On June 29, the European Securities and Markets Authority (ESMA) published its final report (Report) on draft rules (both draft implementing technical standards (ITS) and draft regulatory technical standards (RTS)) relating to authorization (EU licensing requirements), passporting (the right for an investment firm to provide its services cross-border within the European Union), registration of non-EU firms, and co-operation between regulatory authorities under the revised EU Markets in Financial Instruments Directive (MiFID II) and the EU Market in Financial Instruments Regulation (MiFIR).
ESMA consulted on the MiFID II ITS and RTS in December 2014, and this Report on the draft ITS and RTS covers the majority of the draft rules on investor protection topics that ESMA was required to develop (and which it was required to submit to the European Commission (Commission) before July 3) as well as a feedback statement to the ESMA consultation.
ESMA recommends that the Report should be read in conjunction with the consultation paper and the related discussion paper published on May 22, 2014, in order “to have a complete overview of the rationale for ESMA’s proposals.” ESMA states in the introduction to the Report that the remaining draft technical standards that ESMA is required to develop under MiFID II will be published by the end of 2015. (ESMA has indicated (in separate announcements) that the remaining standards will be delivered in September and December 2015).
The Report, which is more than 130 pages, sets out feedback to the consultation, describes any material changes to the technical standards (or confirms that there have been no material changes) and explains the reasons for those changes.
RTS 5 (information to be provided for the registration of non-EU investment firms with ESMA) and RTS 6 (information exchanged between regulatory authorities) and discussions in the Report in connection with the making of an equivalence decision regarding the regulatory status and supervision of non-EU investment firms by their non-EU regulators will be of interest to many non-EU firms who wish to operate in the European Union. This is because MiFIR offers the possibility for non-EU firms to provide investment services or perform investment activities throughout the European Union upon registration with ESMA––though this will be contingent upon an equivalence decision being made regarding specific non-EU countries and their supervision of investment firms. Some other EU directives and regulations also stipulate that access to the European market may be granted to non-EU firms upon the making of an equivalence decision (notably, the European Markets Infrastructure Regulation (EMIR)), though the equivalence decision-making process has not been smooth and it remains to be seen how possible it will be for non-EU investment firms to be able to register with ESMA. To date, under EMIR, there has not been any decision made regarding the “equivalence” of the United States and this remains very much an open issue.
The Report (and the draft ITS and RTS) have also been submitted to the Commission, which now has three months to decide whether or not to endorse ESMA’s technical standards. If the Commission does endorse the technical standards, the European Parliament and the Council of the European Union will then have a further three months to scrutinize them. It is anticipated that the ITS and RTS should be finalized in December 2015 or in the first calendar quarter of 2016, giving EU national regulatory authorities either one year or nine months to implement the standards into national law ahead of the January 3, 2017 MiFID II and MiFIR “go live” date when market participants will be required to comply with the new rules and MiFID I is superseded.
The Report is available online here.