Ireland: MiFID II: Department Of Finance Publishes Feedback Statement On MiFID II Consultation

Last Updated: 26 July 2017
Article by Orla O'Connor, Dara Harrington and Maedhbh Clancy
Most Read Contributor in Ireland, October 2018

The Department of Finance has published its Feedback Statement on its 2016 MiFID II Consultation. This Briefing summarises the approach that the Minister for Finance will take in respect of the various MiFID II Member State discretions.

We have set out below some of the key points arising out of the Feedback Statement.

TRANSPOSITION UPDATE

The transposition date for MiFID II was 3 July 2017. However, the Irish transposing regulations have not yet been published.

In its Feedback Statement, the Department confirmed that it is continuing to work on those regulations, and that work is expected to be completed "in the coming weeks". Given this language, transposing regulations are not expected imminently.

In addition to those transposing regulations, as set out below the Central Bank's Consumer Protection Code will be the subject of certain MiFID II- related amendments, primary legislation will be needed to amend the Investment Intermediaries Act 1995 and the existing sanctions regime, and further regulations are expected at the end of this year to deal with amendments to the Irish Client Asset Regulations.

THIRD COUNTRY FIRMS AND BRANCHES

As expected, the Minister will exercise the discretion under Article 39 of MiFID II to impose a requirement on a third country firm to establish a branch where the firm intends to provide investment services to retail clients and elected-up professional clients in Ireland.

Crucially, whilst implementing Article 39, the Minister has decided to broadly maintain the existing safe harbour under the Irish MiFID I Regulations for non- EEA firms providing investment services into Ireland on a cross-border basis, but has confirmed that the safe harbour will no longer apply in the following circumstances:

  • if the firm provides investment services to retail or elected-up professional clients in Ireland (per Article 39);
  • if the firm is registered by ESMA in accordance with Article 47 (Equivalence decision) of MiFIR, on the basis that the MiFIR third country regime supersedes any national third country regime when the firm is registered by ESMA following an equivalence decision by the Commission in respect of its home country - as such, the Department has highlighted that the safe harbour will still exist for these firms, but under the MiFIR framework (and thereby across the EU) rather than under national law;
  • in respect of third country firms whose home country is on the list of non-cooperative jurisdictions maintained by the Financial Action Task Force and who are not subject to authorisation and supervision in respect of the investment services they provide to wholesale clients in Ireland; and
  • in respect of third country firms whose home country is not a signatory to the IOSCO Multilateral Memorandum of Understanding concerning consultation and cooperation and the exchange of information.

Many firms rely on the safe harbour, so how the safe harbour and the carve-outs from its application will be reflected in the Irish transposing regulations will need to be reviewed carefully when those regulations are published. Firms currently relying on the safe harbour will have to consider whether they will fall within its amended scope from January 2018 onwards.

RTO/ADVICE OPTIONAL EXEMPTION

The Minister will exercise the discretion in Article 3(1) of MiFID II to exempt, from the scope of MiFID II, persons who meet the conditions in Article 3(1)(a), (b) and (c).

Under MiFID II, those exempt persons must be subject to requirements which are "at least analogous" to certain requirements of MiFID II. The Department confirmed that it identified certain gaps between the MiFID II package and national legislation. As a result, the Central Bank's Consumer Protection Code will be amended to include specific obligations on persons who will benefit from the above exemption in respect of the following:

  • obtaining specified information from product producers and understanding the characteristics and identified target market of each product they are selling;
  • ensuring that telephone conversations leading to or intending to lead to a transaction are recorded or, alternatively, following up such telephone conversations with a written communication;
  • disclosing conflicts of interest to clients;
  • providing periodic suitability assessments;
  • aggregating costs and charges in disclosures to clients;
  • making reasonable estimates of costs (where actual costs are not available) in disclosures to clients;
  • disclosing the effect of commissions, fees or other charges when presenting performance information to clients;
  • refraining from using the term "independent financial advice" (or similar) when accepting and retaining commissions from third parties;
  • disclosing certain information to clients when providing independent financial advice;
  • where the firm is a natural person, refraining from providing both independent and non-independent advice; and
  • ensuring that staff performance is not remunerated or assessed in a way that conflicts with the duty of staff to act in the best interests of the relevant firm's clients.

