Ireland: IFLR Mifid II Report 2017, Ireland

Last Updated: 26 October 2017
Article by Joe Beashel

SECTION 1: Market outlook

1.1 Please clarify which products or markets your jurisdiction hosts that are affected by Mifid II.

Mifid II will affect Irish investment firms (such as brokers, asset managers, wealth managers and corporate advisory firms) and market operators, data reporting service providers and banks carrying out Mifid investment services. The Irish funds industry is a major part of the Irish financial services offering. Ireland has over 800 fund managers from 50+ countries with assets administered in Ireland. At an international level, Ireland offers offshore managers access to the EU, with the EU-wide marketing passport for Undertakings for collective investment in transferable securities (Ucits) and alternative investment funds (AIFs).

The far reaching indirect impact of Mifid II on the asset management industry and funds industry will introduce important changes to the regulatory environment in Ireland as Ucits management companies (mancos) and AIF managers (AIFMs) not authorised to carry out Mifid investment services will now be required to comply with certain requirements so that Ucits and AIFs can continue to be sold in the EU.

SECTION 2 (a) – EU member states: Implementation

2.1 Outline the possible key differences in (a) goldplating; and (b) exercise of national discretion, where provided for in Mifid II in your jurisdiction

(a) Gold Plating

The legislative body responsible for transposing Mifid II into Irish law, the Department of Finance, will be implementing Mifid II directly and will not be introducing any gold plating requirements. The national competent authority in Ireland, the Central Bank of Ireland (the Central Bank) has confirmed it will be relying on guidance from European Securities and Markets Authority (Esma).

(b) Exercise of National Discretion

Safe Harbour Regime

The current Irish Safe Harbour regime for third countries carrying out wholesale investment services will be retained. Firms will continue to be considered not to be operating in Ireland where certain conditions are met. However, the application of this Safe Harbour will be limited under Mifid II to eligible counterparties and professionals and will not apply in certain circumstances. The narrowing of the Safe Harbour regime means that some third country firms may no longer be able to provide investment services in Ireland without being authorised by the Central Bank. Prior to the implementation of Mifid II, firms that wish to provide such services under the Safe Harbour must ensure their clients are properly classified as professional clients or eligible counterparties for Mifid II and that their home country meets the new requirements.

Optional Exemptions

National discretion will be exercised in respect of the optionally exempt firms qualifying under Article 3 (1) (a), (b) and (c) (Exempt Firms) from Mifid II, though these Exempt Firms must still meet the Mifid II requirements in Article 3(2).

Third Country Branches

The branch requirement when a third country firm intends to provide investment services to retail and elect-up professional clients in Ireland will be transposed into Irish law. This requirement provides greater protection for retail clients and ensures a level playing field in respect of investment firm rules.


National discretion will be exercised to implement criminal sanctions for infringements of Mifid II. Maximum fines of €5 million for national persons and €10 million for legal persons will be imposed. These sanctions are aligned with fines under the Central Bank's Administrative Sanctions Regime.

2.2 What is the biggest concern in respect of these variations and possible types of divergences?

There is a significant discrepancy between the requirements in Article 3(2) of Mifid II and the current domestic provisions under the Investment Intermediaries Act 1995 (the IIA) and the Central Bank's Consumer Protection Code (the CPC). The Mifid II investor protections will not apply to Exempt Firms, and these firms will only be subject to investor protection requirements under the CPC. To address the potential for any regulatory arbitrage, the CPC will be amended so that Exempt Firms will be subject to certain enhanced CPC investor protections, similar to the Mifid II Protections. The Exempt Firms will be held to the same standards as Mifid II in respect of product governance, remuneration requirements, suitability assessments and disclosure requirements, amongst other provisions. This will ensure the end client will be afforded sufficient protection regardless of the applicable regulatory regime.

The Investment Intermediaries Act 1995 will be amended for Exempt Firms in order to improve consumer protection in relation to retail investment products, while providing for proportionate treatment for relevant investment service providers, which otherwise would be subject to full Mifid II requirements.

2.3 What are the most important extraterritorial issues regarding Mifid II in your jurisdiction?

Collective investment undertakings and their managers are exempt from Mifid II. However, most Irish Ucits mancos and AIFMs follow the 'delegated' model, whereby the day-to-day asset management, marketing and distribution of a fund is delegated to third party asset manager(s) or distributors which are either authorised in the EU to provide Mifid individual portfolio management or advisory services and/ or receipt and transmission of orders, or are subject to an equivalent regime outside the EU. Ucits mancos and AIFMs will be impacted because the relevant service providers will need information (such as product costs and charges, and target market information) and other support in order to meet their obligations under Mifid II. Other services providers to Ucits and AIFs not directly affected by Mifid II may also be requested to provide information as part of the provision of this support (e.g. fund administrators/transfer agents). Therefore, Ucits mancos, AIFMs and Mifid firms will be expected to work together to ensure all the necessary Mifid II information is available so that the end client receives the Mifid II investor protections. Non-Mifid firms may also be required to facilitate Mifid firms in respect of the payment for investment research under Mifid II. These requirements will increase the administrative burden of non-Mifid firms in dealing with Mifid firms.

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