S.I. No. 60/2007 - European Communities (Markets in Financial Instruments) Regulations 2007

“disposal” means any direct or indirect disposal by a person or more than one person acting in concert of a qualifying holding or a disposal which would reduce such a qualifying holding so that the proportion of the voting rights or of the capital held by the person or persons would fall below 20 per cent., 33 per cent or 50 per cent or so that an authorised investment firm or the market operator of a regulated market would cease to be its subsidiary.

Notification of certain transactions

179. (1) Any person who proposes to make an acquiring transaction shall notify the Bank in writing of the proposal as soon as may be and shall include with the notification such information concerning the proposed acquiring transaction as may be specified by the Bank from time to time.

• (2) Any person who proposes to make a disposal shall notify the Bank in writing of the proposal as soon as may be and such notification shall include such information concerning the proposed disposal as may be specified by a supervisory authority from time to time.

• (3) On becoming aware of any proposals of the type referred to in paragraphs (1 or (2) of this Regulation, the investment firm or the market operator of a regulated market concerned shall inform the Bank of the proposed acquiring transactions or disposals that cause holdings to exceed or fall below a qualifying holding or 20 per cent., 33 per cent. or 50 per cent. of the capital held or voting rights, or that cause the firm or market operator to become, or cease to be, a subsidiary.

• (4) Where, having received a notification under this Regulation, the Bank is of the opinion that in order to consider, for the purposes of this Regulation, a proposed acquiring transaction it requires further information it may, within one month of the date of receipt by it of a notification, request such further information in writing from any one or more of the persons concerned with the transaction.

• (5) The Bank may approve of, or approve of subject to conditions or requirements or both, or may refuse to approve of an acquiring transaction.

• (6) If the acquirer of any holding in an investment firm or the market operator of a regulated market referred is itself -

• (a) an investment firm, a credit institution, or an insurance undertaking,

• (b) a UCITS management company authorised in another Member State,

• (c) the parent undertaking of an investment firm, a credit institution or an insurance undertaking,

• (d) the parent company of a UCITS management company authorised in another Member State,

• (e) a person controlling an investment firm, a credit institution or an insurance undertaking, or

• (f) a person controlling an UCITS management company authorised in another Member State,

and if, as a result of that acquisition, the undertaking would become the acquirer's subsidiary or come under the acquirer's control, the assessment of the acquisition by the Bank is subject to the prior consultation provided for in Regulation 137.

Approval of acquiring transactions

180. An acquiring transaction shall not proceed until the Bank -

• (a) has informed the investment firm or the market operator of a regulated market and the party making the acquiring transaction in writing that the Bank approves of the acquiring transaction, or

• (b) until 3 months have elapsed during which the Bank has not refused to approve of the acquiring transaction,

whichever first occurs, the period beginning on the date on which the Bank first receives a notification under Regulation 179 or, where the Bank requests further information from the person or persons concerned under Regulation 179(4), the date of receipt by the Bank of the information.

Period for implementing acquiring transactions

181. Where the Bank approves of an acquiring transaction, it may specify in writing a period for the implementation of that transaction.

Imposition of conditions or requirements in respect if proposed acquiring transactions

182. (1) An approval given by the Bank to a proposed acquiring transaction shall be subject to such conditions or requirements or both as the Bank may impose (being conditions or requirements which in the opinion of the Bank are necessary for the proper and orderly regulation and supervision of investment firms and the market operators of regulated markets).

• (2) The Bank, at any time, may amend or revoke conditions or requirements or both referred to in paragraph (1).

Limitation on validity of certain acquiring transactions

183. Subject to Regulation 181, an acquiring transaction shall only be valid if it is entered into within -

• (a) 12 months after the Bank giving its approval in writing to the transaction, or

• (b) 12 months after the end of the 3 month period referred to in Regulation,

and, accordingly, any purported acquiring transaction which does not comply with either paragraph (a) or (b) shall be invalid and -

• (i) titles to any shares or other interest shall not pass, and

• (ii) any consequential purported exercise of powers relating to such shares or other interest shall be invalid.

Refusal to approve acquiring transactions

184. (1) The Bank shall refuse to approve an acquiring transaction where the Bank -

• (a) is not satisfied as to the suitability of the person proposing to make the acquiring transaction, or

• (b) considers that the acquiring transaction is likely to be prejudicial to

• (i) the sound and prudent management, or

• (ii) the proper and orderly regulation and supervision of an authorised investment firm or of the market operator of a regulated market.

