ESMA writes to Commission on third-country regimes

ESMA has written to the European Commission on various issues which are relevant in the context of Brexit but also to third-countries generally. There has already been discussion on the MiFID 2/MiFIR requirements on trading venues, and this letter now addresses:

  • how MiFIR treats third country firms providing services and activities to ECPs and per se professional clients;
  • how MiFID 2 treats such firms providing services and activities to retail and professional clients on request;
  • third country firms providing services and activities to EU clients on a reverse solicitation basis; and
  • investment firms outsourcing critical or important functions (apart from those related to portfolio management) to third country providers.

ESMA is concerned that there are many examples of circumstances where third country firms will not be subject to MiFID 2/MiFIR but only to national regimes, and that this creates a fragmented regulatory environment made worse because the EU legislation is not clear.  It says some of its analyses have also led it to conclude that there are cases where third-country firms would be subject to a less stringent regulatory regime than EU ones.