S.I. No. 375/2017 - European Union (Markets in Financial Instruments) Regulations 2017

CONTENTS

PART 1 PRELIMINARY

1.

2.

3.

4.

PART 2 AUTHORISATION OF INVESTMENT FIRMS

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

16.

PART 3 REGULATION AND SUPERVISION OF INVESTMENT FIRMS

Chapter 1 Management bodies and persons with qualifying holdings

17.

18.

Chapter 2 Proposed acquisitions and disposals

19.

20.

21.

22.

Chapter 3 Organisational requirements

23.

24.

25.

26.

27.

PART 4 OPERATING CONDITIONS FOR INVESTMENT FIRMS

Chapter 1 General provisions

28.

29.

30.

Chapter 2 Provisions to ensure investor protection

31.

32.

33.

34.

35.

36.

37.

38.

Chapter 3 Market transparency and integrity

39.

40.

Chapter 4 SME growth markets

41.

PART 5 RIGHTS OF EU INVESTMENT FIRMS AND CREDIT INSTITUTIONS

42.

43.

44.

45.

46.

47.

PART 6 PROVISION OF INVESTMENT SERVICES AND INVESTMENT ACTIVITIES TO CERTAIN CLIENTS BY THIRD COUNTRY FIRMS

48.

49.

50.

51.

52.

PART 7 REGULATED MARKETS

53.

54.

55.

56.

57.

58.

59.

60.

61.

62.

63.

64.

65.

66.

67.

68.

69.

70.

71.

72.

73.

74.

75.

76.

77.

78.

79.

80.

PART 8 POSITION LIMITS AND POSITION MANAGEMENT CONTROLS IN COMMODITY DERIVATIVES AND REPORTING

81.

82.

PART 9 DATA REPORTING SERVICES

83.

84.

85.

86.

87.

PART 10 CONDITIONS FOR APAs, CTPs AND ARMs

88.

89.

90.

PART 11 THE BANK AS COMPETENT AUTHORITY

Chapter 1 Designation, powers and redress procedures

91.

92.

93.

Chapter 2 Appointment of Authorised Officers, Appointment of Inspectors, their powers and related matters

94.

95.

96.

97.

98.

99.

100.

101.

102.

103.

104.

105.

106.

107.

108.

109.

110.

111.

Chapter 3 Enforcement in relation to non-regulated financial service providers

112.

113.

114.

115.

116.

117.

118.

Chapter 4 Sanctions

119.

120.

121.

122.

123.

124.

125.

126.

127.

128.

129.

130.

131.

PART 12 COOPERATION BETWEEN COMPETENT AUTHORITIES AND WITH ESMA

132.

133.

134.

135.

136.

137.

138.

139.

140.

PART 13 COOPERATION WITH THIRD COUNTRIES

141.

PART 14 FINAL PROVISIONS

142.

143.

144.

145.

146.

147.

148.

SCHEDULE 1 INVESTMENT SERVICES AND ACTIVITIES AND FINANCIAL INSTRUMENTS

PART 1 Investment services and activities

PART 2 Ancillary services

PART 3 Financial instruments

PART 4 Data reporting services

SCHEDULE 2 PROFESSIONAL CLIENTS

SCHEDULE 3 SAFEGUARDING CLIENT FINANCIAL INSTRUMENTS AND FUNDS

SCHEDULE 4 PRODUCT GOVERNANCE REQUIREMENTS

SCHEDULE 5 INDUCEMENTS

S.I. No. 375 of 2017

EUROPEAN UNION (MARKETS IN FINANCIAL INSTRUMENTS) REGULATIONS 2017

Notice of the making of this Statutory Instrument was published in

“Iris Oifigiúil” of 18th August, 2017.

I, PASCHAL DONOHOE, Minister for Finance, in exercise of the powers conferred on me by section 3 of the European Communities Act 1972 (No. 27 of 1972), and for the purpose of giving effect to Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 and Commission Delegated Directive (EU) 2017/593 of 7 April 2016 and giving full effect to Regulation (EU) No 600/2014 of the European Parliament and the Council of 15 May 2014, hereby make the following regulations:

PART 1 PRELIMINARY

Citation and commencement

• (2) These Regulations shall come into operation on 3 January 2018.

