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Central Bank of Ireland Reminder to MiFID Firms

The Central Bank of Ireland (CBI) has, in its latest CBI Markets Update, reiterated its position on the interaction between Irish authorised MiFID investment firms and branches they may have in third countries. The CBI has highlighted the importance of these firms to consider:

  • The European Securities and Markets Authority’s (ESMA) MiFID II briefing paper on the supervision of non-EU branches of EU firms providing investment services and activities (Branch Briefing)
  • Additional risks associated with the use of branch structures
  • ESMA’s opinion on supervisory convergence in the context of Brexit (ESMA Opinion), and
  • The CBI’s requirements for Pre-Approval Controlled Function (PCF) holders.

ESMA Branch Briefing

Firms are reminded that they are required to align themselves, and their third country branches, with the principles set out in the Branch Briefing. It is of paramount importance that firms ensure they do not operate their branches as letter-box entities. The CBI has reminded firms that they should provide the information set out in the Branch Briefing under section 18 whenever they seek to consult the CBI on the operations of an existing or proposed country branch. This information includes:

  • How the non-EU branch will contribute to the firm’s, or the group’s, strategy
  • The functions that branch will fulfil, and
  • Confirmation that local legal requirements in the non-EU jurisdiction will not interfere with compliance by the firm with its regulatory obligations.

Risk assessments

While not specifically highlighted in the reminder issued to firms in the most recent CBI Market Update, firms are reminded that they should assess any additional risks associated with the use of a third country branch. They also need to consider whether the firm has, or plans to have, suitably robust mitigating plans or measures in place to address any risks posed.

ESMA Opinion

In line with the ESMA Opinion on supervisory convergence following Brexit, the CBI expects that key function holders within investment firms, other than branch managers, are not based in a third country.

PCF holders

Finally, the CBI has reminded firms of the recently effective amendment to the list of PCFs. This introduces a material change to PCF-16 (Branch Manager), such that it now includes branch managers in non-EEA countries alongside those located in EEA countries.

Conclusion

Investment firms should ensure that they take heed of the CBI’s reminder to ensure they are compliant with all of their regulatory obligations, where they wish to continue operating existing branches located outside the EU. It also emphasises the need to consider important factors when establishing additional branches. CBI scrutiny cannot be discounted, and this is likely to be an area of CBI focus going forward.

For more information, please contact a member of our Financial Regulation team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

Upcoming Event

We will host our Investment Funds Summer Update on Thursday 20 July at 11.00am - 12.00pm. At this webinar, our speakers will review some of the recent key developments that have taken place in the Investment Funds Industry with a focus on:

  • The Development of a Macro-prudential Framework for Investment Funds
  • Loan Origination and Delegation under AIFMD II
  • What is the Future of the ELTIF?



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