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MiFID II 'reverse solicitation' rules post-Brexit

Against the backdrop of Brexit, ESMA issued a public statement on 13th January 2021 to remind firms of the requirements under the MiFID II Directive of the provision of investments services to retail or professional clients by firms not established or situated in the EU.

By way of Article 42 of MiFID II, where a retail client or professional client established or situated in the EU initiates, at its own exclusive initiative, the provision of an investment service or activity by a third-country firm, the third-country firm is not subject to the requirements relating to establishing a branch under Article 39 of MiFID II (Establishment of a Branch).

ESMA further makes note within the statement that following the end of the UK's transition period on 31 December 2020, some firms appear to be trying to circumvent MiFID II reverse solicitation requirements by including general clauses in their terms of business, or through the use of online pop-up "I agree" boxes, where clients are to state that any transaction is executed on their own exclusive initiative.

Among other things, ESMA reminds firms of recital 111 of MiFID II, which provides guidance on the scope of "own exclusive initiative of the client". 

In addition, it reminds firms that every communication means used, such as press releases, advertising on the internet or phone calls, should be considered in determining if the client, or potential client, has been subject to any solicitation, promotion or advertising in the EU on the firm's investment services or activities or on financial instruments.

For more information, read ESMA's statement below.

“where a third-country firm solicits clients or potential clients in the Union or promotes or advertises investment services or activities together with ancillary services in the Union, it should not be deemed as a service provided at the own exclusive initiative of the client”. This is true “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”.

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