ESMA’s final MiFID II/MiFIR Technical Standards provide administrative clarity for third country firms

ESMA’s final MiFID II/MiFIR Technical Standards

The final technical standards (TS) for authorisation, passporting, registration of third country firms and cooperation between competent authorities cover the majority of the RTS .

Director, Investment Management, Regulatory Change

KPMG in the UK


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The final technical standards (TS) for authorization, passporting, registration of third country firms and cooperation between competent authorities cover the majority of the regulatory technical standards and implementing technical standards on investor protection topics that European Securities and Markets Authority (ESMA) is expected to develop under Markets in Financial Instruments Directive (MiFID) II / Markets in Financial Instruments Regulation (MiFIR). The TS are little changed from the draft on which ESMA consulted, but include a small number of welcome changes that provide clarity on the administrative process for their country firms.

Generally, ESMA received few comments on its proposed standard forms and templates. Therefore, these final regulatory technical standards (RTS) and implementing technical standards (ITS) are largely unchanged from the drafts on which ESMA consulted. There are, though, some helpful changes that are expected to ease the administrative process for regulators and firms.

Procedures for granting and refusing requests for authorization of investment firms

ESMA confirms that these RTS relate only to new requests for authorization and not to existing authorizations. Respondents to the consultation had sought clarity on this point. 

The industry had expressed concern that the information requirements were too broad, especially in relation to financial and non-financial interests, which were thought to be too instructive and which might have created issues with existing data privacy regulation. ESMA has amended the text of the RTS in order to take these comments into account.

Freedom to provide investment services and activities

There has been a lack of clarity as to which obligations of the draft RTS, and related ITS, applied to credit institutions. Also, respondents had argued that some of the content of the draft RTS and ITS seemed to go beyond the requirements of MiFID II. ESMA has amended the text to ensure alignment with the scope set out in MiFID II Article 1(3).

Also, ESMA has introduced a requirement for the host Member State authority to acknowledge receipt of the branch passport notification. However, it has re-iterated that application forms must be completed in the official languages one or all the official languages of the home Member State. Furthermore, although the ITS allow for the option to submit forms through electronic means if accepted by the relevant competent authority, ESMA states that it would be extremely costly and complex to impose on all competent authorities a requirement to accept an electronic communication.

Provision of services and performance of activities by third-country firms following an equivalence decision

ESMA’s draft seemed to propose a requirement for a written declaration to be issued by the competent authority of the third country, formally stating that the firm is subject to its effective supervision and enforcement, and specifying which investment services, activities, and ancillary services it is authorized to provide in its home jurisdiction. Respondents had noted that the process of obtaining such a statement could be arduous and that third country authorities might be reluctant to issue such statement. 

ESMA has amended the text to clarify that it is not expecting firms to declare whether they are subject to an “effective” supervision, but only to provide a declaration from the relevant supervisory authority stating that the firm is authorized to provide investment services in its home jurisdiction and setting out the list of investment services that it is authorized to provide.

Next steps

ESMA has submitted these RTS and ITS to the European Commission, which should decide within three months whether to endorse them. 

The remaining technical standards that ESMA is mandated to develop under MiFID II / MiFIR will be published by the end of this year. 

Regulatory challenges

KPMG’s Financial Services Regulatory Centers of Excellence can provide insights into the implications of the raft of regulatory change.

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