During 2013, the European Parliament and Council are expected to conclude MiFID II legislative proposals, to replace the MIFID directives and regulation with a recast directive, MiFID II directive and a MiFID regulation (MiFIR) .

Broadly MiFID II will amend MiFID in the following ways:

Third country firms: access to the EU will be permitted where the Commission has made a declaration of equivalence in relation to the third country from which the investment firm wishes to provide services from. Subject to that, the proposal is they will be able to provide cross border services from a branch in the EU which they will be obliged to set up. If the investment services are directed to eligible counterparties only, branch establishment will not be necessary, however there will be a registration requirement with ESMA before they can so. In this sense MiFID II proposes to harmonise access by third country firms.

Financial Instruments: emission allowances will be added to the list of financial instruments regulated by MiFID.

Derivatives: all trading of derivatives which are eligible for clearing and which are sufficiently liquid will move to either regulated markets, MTFs or OTFs

Custody services: these will become a MiFID service requiring authorisation and will no longer be classified as an ancillary service. Exemptions: for commodity dealers will be deleted. Existing exemptions will be narrowed down. Certain exemptions for commercial firms will remain.

Better Protection for Investors: MIFID requirements will apply to credit institutions when selling structure deposits.

Conduct of Business Obligations: MIFID II will set stricter requirements for portfolio management, or the provision of investment advice (whether that advice is provided on an independent basis or restricted basis).

Inducements: Investment advisors who give independent advice and portfolio managers will be prohibited from making or receiving third-party payments or other monetary gains.

Execution-only of financial instruments: currently there is an exemption from the appropriateness requirement for these. However the Commission was concerned that what constituted non complex is not clear and are clarifying the definition. In this context complex structured UCITS products will not benefit from the exemption.

Key Contacts
Paul Foley

IFSC, Dublin
Paul practises both English and Irish law and specialises in cross border financial services law, online trade and internet law.

T: +353 (0) 1 670 2990

F: +353 (0) 1 670 2988

E: pfoley@mckr.ie