Final Technical Standards on Third-Country Investment Firm Registration and Reporting Requirements

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Shearman & Sterling LLPThe European Securities and Markets Authority has published final draft Technical Standards on the provision of investment services and activities in the EU by third-country firms under the Markets in Financial Instruments package. Amendments that were made to the MiFID II package under the Investment Firm Regulation and Directive require, among other things, third-country firms providing services to all types of clients to provide ESMA with further information. In addition, ESMA has increased powers over third-country firms providing services to eligible counterparties and per se professional clients, such as the ability to conduct on-site inspections and impose product restrictions or prohibitions. The revisions will apply from June 26, 2021.

Following its consultation launched in January this year, ESMA has submitted the following Technical Standards to the European Commission for endorsement:

  • draft Regulatory Technical Standards on the information for registration of third-country firms and the information to be reported annually by third-country firms registered with ESMA;
  • draft Implementing Technical Standards on the format of applications for registration of third-country firms and the format of the information to be reported annually; and
  • draft ITS on the format of the information to be reported annually to national regulators by branches of third-country firms.

The final draft RTS have been amended substantively from the consultation version. Many of the changes reflect the feedback provided to ESMA regarding the scope of the information requirements. ESMA has amended the text to clarify that much of the information only relates to the third-country firm's operations and activities in the EU. However, some of the requirements arguably go beyond the mandate that ESMA is given in MiFIR, which aims to facilitate ESMA's obligation to monitor third-country equivalencies as opposed to granting it powers to supervise third-country firms. For example, ESMA is still requiring information on the global turnover of a third-country firm. In addition, ESMA has not considered whether a more proportionate reporting regime would be applicable to smaller less complex firms that do not present the same level of risk as the large investment firms.

View ESMA's final report and final draft Technical Standards.

You may like to view our client note on ESMA's consultation on the draft Technical Standards, "ESMA'S Post-Brexit Regime For UK Investment Firms—'Equivalence' Or Direct Regulation?"

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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