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MiFID II: Central Bank consults on changes to Client Asset Regulations and Investor Money Regulations
KEY CONTACTS If you require advice or further information, please contact Robert Cain or your usual Arthur Cox contact.
ROBERT CAIN PARTNER, FINANCIAL REGULATION +353 1 920 1050 firstname.lastname@example.org
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This document 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.
In its recent Feedback Statement on its 2016 MiFID II Consultation, the
expected to take place by 3 January 2018.
Department of Finance signalled that
the existing 2015 Client Asset
In its new consultation paper, CP111
Regulations for Investment Firms
(Consultation Paper on the Second
would be maintained, with minor
Edition of the Central Bank's
amendments to take account of the
Investment Firms Regulations
fact that there will be some overlap including changes related to MiFID
between the detailed MiFID II Level 2 II), published this week, the Central
measures and the 2015 Client Asset Bank has set out its proposal to update
the 2015 Client Asset Regulations to
take account of MiFID II and to then
The 2015 Client Asset Regulations are integrate the following into its 2017 super-equivalent to MiFID II and their Investment Firms Regulations:
retention has been approved by the European Commission. While the majority of matters that need to be addressed as part of the implementation of MiFID II in Irish law will be dealt with by way of the transposing regulations to be
the updated 2015 Client Asset Regulations;
the 2015 Investor Money Regulations (as amended in 2016); and
published by the Department of Finance "in the coming weeks",
changes to the 2015 Client Asset
Regulations are being implemented
the Central Bank's rules on capital requirements applied to market operators (as set out in its CP101 Feedback Statement relating to its consultation on a
CENTRAL BANK PROPOSAL
capital requirements framework for market operators).
As signposted by the Central Bank in CP97 (its 2015 consultation on its Investment Firms Regulations), the Central Bank has, for some time, been
STRUCTURE OF THE CONSOLIDATED INVESTMENT FIRMS REGULATIONS
considering the integration of its rules
in relation to client assets and investor The revised Investment Firms
money into a "living single document" Regulations will contain very limited
with its 2017 Investment Firms
changes to the existing Parts 2
Regulations. That integration is now (General Supervisory Requirements
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MiFID II: CENTRAL BANK CONSULTS ON CHANGES TO CLIENT ASSET REGULATIONS AND INVESTOR MONEY REGULATIONS
for Investment Firms), 4 (Fund Administrator Requirements) and 5 (Own Funds and Capital Adequacy Requirements for Fund Administrators), together with Part 1 of the schedule of reporting requirements for fund administrators.
The revised Client Asset Requirements will be contained at Part 6 and a number of matters previously set out in the Central Bank's Guidance on Client Asset Regulations for Investment Firms will be incorporated into Part 6 (i.e. given legislative standing), meaning that the Central Bank Guidance will need to be substantially revised.
The Investor Money Requirements will be contained at Part 7 and a number of matters previously set out in the Central Bank's Guidance on Investor Money Regulations for Fund Service Providers will be incorporated into Part 7 (i.e. given legislative standing), meaning that the Central Bank Guidance will need to be substantially revised.
The Central Bank's policy position on capital requirements for market operators will be integrated into Part 8.
KEY CONSULTATION QUESTIONS
The existing Client Asset Regulations use several defined terms to refer to third parties with whom client assets (i.e. client funds or client financial instruments) may be held or deposited, including "eligible credit institution", "eligible custodian", "relevant party" and "related party".
Those Regulations also use a number of different definitions and terms in
relation to nominees including "nominee", "nominee company" and "eligible nominee".
The Central Bank acknowledges that the use of multiple terms may be unnecessary and could lead to confusion. In light of that, it is seeking views on whether the various definitions could be better aligned with MiFID II and streamlined.
The Central Bank is also proposing to amend certain defined terms in the Client Asset Regulations and in the Investor Money Regulations for the purposes of clarity and consistency, and is seeking feedback on the changes that it has proposed. It does not expect those changes to have any significant operational impact.
Alignment of Client Asset Regulations with MiFID II
In the draft regulations set out in Consultation Paper, the Central Bank has proposed removing or amending parts of the existing Client Asset Regulations (which will form Part 6 of the revised Investment Firms Regulations) to remove duplication or to complement the wording of MiFID II. This is with a view to ensuring that Irish domestic rules regarding client assets are not read in isolation from MiFID II. The Central Bank is seeking feedback on its proposed approach and whether any existing client asset rules have not been adequately reflected in the revised Part 6.
Investor Money Regulations
The Central Bank is seeking feedback on its drafting changes to the Investor Money Regulations generally.
The consultation period closes on 27 September 2017, and the revised Investment Firms Regulations, incorporating the revised 2015 Client Asset Regulations, the revised 2015 Investor Money Regulations, and the revised 2016 capital requirements for market operators) are expected to be in place by 3 January 2018. We will issue a further update when the revised Regulations are published.
For further information on the status of MiFID II in Ireland, please read our recent Client Briefings: MiFID II: Department of Finance publishes Feedback Statement on MiFID II Consultation and MiFID II: Safe Harbour Update.