MiFID in Ireland
Regulation of Investment Services in Ireland. The two MiFID Directives and the MiFID Regulation were implemented in Irish law by the European Communities ( Markets in Financial Instruments Directive ) Regulations 2007 as amended (“the MiFID Regulations”) .
MiFID Services
Certain services where provided on MiFID financial instruments ( see below) require authorisation under the MiFID Regulations: (i) the reception and transmission of orders in relation to one or more financial instruments (ii) the execution of orders on behalf of clients (iii) dealing on own account, being the activity of trading against proprietary capital resulting in the conclusion of transactions in one or more financial instruments (iv) Portfolio management (v) Investment advice (vi) Underwriting of financial instruments or placing of financial instruments on a firm commitment basis (vii) Placing of financial instruments without a firm commitment basis (viii) Operation of multilateral trading facilities
MiFID Financial Instruments. The MiFID financial instruments are (i) transferrable securities (ii) money market instruments (iii) units in collective investment in transferrable securities (iv) units in a unit trust (v) shares in an investment company (vi) capital contributions to an investment limited partnership) (vii) units in a common contractual fund (viii) options, futures, swaps, forward rate agreements and a range of different derivative contracts as set out in the MiFID Regulations (ix) and financial contracts for differences.
Capital Requirements - Initial Capital
- Investment firms which do not deal in any financial instruments for their own account or which do not underwrite issues of financial instruments on a firm commitment basis, but which hold clients’ money or securities or both and which offer one or more of the following services must have initial capital of Euro 125,000: (a) the reception and transmission of investors orders for financial instruments (b) the execution of investors orders for financial instruments, or (c) the management of individual portfolios of investments in financial instruments.
- Investment firms which simply provide Investment advice, or receive and transmit client orders, and where no client monies or securities or both are held, the initial capital required is 50,000 Euro and a requirement to have a certain level of professional indemnity insurance
- Where the investment firm provides Investment advice, or receives and transmits client orders, and holds no client money or securities or both and is also registered as an Insurance Intermediary, then the initial capital drops to 25,000 Euro plus a requirement to have PI insurance covering the whole territory of the Community representing at least EUR 500,000 applying to each claim and in aggregate EUR 750,000 per year for all claims.
- An investment firm which does not fit in any of the stated categories then the initial capital is 730,000 Euro.
Capital Requirements -Ongoing capital cover. For small investment firms, the ongoing capital cover requirement is the higher of the initial capital requirement or the fixed overhead requirement, which latter requirement equates to 25% of all fixed expenses.
Authorisation requirements
- Business Plan The Business Plan will need to describe the types of investment services and financial instruments, the client categories you are targeting, how you propose to market your services, and will need to describe the full investment advice cycle, for example from first client contact, to provision of advice, how orders are received and transmitted etc. It will also have to set out an organisation chart and what are the roles of each person in the organisation.
- Directors IQ A MiFID firm requires two directors and both must be fit and proper persons ( in other words have completed and have accepted their Director's IQ).
- Matters requiring Board Approval have to be listed as part of the application. These are largely driven by Compliance issues
- Risk Management Policy setting out key risks ( such as on data security, misselliing, money laundering etc ) has to be submitted with the application.
- Business Continuity Plan, we provide assistance on the drafting of this plan
- Terms of Business The terms of business are heavily regulated and require careful drafting. Under MiFID, they will have to include a summary of the Execution Policy, and Conflicts of Interest Policy.
- Compliance Manual. This document will set out what the firm will do to ensure compliance with money laundering regulations, with MiFID, including setting out the reporting requirements. It should also set out the rules governing passporting.
- Memorandum and Articles of Association of the applicant company will need to be MiFID compliant.
Companies affected by MiFID — Where we advise
- Whether your service, activity or provision of advice is regulated by MiFID or whether you can avail of a MiFID exemption
- Providing advice and drafting ion the documents required for a MiFID application
- Providing MiFID related drafting for employment contracts
- Providing advice on passporting into the UK
- Advising retail and professional investors on rights of action against investment firms and credit institutions
- Securing access to RMs and MTFs and their facilities and services
- Advising on investment management agreements and custody agreements
- Advising on the CRD requirements that apply to investment firms
- MiFID and its application to Irish branches of third country firms and to collective investment scheme managers and custodians.
Contacts
Gerry Walsh (Partner) Profile Paul Foley (Partner) Profile