• (2) Where the Bank -

• (a) refuses to approve an acquiring transaction, or

• (b) becomes aware of a proposed acquiring transaction of which it has not been notified under Regulation 179,

the Bank may issue a direction under Regulation 147 or 148 to the directors and those responsible for the management of the authorised investment firm or the market operator of the regulated market concerned.

Inquiries into certain acquiring transactions

185. (1) The Bank may carry out such inquiries and obtain such information as it considers necessary to enable it to consider a proposed acquiring transaction.

• (2) No person shall -

• (a) wilfully or knowingly obstruct or prevent inquiries by the Bank under this Regulation, or

• (b) knowingly or recklessly provide false or misleading information.

Obligation to inform a supervisory authority of shareholdings

186. (1) At least once in each year, authorised investment firms and the market operators of regulated markets shall inform the Bank of -

• (a) the names of direct shareholders and persons possessing qualifying holdings, and

• (b) the sizes of the holdings.

• (2) At least once in each year, authorised investment firms and the market operators of regulated markets, having made best efforts to ascertain the identity of all indirect shareholders and persons possessing qualifying holdings, shall inform the Bank of the names of those persons.

Contravention of terms of approval of acquiring transactions

187. (1) Nothing in any enactment shall be construed as relieving an authorised investment firm, the market operator of a regulated market or another person of any of the obligations to comply with Regulation 179(1), (2) or (3).

• (2) An order under section 201 of the Companies Act, 1963, in respect of a proposed amalgamation (being an acquiring transaction) shall not be made until -

• (a) the Bank has given its approval to the acquiring transaction, or

• (b) the period (within which an acquiring transaction may not proceed referred to in Regulation 180 has elapsed without the Bank having given or refused to give approval.

• (3) Having regard to -

• (a) the proper and orderly regulation and supervision of investment firms and regulated markets, and

• (b) the protection of investors and the requirements of the Directive,

the Bank, following consultation with the Minister, may specify a class or classes of authorised investment firms or market operators of regulated markets who need not comply with Part 14.

Part 15 — Offences

Summary conviction offences

188. (1) A person is guilty of an offence and is liable on summary conviction to a fine not exceeding €5,000 or imprisonment for a term not exceeding 12 months or both if the person -

• (a) being an authorised investment firm, fails to comply with a condition or requirement of the firm's authorisation under these Regulations to operate as an investment firm,

• (b) being the market operator of a regulated market, fails to comply with a condition or requirement of the operator's authorisation under these Regulations to operate a regulated market,

• (c) contravenes a provision of these Regulations,

• (d) fails to discharge a duty to which the person is subject under these Regulations.

• (2) Paragraph (1) is without prejudice to any provision of an Act that makes provision, in relation to an act or omission of which the summary conviction offence under that paragraph consists, for that act or omission to be prosecuted on indictment, subject to any maximum fine or any maximum term of imprisonment as may be imposed under that Act.

• (3) Where the contravention, failure to comply or failure to discharge a duty in respect of which a person is convicted of an offence under these Regulations is continued after the conviction, the person -

• (a) is guilty of a further offence on every day on which the contravention or failure continues, and

• (b) for each such further offence, is liable on summary conviction to a fine not exceeding €5,000 or imprisonment for a term not exceeding 12 months or both.

Offences by bodies corporate

189. (1) Where an offence is committed under these Regulations by a body corporate and is proved to have been committed with the consent, connivance or approval of or to have been attributable to the willful neglect on the part of any person, being -

• (a) a director, manager, secretary or other officer of the body corporate, or

• (b) a person who was purporting to act in any such capacity,

that person as well as the body corporate is guilty of an offence and is liable to be proceeded against and punished as if that person were guilty of the first-mentioned offence.

• (2) A person may be charged with having committed an offence under these Regulations even if the body corporate concerned is not charged with having committed an offence under these Regulations in relation to the same matter.

Summary proceedings may be brought by Bank

190. (1) Summary proceedings for an offence under these Regulations may be brought and prosecuted by the Bank.

• (2) Summary proceedings for an offence under these Regulations may be instituted within 12 months after the date of the offence.

