The MiFID II Directive 2014/65 has been transposed into Irish law in the form of the European Union (Markets in Financial Instruments) Regulations 2017. The 2017 Regulations will apply from 3 January 2018.
The MiFID Directive 2004/39 sets out a detailed framework regulating firms carrying on investment services and activities within the EEA and was transposed into Irish law by the European Communities (Markets in Financial Instruments) Regulations 2007.
In 2014 the EU adopted the MiFID II Directive and the Markets in Financial Instruments Regulation 600/2014 (“MiFIR”) which partially recast and replace the MiFID Directive. Member states were required to transpose the MiFID II Directive into national law by 3 July 2017 and to apply the transposing measures from 3 January 2018. MiFIR also applies from that date as do the numerous level 2 (EU Commission delegated legislation) and level 3 measures (ESMA Guidelines) which form part of the MiFID II regulatory framework.
In July 2016 the Department of Finance published a consultation on the national discretions contained in the MiFID II Directive and elements of the Insurance Distribution Directive 2016/97. It published a feedback statement on that consultation in July 2017.
The 2017 Regulations
The 2017 Regulations largely reflect the text of the MiFID II Directive together with the approach to the national discretions outlined in the feedback statement mentioned above. See our related briefings here and here. In particular, the Regulations retain a version of the existing safe harbour exemption which can be used to provide services to eligible counterparties and per-se professional clients.
The 2017 Regulations also amend the Central Bank Act 1942 as well as the Investment Intermediaries Act 1995. Among other things, the 1942 Act has been amended to include the 2017 Regulations as a designated statutory instrument under part 2 of Schedule 2 of that Act. This means that an infringement of the 2017 Regulations is a prescribed contravention for the purpose of the enforcement provisions set out in Part IIIC of the 1942 Act. Infringement of MiFIR and MiFID II related level 2 legislation as set out in Schedule 9 of the 1942 Act, will also be a prescribed contravention for this purpose.
A person who immediately before 3 January 2018 is an authorised investment firm under the 2007 Regulations is deemed to be an authorised person for the purpose of the 2017 Regulations and will not have to apply for a new authorisation. However, such firms will still have to ensure that they comply with the new requirements imposed on investment firms under the MiFID II regulatory framework. Some of these additional requirements are outlined in our previous briefings here, here, and here.
Given that the scope of the MiFID II Directive is, in some respects, considerably broader than that of the MiFID Directive, a number of entities will need to become authorised as an investment firm for the first time by 3 January 2018. According to the Central Bank of Ireland, all applicants seeking authorisation as a MiFID investment firm should use the form “MiFID Application Form – Investment Firms” regardless of whether authorisation is sought before, or from, 3 January 2018. The Central Bank has updated its MiFID Application Form and MiFID Guidance to take account of the MiFID II Directive and associated measures.
For those entities seeking to rely on the ancillary services exemption under Article 2(1)(j) of the MiFID II Directive, the Central Bank's website states that Article 2(1)(j) Ancillary Exemption Notification Forms should not be submitted before 3 January 2018.
Other MiFID II changes
While the 2017 Regulations contain the vast majority of the domestic legal requirements necessary to give effect to MiFID II, MiFID II also necessitates a number of changes to Central Bank rules.
While the MiFID II Directive gives member states the option to exempt from its scope certain types of firms, including firms authorised under the Investment Intermediaries Act 1995, this is subject to a new requirement that such firms must be subject to requirements which are “at least analogous” to the MiFID II requirements concerning conditions and procedures for authorisations, supervision, conduct of business rules and organisational requirements. The Central Bank has amended the Consumer Protection Code 2012 (“CPC”) so as to ensure that firms authorised under the Investment Intermediaries Act 1995 are subject to such analogous requirements. The amendments include the insertion of a new Chapter 14 into the CPC as well as amendments to the chapters of the CPC dealing with the provision of information (Chapter 4), advertising (Chapter 9) and definitions (Chapter 12). The amendments also update references to the 2007 Regulations in the CPC.
At the end of July 2017 the Central Bank launched a consultation on proposed changes to the client asset regime as set out in the Central Bank (Supervisory and Enforcement) Act 2013 (Section 48(1)) Client Asset Regulations 2015. Among other things the Central Bank intends to integrate those regulations into its Investment Firm Regulations (here), adopted in March 2017.
The Central Bank is also planning to publish a Consultation Paper in Q3 2017, outlining proposed measures to strengthen protections for consumers in the area of commission payments to intermediaries. The Central Bank consulted on changes to its Minimum Competency Code in November 2016.