General purpose of Regulations and application of certain provisions

• (a) authorisation and operating conditions for investment firms,

• (b) provision of investment services or activities by third-country firms through the establishment of a branch,

• (c) authorisation and operation of regulated markets,

• (d) authorisation and operation of data reporting services providers, and

• (e) supervision, cooperation and enforcement by competent authorities.

• (2) The following provisions apply to credit institutions authorised in accordance with Directive 2013/36/EU that provide one or more investment services or perform investment activities (or both):

• (a) Regulations 4(2), 9(8) and (9), 17(3) and (4) and 23 to 27,

• (b) Chapters 1 to 3 of Part 4 (other than Regulation 37(2) to (4)),

• (c) Part 5 (other than Regulations 42(3) to (5), (7) and (8), 43(4) to (6) and (13), 44(7)(a) and 45(2) to (4)), and

• (d) Regulations 91, 92(1) to (4), 119, 126 to 129, 133, 138 and 139.

• (3) The following provisions apply to investment firms and credit institutions authorised under Directive 2013/36/EU that sell or advise clients in relation to structured deposits:

• (a) Regulations 9(8) and (9), 17(3) and (4) and 23(1)(a) to (e) and (2) to (4);

• (b) Regulations 30 to 34, 36, 37 (other than paragraph (3) of it) and 38, and

• (c) Regulations 91, 92(1) to (4), 119, 126 to 129, 133, 138 and 139.

• (4) Regulation 24 shall also apply to members of, or participants in, regulated markets and MTFs who are not required to be authorised under this Regulation pursuant to Regulation 4(1)(a), (d), (k) or (p).

• (5) Regulations 81 and 82 shall also apply to persons exempt under Regulation 4(1).

• (6) All multilateral systems in financial instruments shall operate either in accordance with the provisions of Parts 2 to 6 concerning MTFs or OTFs or the provisions of Part 7 concerning regulated markets.

Interpretation

“Act of 1942” means the Central Bank Act 1942 (No. 22 of 1942);

“agricultural commodity derivatives” means derivative contracts relating to products listed in Article 1 of, and Annex I, Parts I to XX and XXIV/1, to, Regulation (EU) No 1308/2013 of the European Parliament and of the Council;

“algorithmic trading” means trading in financial instruments where a computer algorithm automatically determines individual parameters of orders such as whether to initiate the order, the timing, price or quantity of the order or how to manage the order after its submission, with limited or no human intervention, and does not include any system that is only used for the purpose of routing orders to one or more trading venues or for the processing of orders involving no determination of any trading parameters or for the confirmation of orders or the post-trade processing of executed transactions;

“ancillary services” means any of the services listed in Part 2 of Schedule 1;

“approved publication arrangement” or “APA” means a person authorised under these Regulations to provide the service of publishing trade reports on behalf of investment firms pursuant to Articles 20 and 21 of Regulation (EU) No 600/2014;

“approved reporting mechanism” or “ARM” means a person authorised under these Regulations to provide the service of reporting details of transactions to competent authorities or to ESMA on behalf of investment firms;

“authorised officer” means an authorised officer appointed under Regulation 94;

“Bank” means the Central Bank of Ireland;

“branch” means a place of business other than the head office which is a part of an investment firm, which has no legal personality and which provides investment services or performs investment activities (or does both) and which may also perform ancillary services for which the investment firm has been authorised and, for the purposes of this definition, all the places of business set up in the same Member State by an investment firm with headquarters in another Member State shall be regarded as a single branch;

“C6 energy derivative contracts” means options, futures, swaps, and any other derivative contracts mentioned in paragraph 6 of Part 3 of Schedule 1 relating to coal or oil that are traded on an OTF and must be physically settled;

“CCP” means a CCP as defined in Article 2(1) of Regulation (EU) No 648/2012;

“central securities depositories” or “CSD” means a central securities depository as defined Article 2(1) of Regulation (EU) No 909/2014;

