The European Union (Markets in Financial Instruments) Regulations 2017 (S.I. 375 of 2017) (the “2017 Regulations”) were signed into law on 10 August 2017. They transpose the second Markets in Financial Instruments Directive (“MiFID II”) into Irish law which comes into force on 3 January 2018 with no phase-in period.


Certain entities which were previously not required to seek authorisation from the Central Bank to act as investment firms will now be subject to MiFID II including commodity trading firms. Investment firms are more broadly defined as any person or entity whose regular occupation or business is the provision of one or more investment services to third parties or the performance of one or more investment activities on a professional basis or both. The 2017 Regulations also bring a wider range of financial instruments under the scope of MiFID II including investments packaged as insurance contracts which were previously exempt under MiFID.

Article 3 of MiFID II provides Member States with a national discretion to exempt certain firms from being under the scope of MiFID II if those firms are authorised and regulated by the relevant national authority. This optional exemption has been utilised in Ireland under Regulation 4(3) which outlines a full list of all those entities to which the 2017 Regulations do not apply, some of which include:

  • Firms that do not hold clients’ funds or securities;
  • Firms that provide limited investment services as set out in Regulation 4(3)(b);
  • Firms that provide investment services to their parent or subsidiary;
  • Branches of third party firms established in Ireland;
  • Firms that deal on their own account in financial instruments other than commodity derivatives or emission allowances and do not perform aby investment activities in financial instruments other than commodity derivatives or emission allowances

However it is worth noting that firms which are exempt from MiFID II may still be subject to other legislation including the Investment Intermediaries Act 1995 and the EC (Insurance Mediation) Regulations 2005. The 2017 Regulations have also made amendments to the Investment Intermediaries Act 1995 specifically in relation to those firms which are exempt under Regulation 4(3). Further, those exempt firms will still be subject to all requirements under the Consumer Protection Code. In light of this, the Central Bank has amended the Consumer Protection Code to ensure that these exempt firms are subject to similar investor protections provided by the 2017 Regulations and MiFID II.

Key provisions

One of the main purposes for introducing MiFID II was to create increased protection for investors, particularly retail clients. One such protection is Regulation 32 which stipulates that a firm selling financial instruments must ensure that the instruments are designed to meet the needs of the particular client and the firm must assess the compatibility of the instruments with the client’s needs. Regulation 32(3) requires that all information presented to the client must be fair, clear and not misleading.

Regulation 33 requires that a suitability and appropriateness assessment be carried out by those firms who provide investment advice or portfolio management to clients. A MiFID firm must obtain certain information from a customer before providing its services including the client’s financial situation, investment objectives and the client’s knowledge and experience in respect of the investment product/investment field. If the customer is a professional client, the firm can assume that the customer has the required knowledge and experience. Clearly the firm must have the relevant policies and procedures in place to ensure that the suitability and appropriateness tests are carried out and a suitability report must be provided to the client. In short, the products recommended to an investor must be suitable and must meet their needs.

Some other key provisions under the 2017 Regulations include the Safe Harbour Exemption which, subject to certain restrictions and the meeting of certain conditions as set out in the 2017 Regulations, means that a non-EU entity (a “Third Country Firm”) can provide investment services in Ireland to professional clients and eligible counterparties without obtaining authorisation from the Central Bank. This exemption will not apply where the third country firm provides investment services to retail clients in Ireland and elect-up professionals. Under the 2017 Regulations, any such Third Country Firm will have to establish a branch in Ireland to provide those investment services.

In addition, if a Third Party Firm has had its registration withdrawn from ESMA, the Central Bank may issue a direction to that firm stating that it cannot perform investment activities in Ireland under MiFID. Under the 2017 Regulations, the Central Bank can also implement rules requiring Third Country Firms to notify it of any particulars which it deems necessary to ensure the firm is complying with the safe harbour exemption conditions.

MiFID II will strengthen the regulation of financial markets in the EU and will provide a significantly greater level of protection for retail investors in particular.