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

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
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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.