PART 16 — APPEALS AND MISCELLANEOUS

Rights of appeal against Bank decisions

191. The following decisions of the Bank are appealable decisions for the purposes of Part VIIA of the Central Bank Act 1942:

• (a) a decision of the Bank under Regulation 11 -

• (i) refusing to grant an authorisation to operate as an investment firm, or

• (ii) granting such an authorisation subject to conditions or requirements;

• (b) a decision of the Bank under Regulation 47 -

• (i) refusing to grant an authorisation to operate a regulated market or

• (ii) granting such an authorisation subject to conditions or requirements;

• (c) a decision of the Bank under Regulation 21 to withdraw an authorisation granted under Regulation 11 to operate as an investment firm;

• (d) a decision of the Bank under Regulation 53 to withdraw an authorisation granted under Regulation 47 to operate a regulated market;

• (e) a direction given under Regulation 148;

• (f) a decision of the Bank to impose a condition or requirement under Regulation 145;

• (g) a decision of the Bank under Regulation 179 -

• (i) refusing to give its approval to an acquiring transaction, or

• (ii) giving its approval to an acquiring transaction, subject to conditions or requirements.

Part 17 — Consequential Amendments (Central Bank Act, Investment Intermediaries Act, Stock Exchange Act)

Amendment of section 33AK(10) of Central Bank Act 1942

192. Section 33AK(10) of the Central Bank Act 1942 (inserted by section 26 of the Central Bank and Financial Services Authority of Ireland Act 2003 and amended by section 36 of the Investment Funds, Companies and Miscellaneous Provisions Act 2005) is amended by deleting the definition of “Supervisory Directives” and substituting the following definition:

“ ‘Supervisory Directives’ means -

• (a) Directive 2000/12/EEC of the European Parliament and of the Council of 20 March 2000,

• (b) Council Directive 93/22/EEC of 10 May 1993,

• (c) Council Directive 85/611/EEC of 20 December 1985,

• (d) Council Directive 92/49/EEC of 18 June 1992,

• (e) Council Directive 92/96/EEC of 10 November 1992,

• (f) the 2003 Market Abuse Directive (within the meaning of Part 4 of the Investment Funds, Companies and Miscellaneous Provisions Act 2005),

• (g) the supplemental Directives (within the meaning of that Part 4),

• (h) the 2003 Prospectus Directive (within the meaning of Part 5 of the Investment Funds, Companies and Miscellaneous Provisions Act 2005),

• (i) Directive 2005/68/EC of 16 November 2005,

• (j) Directive 2004/39/EC of 21 April 2004 together with the associated implementing measures provided for in Directive 2005/73/EC of 10 August 2006 and in Commission Regulation (EC) No. 1287/2006 of 10 August 2006,”.

Amendment to Schedule 2 of Central Bank Act 1942

193. Schedule 2 to the Central Bank Act 1942 (inserted by section 31 of the Central Bank and Financial Services Authority of Ireland Act 2003 and amended by section 87 of the Investment Funds, Companies and Miscellaneous Provisions Act 2005) is amended -

• (a) by inserting in Part 2 the following item after the item relating to the Investment Funds Companies and Miscellaneous Provisions Act 2005:

“

	S.I. No. 60 of 2007	European Communities (Markets in Financial Instruments) Regulations 2007	The whole instrument

”

Repeals

194. Section 12 of the Investment Intermediaries Act 1995 is repealed.

Schedule 1

Part 1 Investment Services

Part 2 Ancillary Services

• (a) these are connected to the provision of investment or ancillary services, and

• (b) the underlying reference is not itself a financial instrument.

Part 3 Financial Instruments

• (a) securities, currencies, interest rates or yields, or other derivative instruments, financial indices or financial measures which may be settled physically or in cash;

• (b) commodities that must be settled in cash or may be settled in cash at the option of one of the parties (otherwise than by reason of a default of other termination event);

• (c) commodities that can be physically settled, provided that they are traded on a regulated market or on an MTF;

• (d) commodities, other than as described in clause (iii), and not being for commercial purposes, if the commodities can be physically settled and have the characteristics of other derivative financial instruments having regard to whether, inter alia, they are cleared and settled through recognized clearing houses or are subject to regular margin calls;

• (e) climatic variables, freight rates, emission allowances or inflation rates or other official economic statistics if the options, futures, swapsforward rate agreements or other derivative contracts, as the case may be, must be settled in cash or may be settled in cash at the option of one of the parties (otherwise that by reason of a default or other termination event).

• (a) traded on a regulated market or an MTF,

• (b) cleared and settled through recognised clearing houses, or

• (c) subject to regular margin calls.