Amendments will also be made to the Investment Intermediaries Act 1995 regarding the provision by firms of information on their management bodies and resources when seeking authorisation, and the establishment by the Central Bank of a public register of tied agents.

The implementation of Article 3(1)(a) as described above will lead to fairly significant changes for some firms currently authorised under the Investment Intermediaries Act 1995.

The Minister for Finance is not exercising the discretion to exempt persons that meet the conditions in Article 3(1)(d) or (e) (i.e. firms that provide hedging for clients operating in the energy markets, or firms that provide hedging for clients that are operators within the EU Emissions Trading System Directive).

IRISH CLIENT ASSET REGULATIONS

The existing Central Bank Client Asset Regulations will be retained (those Regulations are super-equivalent to MiFID II and this has been approved by the European Commission), subject to certain amendments to take account of MiFID II. These amendments will be made by way of separate regulations (i.e. not by way of the Irish transposing regulations). The Department has signalled that the Central Bank will consult on those changes before amending the existing Client Asset Regulations, and the revised Client Asset Regulations are expected to be in place by 3 January 2018 when MiFID II comes into force.

INVESTOR COMPENSATION SCHEME

All investment firms (including those exempt under Article 3(1)(a), (b) and (c)) must still be covered by the Investor Compensation Scheme.

INVESTOR PROTECTION AND CONFLICTS OF INTEREST

Under Article 24(12) of MiFID II, Member States have a discretion to impose additional requirements on investment firms in respect of various investor protection matters, including the provision of information' and remuneration arrangements relating to investment advice and portfolio management.

Feedback had been sought as to whether a level playing field should exist between the requirements of MiFID II and the requirements of the Insurance Distribution Directive. The Minister has decided not to exercise this discretion for the time being pending the outcome of a planned consultation by the Central Bank, later this year, on the payment of commission to intermediaries.

CLIENT ORDER HANDLING

As expected, the Minister has followed the approach taken under MiFID I, and will exercise the discretion to allow investment firms to fulfil their obligation regarding the earliest possible execution of client limit orders in respect of shares admitted to trading on a regulated market or traded on a trading venue which are not immediately executed under prevailing market conditions, by transmitting the client limit order to a trading venue.

CANCELLED ORDERS

The Minister will exercise the discretion to allow regulated markets to impose higher fees:

  • in respect of orders placed that are subsequently cancelled; and
  • on participants that place a high ratio of cancelled orders to executed orders.

COMPETENT AUTHORITY

As expected, the Minister will designate the Central Bank of Ireland as the single national competent authority for the purposes of MiFID II.

ENFORCEMENT

  • Criminal sanctions: The Minister will provide for criminal sanctions in respect of breaches of MiFID II, and these are expected to be aligned with the current maximum penalties applicable in Ireland under the MiFID I regime. Primary legislation will be needed to give effect to this, and that will be published after the Irish transposing regulations are published.
  • Fines: The maximum administrative fine for an individual will be €5,000,000, and the maximum fine for legal persons will be €10,000,000.
  • Non-regulated persons: Parts of MiFID II and MiFIR apply or might apply to non-regulated persons such as non-financial counterparties under EMIR. For those persons, the applicable enforcement regime will be the regime applicable to non-regulated persons i.e. not the Central Bank's Administrative Sanctions Regime or similar.

FX FORWARDS/EMIR

The Department has noted that a harmonised concept of "fx forward" will come into force on 3 January 2018, following previous divergences in the manner in which different Member States interpreted that term under MiFID I. That harmonised concept of "fx forward" is set out in Article 10 of Commission Delegated Regulation (EU)2017/565.

CONCLUSION

The position taken by the Department in relation to national discretions is largely as expected. It is hoped that transposing regulations will be published soon to allow firms to complete their implementation projects.

We will publish further updates as the Irish transposition process progresses.

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions