2020, the European Securities and Markets Authority (ESMA) published a consultation paper on draft technical standards on the provision of investment services and activities in the EU by third-country firms under MiFID II and MiFIR, as mandated by Article 16(2) of the ESMA Regulation.

The third country regime under MiFIR is being updated by the Investment Firms Regulation (IFR) in that:

third-country firms providing investment services and activities in the EU in accordance with Article 46 of MiFIR will be required to report, on an annual basis, granular information to ESMA on their activities in the EU such as: information about the scale and scope of such activities, specific figures regarding their dealing on own account and underwriting and placing activities, the turnover and aggregated value of the assets corresponding to their activities in the EU, their investor protection and risk management arrangements, their governance arrangements and any other information necessary to enable ESMA or the competent authorities to carry out their tasks in accordance with MiFIR;
ESMA is given the power to ask third country firms that are registered with the European Supervisory Authority to provide: (i) any further information in respect of their operations (where necessary for the accomplishment of the tasks of ESMA or the competent authorities in accordance with MiFIR); and (ii) the data relating to all orders and all transactions in the EU, whether on own account or on behalf of a client, for a period of five years;
ESMA is given the power to conduct onsite inspections; and
ESMA has the power to temporarily prohibit or restrict the provision of investment services or activities in the EU by a third-country firm under Article 46 of MiFIR where: (i) the third-country firm has failed to comply with product intervention measures taken by ESMA or the European Banking Authority or the competent authorities of a Member State; or (ii) the third-country firm has failed to comply with its annual reporting obligations to ESMA or with a request for information from ESMA; or (iii) the third-country firm has not cooperated with an investigation or an on-site inspection carried out by ESMA in accordance with Article 47(2) of MiFIR.

To take into account the enhanced flow of information that firms have to report and ESMA’s new powers and role in the new third-country regime under MiFIR, ESMA is mandated to prepare draft technical standards in relation to the revised third-country regime under MiFIR.

The draft technical standards are set out in Annex III to the consultation paper.

The deadline for comments on the consultation is 31 March 2020. ESMA expects to publish the draft technical standards and send its final report to the European Commission for endorsement in Q3 2020.