SCHEDULE 2

Definition of professional client

Categories of client who are considered to be professionals

• (1) Entities which are required to be authorised or regulated to operate in the financial markets. The list below should be understood as including all authorised entities carrying out the characteristic activities of the entities mentioned: entities authorised by a Member State under a directive, entities authorised or regulated by a Member State without reference to a directive and entities authorised or regulated by a non-Member State:

• (a) credit institutions;

• (b) investment firms;

• (c) other authorised or regulated financial institutions;

• (d) insurance companies;

• (e) collective investment schemes and management companies of such schemes;

• (f) pension funds and management companies of such funds;

• (g) commodity and commodity derivatives dealers;

• (h) locals;

• (i) other institutional investors

• (2) Large undertakings meeting two of the following size requirements on a company basis:

balance sheet total: net turnover; own funds;	€20,000,000 €40,000,000 €2,000,000

• (3) National and regional governments, public bodies that manage public debt Central Banks, international and supranational institutions such as the World Bank, the IMF, the ECB, the EIB and other similar international organisations.

• (4)
• (a) Other institutional investors whose main activity is to invest in financial instruments, including entities dedicated to the securitisation of assets or other financing transactions.

• (b) The entities mentioned above are considered to be professionals. They must however be allowed to request non-professional treatment and investment firms may agree to provide a higher level of protection. Where the client of an investment firm is an undertaking referred to above, the investment firm must inform it before any provision of services that, on the basis of the information available to the firm, the client is deemed to be a professional client, and will be treated as such unless the firm and the client agree otherwise. The firm must also inform the customer that he can request a variation of the terms of the agreement in order to secure a higher degree of protection. It is the responsibility of the client, considered to be a professional client, to ask for a higher level of protection when it deems it is unable to properly assess or manage the risks involved.

• (c) This higher level of protection will be provided when a client who is considered to be a professional enters into a written agreement with the investment firm to the effect that it shall not be treated as a professional for the purposes of the applicable conduct of business regime. Such agreement should specify whether this applies to one or more particular services or transactions, or to one or more types of product or transaction.

Clients who may be treated as professionals on request

• (2) Investment firms should therefore be allowed to treat any of the above clients as professionals provided the relevant criteria and procedure mentioned below are fulfilled. These clients should not, however, be presumed to possess market knowledge and experience comparable to that of the categories listed in subparagraphs (1) to (4) of paragraph 2 of this Schedule.

• (3) Any such waiver of the protection afforded by the standard conduct of business regime shall be considered valid only if an adequate assessment of the expertise, experience and knowledge of the client, undertaken by the investment firm, gives reasonable assurance, in light of the nature of the transactions or services envisaged, that the client is capable of making the client's own investment decisions and understanding the risks involved.

• (4) In the case of small entities, the person subject to the assessment under subparagraph (3) of paragraph 3 of this Schedule should be the person authorised to execute transactions on behalf of the entity.

• (5) A client who is to be treated as a professional client for the purpose of these Regulations must satisfy at least two of the following criteria:

• (a) the client has carried out transactions, in significant size, on the relevant market at an average frequency of 10 per quarter over the previous four quarters;

• (b) the size of the client's financial instrument portfolio, defined as including cash deposits and financial instruments, exceeds €500,000;

• (c) the client works or has worked in the financial sector for at least one year in a professional position, which requires knowledge of the transactions or services envisaged.

• (6) The clients referred to in this Schedule may waive the benefit of the detailed rules of conduct only where the following procedure is followed:

• (a) they must state in writing to the investment firm that they wish to be treated as a professional client, either generally or in respect of a particular investment service or transaction, or type of transaction or product;

• (b) the investment firm must give them a clear written warning of the protections and investor compensation rights they may lose;

• (c) they must state in writing, in a separate document from the contract that they are aware of the consequences of losing such protections.

• (7) Before deciding to accept any request for waiver, investment firms must be required to take all reasonable steps to ensure that the client requesting to be treated as a professional client meets the relevant requirements stated in subparagraph (5) of pagagraph 3 of this Schedule.

• (8) If, before 1 November 2007, clients have already been categorised as professionals under parameters and procedures similar to those set out in subparagraphs (5) and (6) of paragraph 3 of this Schedule, that categorisation may satisfy the requirements of this Schedule.

• (9) Investment firms must implement appropriate written internal policies and procedures to categorise clients. Professional clients are responsible for keeping the firm informed about any change, which could affect their current categorisation. Should the investment firm become aware however that the client no longer fulfils the initial conditions, which made the client eligible for a professional treatment, the investment firm must take appropriate action.

	GIVEN under my Official Seal, 15 February 2007.
	BRIAN COWEN Minister for Finance.