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ESMA issues public statement on third-country firms marketing in the EU

The European Securities and Markets Authority (‘ESMA’) has, on the 13th January 2021, issued a public statement to remind firms of the MiFID II requirements on the provision of investment services to retail and professional clients by third country investment firms.

According to MiFID II, a third country firm may provide investment services to EU-based retail or professional clients without the requirement to establish a branch within the EU, where the service is being sought by the client at its own exclusive initiative. ESMA has noted some questionable practices following the end of the UK transition period on the 31st December 2020, such as the inclusion of general clauses in their terms of business or through the use of online pop-up “I agree” boxes whereby clients state that any transaction is executed on the exclusive initiative of the client.

ESMA has therefore issued a statement reminding the industry, and in particular third country investment firms, that:

  • Whilst MiFID II permits third country investment firms to provide investment services to EU-based clients without the requirement to establish a branch within the EU in cases of reverse-solicitation, this does not apply where such firm solicits clients in the EU or promotes or advertises investment services. ESMA has emphasised that this applies ‘regardless of any contractual clause or disclaimer purporting to state, for example, that the third country firm will be deemed to respond to the exclusive initiative of the client’.
  • Every communication means used, such as press releases, advertising on internet, brochures, phone calls or face-to-face meetings, should be considered to determine if the client has been subject to any solicitation, promotion or advertising in the EU.
  • Solicitation, promotion or advertising should be considered regardless of the person through whom it is issued, such as the third country firm itself, or an entity acting on its behalf or having close links with such third country firm.
  • The provision of investment services in the EU without proper authorisation in accordance with EU and national law, exposes firms to the risk of administrative or criminal proceedings, for the application of relevant sanctions.

ESMA has also reminded investors of the risk that they lose protections afforded to them under EU law when using the services of investment firms which are not properly authorised in accordance with EU and Member States’ law, including coverage under the investor compensation schemes.

Our financial services team is dedicated at assisting stakeholders within the financial services sector, including firms and clients. Should you require further information or assistance in relation to the above, please do not hesitate to contact our financial services team on dfcs@dfadvocates.com .

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