“certificates” means certificates as defined in Article 2(1)(27) of Regulation (EU) No 600/2014;

“client” means any natural or legal person to whom an investment firm provides investment or ancillary services, or both;

“close links” means a situation in which two or more natural or legal persons are linked by—

• (a) participation in the form of ownership, direct or by way of control, of 20 % or more of the voting rights or capital of an undertaking,

• (b) control, namely the relationship between a parent undertaking and a subsidiary, in all the cases referred to in Article 22(1) and (2) of Directive 2013/34/EU, or a similar relationship between any natural or legal person and an undertaking, any subsidiary undertaking of a subsidiary undertaking also being considered to be a subsidiary of the parent undertaking which is at the head of those undertakings, or

• (c) a permanent link of both or all of them to the same person by a control relationship;

“commodity derivatives” means commodity derivatives as defined in Article 2(1)(30) of Regulation (EU) No 600/2014;

“competent authority” means the Bank or, in the case of another Member State, the authority designated by that State in accordance with Article 67 of the Directive;

“consolidated tape provider” or “CTP” means a person authorised under these Regulations to provide the service of collecting trade reports for financial instruments listed in Articles 6, 7, 10, 12 and 13, 20 and 21 of Regulation (EU) No 600/2014 from regulated markets, MTFs, OTFs and APAs and consolidating them into a continuous electronic live data stream providing price and volume data per financial instrument;

“contravention” includes, in relation to any provision, a failure to comply with that provision;

“Court” means the High Court;

“credit institution” means a credit institution as defined in point (1) of Article 4(1) of Regulation (EU) No 575/2013;

“cross-selling practice” means the offering of an investment service together with another service or product as part of a package or as a condition for the same agreement or package;

“data reporting services provider” means an APA, a CTP or an ARM;

“dealing on own account” means trading against proprietary capital resulting in the conclusion of transactions in one or more financial instruments;

“depositary receipts” means those securities which are negotiable on the capital market and which represent ownership of the securities of a non-domiciled issuer while being able to be admitted to trading on a regulated market and traded independently of the securities of the non-domiciled issuer;

“derivatives” means derivatives as defined in Article 2(1)(29) of Regulation (EU) No 600/2014;

“direct electronic access” means an arrangement where a member or participant or client of a trading venue permits a person to use its trading code so the person can electronically transmit orders relating to a financial instrument directly to the trading venue and includes arrangements which involve the use by a person of the infrastructure of the member or participant or client, or any connecting system provided by the member or participant or client, to transmit the orders (direct market access) and arrangements where such an infrastructure is not used by a person (sponsored access);

“Directive” means Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU;

“durable medium” means any instrument which—

• (a) enables a client to store information addressed personally to that client in a way accessible for future reference and for a period of time adequate for the purposes of the information, and

• (b) allows the unchanged reproduction of the information stored;

“enactment” includes an instrument made under an enactment;

“exchange-traded fund” means a fund of which at least one unit or share class is traded throughout the day on at least one trading venue and with at least one market maker which takes action to ensure that the price of its units or shares on the trading venue does not vary significantly from its net asset value and, where applicable, from its indicative net asset value;

“execution of orders on behalf of clients” means acting to conclude agreements to buy or sell one or more financial instruments on behalf of clients and includes the conclusion of agreements to sell financial instruments issued by an investment firm or a credit institution at the moment of their issuance;

“FATF” means the Financial Action Task Force on Money Laundering and Countering the Financing of Terrorism;

“financial instrument” means any of the instruments specified in Part 3 of Schedule 1;

“group” means a group as defined in Article 2(11) of Directive 2013/34/EU;

“high-frequency algorithmic trading technique” means an algorithmic trading technique characterised by—

• (a) infrastructure intended to minimise network and other types of latencies, including at least one of the following facilities for algorithmic order entry: co-location, proximity hosting or high-speed direct electronic access,

• (b) system-determination of order initiation, generation, routing or execution without human intervention for individual trades or orders, and

• (c) high message intraday rates which constitute orders, quotes or cancellations;

“home Member State” means:

• (a) in the case of an investment firm:

