Financial Services Regulation and Compliance – Investment Firms Jan 2022


The CBI issues a statement to MiFID investment firms authorized to provide MiFID 3 activities and/or 6

On January 26, 2022, the CBI issued a statement to all MiFID investment firms authorized to provide MiFID investment services of trading on own account or underwriting financial instruments on a firm commitment basis. This statement follows the publication of a package of two final RTS drafts relating to the reclassification of MiFID investment firms as credit institutions by the EBA in December 2021.

The CBI stressed that affected MiFID firms should give due consideration to both the threshold reporting requirements and the methodology for calculating the threshold in determining the need to reclassify an investment firm as a credit institution set out in these publications. Any company that expects to reach the threshold triggering the obligation to apply for a new authorization as a credit institution must:

  • make a commitment to the Central Bank concerning their re-approval within 3 months following the date of entry into force of the Delegated Act and
  • submit an application for re-approval as a credit institution within 6 months of the date of entry into force of the delegated act.

Ireland transposes MiFID II ‘Quick-Fix’

The MiFID II “Quick Fix” Directive (the Directive) was published in the Official Journal on January 11, 2022. Its dual purpose is to support economic recovery after the Covid-19 pandemic and to remove unnecessary administrative burdens for businesses. Under the directive, EU member states must implement the “Quick Fix” amendments into their national legislation by February 28, 2022. financial instruments) transposes the directive into Irish law and will come into force on 28 February. 2022.

Some of the key changes introduced under the directive include:

  1. the default method of communication between investment firms and clients will be electronic
  2. professional clients and eligible counterparties are exempt from the obligations to disclose costs and fees, both ex ante and ex post, with the exception of investment advice or portfolio management services
  3. financial instruments that are exclusively marketed or distributed to eligible counterparties will no longer be subject to product governance requirements and
  4. publication of best execution reports by trading venues, systematic internalisers and other execution venues will be temporarily suspended until February 28, 2023.


ESMA publishes guidance on suitability and execution requirements only under MiFID II

On January 3, 2022, ESMA published the final report on its guidelines on certain aspects of the suitability and execution-only requirements of MiFID II. Under MiFID II, investment firms providing non-advised services are required to request information about the knowledge and experience of clients or potential clients in order to assess whether the intended investment service or product is appropriate, and to issue a warning if the investment service or product is deemed inappropriate. The execution-only framework allows for exemption from this assessment under certain conditions, including that the firm issue a warning to the client.

The purpose of the guidelines is to improve clarity and promote convergence in the application of adequacy and performance requirements only. The guidelines cover a number of aspects of the suitability process, including what information to provide to customers about the purpose of the suitability assessment, matching customers with appropriate products, and the effectiveness of disclaimers. In addition, other related requirements are clarified, such as Execution Only Exemption and Record Keeping and Controls.

National competent authorities will have two months to confirm to ESMA whether they comply or intend to comply.

ESMA consults on the revision of the MiFID II suitability guidelines

ESMA has launched its consultation (the consultation) on certain aspects of the adequacy requirements laid down in the Markets in Financial Instruments Directive (MiFID II), in order to update its guidelines following the changes of MiFID II relating to sustainability. The Consultation follows the adoption by the European Commission of amendments to the MiFID II Delegated Regulation (the Delegated regulation) to incorporate sustainability factors, risk and preferences into certain organizational requirements and operating conditions of investment firms.

The main changes introduced in the delegated regulations and reflected in these proposed guidelines are as follows:

  • collecting information from customers on sustainability preferences: companies will need to collect information from customers about their preferences with respect to different types of sustainable investment products to what extent they wish to invest in these products
  • assessment of sustainability preferences: once the company has identified a suitable product line for a customer, in accordance with criteria of knowledge and experience, financial situation and other investment objectives, it must identify – secondly – the product(s) that meet the customer’s sustainability preferences and
  • Organizational Requirements: Companies will need to provide staff with appropriate training on sustainability topics and maintain appropriate records of customer sustainability preferences (if any) and any updates to those preferences.

The consultation closes on April 27, 2022. ESMA will then consider the comments it receives on the consultation in the second quarter of 2022 and expects to publish a final report in the third quarter of 2022.

Speech by European Council President Charles Michel at the European Investment Bank’s 2022 Annual Economic Conference

On 12 January 2022, the President of the European Council, Charles Michel, delivered his speech at the European Investment Bank (EIB) Annual Economic Conference.

President Michel spoke on the concept of sovereignty, which is a priority on the EC agenda. He noted the impact that COVID-19 has had on the European Union, and how the EU is now “…moving away from crisis management to consolidate a sustainable, innovative and inclusive recovery”. This shift in focus will strengthen both economic and social resilience. The recovery from the pandemic also offers a unique opportunity for transformation and innovation. The EC said that to capitalize on this opportunity, retooling to promote further digital improvements and shifting to a carbon-neutral growth paradigm is needed. Rapid progress in green finance and increased collaboration between the public and private sectors are needed to facilitate the dual transition.

In order to support economic recovery and strengthen the economic base of the European Union, President Michel said that there were three crucial areas of interest. The first is the empowerment of the internal market. The second is to channel the money into the economy, in line with EU priorities. The third and final area is economic governance. It should strengthen the EU’s macroeconomic resilience, striking the right balance between sustainability and stabilisation.

ESMA publishes guidelines on deferred disclosures under MAR

On January 5, 2022, ESMA published its final report on the modification of the Market Abuse Regulation (TUE) guidelines on deferred publication in prudential supervision. The guidelines are intended to provide clarity and enhance legal certainty and should help issuers to assess whether they meet the conditions to defer inside information in accordance with MAR.

The guidelines also introduce clarifications on the case-by-case assessment of institutions as to whether they would be in possession of inside information in relation to the institution’s own supervisory review and evaluation process (SREP) decisions received from their competent prudential authority, with particular reference to Pillar 2 capital requirements and capital guidelines.

The guidelines are currently in the translation stage, after which the usual process of compliance or explanation will be carried out before the full application of the guidelines.