MiFID1 is the EU framework for the regulation of investment firms carrying out investment services.
Ireland is a key European jurisdiction for the provision of investment services – particularly as a European hub for EU cross-border services.
Here, we explain the application process to establish an investment firm in Ireland under MiFID.
Subject to qualifying for any applicable exemptions, an investment firm will require authorisation under Regulation 8 of the MiFID Regulations2 to (i) provide one or more investment services in Ireland; and (ii) in respect of one or more financial instruments as set out in Schedule 1 of the MiFID Regulations.
The authorisation process involves an application to the Central Bank of Ireland (the "Central Bank").
The key steps in the process are as follows:
- An initial submission to the Central Bank of a Key Facts Document ("KFD");
- A preliminary meeting with the Central Bank to discuss the applicant's business objectives and how these fit within the MiFID regime;
- Submission of a complete application form including (i) a detailed programme of operations covering, inter alia, business strategy along with a business model, organisational structure and corporate governance arrangements; (ii) online inpidual questionnaires for each inpidual performing a pre-approved control function ("PCF"); (iii) financial projections for the first three years of operation; and (iv) ownership details, including group structure and required supporting documentation (considered in more detail in "Conditions for Authorisation" below); and
- Review of the application by the Central Bank and a final decision.
Once authorised in one EU member state, an investment firm can easily "passport" its services (by way of establishing a branch, through the freedom of services or through the appointment of local tied agents) into other EU member states.
Conditions for Authorisation
An application to the Central Bank will need to address the following:
- Capacity to provide investment services. The applicant's constitutional documents must give it sufficient capacity to conduct investment services;
- Minimum capital. The applicant must have sufficient regulatory capital;
- Directors/managers. The Central Bank must be satisfied as to the probity and competence of the directors and senior managers / executives of the applicant. Online inpidual questionnaires must be completed for each PCF. The Central Bank requires the board to have a balance of executive and non-executive directors. It also requires a minimum of two directors direct the firm's business and have at least one independent non-executive director ("INED");
- Ownership. Full details of the suitability of each "qualifying shareholder" needs to be provided, including group structure charts, details of all regulated entities in the group, accounts for all entities in the ownership chain and evidence showing ownership of each entity in that chain;
- Structure, skill, staffing. The Central Bank must be satisfied as to the organisational structure and management skills of the applicant and that adequate levels of staff and expertise will be employed to carry out its proposed activities (see also "Outsourcing Considerations" below); and
- Ongoing organisational requirements and conduct of business requirements. The MiFID Regulations apply a range of organisational and conduct of business standards to all investment firms.
To establish a MiFID entity, the "head office" / "principal place of business" or "the mind and management" of the applicant must be located in Ireland.
Therefore, there should be a significant senior management presence in Ireland to ensure that full authority and effective control of the applicant firm rests within the head office / principal place of business.
An Irish authorised MiFID firm may delegate or outsource some of its activities to entities in other jurisdictions, subject to the MiFID Regulations and the Central Bank's guidance on outsourcing.
The Central Bank expects that a firm can demonstrate that it has necessary expertise to supervise the outsourced functions effectively, particularly in the case of outsourcing of any critical activity.
The Central Bank has six months from the date it receives a complete application to provide its decision (which can be extended by another six months). The process usually takes six to nine months.
The Financial Services Regulatory team at the Maples Group provides legal advice, regulatory guidance and practical support to investment firms regulated under the MiFID regime.
The team can provide full support on MiFID authorisation projects for new investment firms setting up in Ireland (including associated support from other practice areas including Corporate, Tax and Employment). We have obtained authorisations for a significant number of investment firms in Ireland and have developed framework documents in line with the Central Bank's MiFID requirements.
Additionally, we can carry out policies and procedures reviews and upgrades to meet MiFID organisational requirements and conduct of business rules.
We regularly liaise with the Central Bank on cross-border passport applications and EU branch establishments.
We also provide support on areas such as anti-money laundering, business continuity planning and automated compliance monitoring.
1 Markets in Financial Instruments Directive (recast) (Directive 2014/65/EU)
2 European Union (Markets in Financial Instruments) Regulations 2017 as amended
Originally published 05 August, 2020
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.