• (i) if the investment firm is a natural person, the Member State in which its head office is situated;

• (ii) if the investment firm is a legal person, the Member State in which its registered office is situated;

• (iii) if the investment firm has, under its national law, no registered office, the Member State in which its head office is situated;

• (b) in the case of a regulated market, the Member State in which the regulated market is registered or, if under the law of that Member State it has no registered office, the Member State in which the head office of the regulated market is situated;

• (c) in the case of an APA, a CTP or an ARM:

• (i) if the APA, CTP or ARM is a natural person, the Member State in which its head office is situated;

• (ii) if the APA, CTP or ARM is a legal person, the Member State in which its registered office is situated;

• (iii) if the APA, CTP or ARM has, under its national law, no registered office, the Member State in which its head office is situated;

“host Member State” means the Member State, other than the home Member State, in which an investment firm has a branch or provides investment services or performs activities (or does both), or the Member State in which a regulated market provides appropriate arrangements so as to facilitate access to trading on its system by remote members or participants established in that same Member State;

“investment advice” means the provision of personal recommendations to a client, either upon its request or at the initiative of the investment firm, in respect of one or more transactions relating to financial instruments;

“investment firm” means any person whose regular occupation or business is the provision of one or more investment services to third parties or the performance of one or more investment activities on a professional basis or both but does not include a natural person unless—

• (a) his or her legal status ensures a level of protection for third parties’ interests equivalent to that afforded by legal persons,

• (b) he or she is subject to equivalent prudential supervision appropriate to his or her legal status, and

• (c) if paragraph (2) is applicable, he or she ensures that the conditions set out in that paragraph are fulfilled;

“investment services and activities” means any of the services and activities listed in Part 1 of Schedule 1 relating to any of the instruments listed in Part 3 of that Schedule;

“limit order” means an order to buy or sell a financial instrument at its specified price limit or better and for a specified size;

“liquid market” means a market for a financial instrument or a class of financial instruments, where there are ready and willing buyers and sellers on a continuous basis, assessed in accordance with the following criteria, taking into consideration the specific market structures of the particular financial instrument or of the particular class of financial instruments, namely:

• (a) the average frequency and size of transactions over a range of market conditions, having regard to the nature and life cycle of products within the class of financial instrument;

• (b) the number and type of market participants, including the ratio of market participants to traded instruments in a particular product;

• (c) the average size of spreads, where available;

“management body” means the body or bodies of an investment firm, market operator or data reporting services provider, which are appointed in accordance with the law of the State or the law of another Member State, which are empowered to set the entity’s strategy, objectives and overall direction, and which oversee and monitor management decision-making and includes persons who effectively direct the business of the entity;

“market maker” means a person who holds himself or herself out on the financial markets on a continuous basis as being willing to deal on own account by buying and selling financial instruments against that person’s proprietary capital at prices defined by that person;

“market operator” means one or more persons who manage or operate (or both manage and operate) the business of a regulated market and may be the regulated market itself;

“matched principal trading” means a transaction where the facilitator interposes itself between the buyer and the seller to the transaction in such a way that it is never exposed to market risk throughout the execution of the transaction, with both sides executed simultaneously, and where the transaction is concluded at a price where the facilitator makes no profit or loss, other than a previously disclosed commission, fee or charge for the transaction;

“Member State” means Member State of the European Union and, where relevant, includes a contracting party to the Agreement on the European Economic Area signed at Oporto on 2 May 1992 (as adjusted by the Protocol signed at Brussels on 17 March 1993), as amended;

“Minister” means Minister for Finance;

“money-market instruments” means those classes of instruments which are normally dealt in on the money market, such as treasury bills, certificates of deposit and commercial papers and excluding instruments of payment;

“multilateral system” means any system or facility in which multiple third-party buying and selling trading interests in financial instruments are able to interact in the system;

“multilateral trading facility” or “MTF” means a multilateral system, operated by an investment firm or a market operator, which brings together multiple third-party buying and selling interests in financial instruments — in the system and in accordance with non-discretionary rules — in a way that results in a contract in accordance with Parts 2 to 6;

“non-regulated financial service provider” means a person who is not a regulated financial service provider (within the meaning of the Act of 1942) but who otherwise is a person subject to requirements imposed by these Regulations or Regulation (EU) No 600/2014;

“organised trading facility” or “OTF” means a multilateral system which is not a regulated market or an MTF and in which multiple third-party buying and selling interests in bonds, structured finance products, emission allowances or derivatives are able to interact in the system in a way that results in a contract in accordance with Parts 2 to 6;

“parent undertaking” means a parent undertaking within the meaning of Article 2(9) and 22 of Directive 2013/34/EU of the European Parliament and of the Council;

“portfolio management” means managing portfolios in accordance with mandates given by clients on a discretionary client-by-client basis where such portfolios include one or more financial instruments;

“professional client” means a client meeting the criteria specified in Schedule 2;

“qualifying holding” means, in relation to an investment firm or a market operator, a direct or indirect holding in an investment firm or market operator which represents 10 % or more of the capital or of the voting rights, as set out in Articles 9 and 10 of Directive 2004/109/EC of the European Parliament and of the Council, taking into account the conditions regarding aggregation thereof specified in Article 12(4) and (5) of that Directive, or which makes it possible to exercise a significant influence over the management of the investment firm or market operator in which that holding subsists;

“qualifying money market fund” means a collective investment undertaking authorised under Directive 2009/65/EC, or which is subject to supervision and, if applicable, authorised by an authority under the national law of the authorising Member State, and which satisfies all of the following conditions:

• (a) its primary investment objective must be to maintain the net asset value of the undertaking either constant at par (net of earnings), or at the value of the investors’ initial capital plus earnings;

• (b) it must, with a view to achieving that primary investment objective, invest exclusively in high quality money market instruments with a maturity or residual maturity of no more than 397 days, or regular yield adjustments consistent with such a maturity, and with a weighted average maturity of 60 days (and it may also achieve that objective by investing on an ancillary basis in deposits with credit institutions);

• (c) it must provide liquidity through same day or next day settlement,

and, for the purposes of paragraph (b) of this definition—

• (i) a money market instrument shall be considered to be of high quality if the management or investment company performs its own documented assessment of the credit quality of money market instruments that allows it to consider a money market instrument as high quality, and

• (ii) where one or more credit rating agencies registered and supervised by ESMA have provided a rating of the instrument, the management or investment companys internal assessment should have regard to, inter alia, those credit ratings;

“regulated market” means a multilateral system operated or managed (or both managed and operated) by a market operator, which brings together or facilitates the bringing together of multiple third-party buying and selling interests in financial instruments — in the system and in accordance with its non-discretionary rules — in a way that results in a contract, in respect of the financial instruments admitted to trading under its rules or systems (or both), and which is authorised and functions regularly and in accordance with Part 7;

“retail client” means a client who is not a professional client;

“securities financing transaction” means transactions as defined in Article 3 point (11) of Regulation (EU) 2015/2365 of the European Parliament and of the Council on transparency of securities financing transactions and of reuse;

“senior management” means natural persons who exercise executive functions within an investment firm, a market operator or a data reporting services provider and who are responsible, and accountable to the management body, for the day-to-day management of the entity, including for the implementation of the policies concerning the distribution of services and products to clients by the firm and its personnel;

“small and medium-sized enterprise” means a company that had an average market capitalisation of less than €200, 000 000 on the basis of end-year quotes for the previous 3 calendar years;

“SME growth market” means an MTF that is registered as an SME growth market in accordance with Regulation 41;

“sovereign debt” means a debt instrument issued by a sovereign issuer;

“sovereign issuer” means any of the following that issues debt instruments:

• (a) the Union;

• (b) a Member State, including a government department, an agency, or a special purpose vehicle of the Member State;

• (c) in the case of a federal Member State, a member of the federation;

• (d) a special purpose vehicle for several Member States;

• (e) an international financial institution established by two or more Member States which has the purpose of mobilising funding and providing financial assistance to the benefit of its members that are experiencing or threatened by severe financing problems;

• (f) the European Investment Bank;

“structured deposit” means a deposit as defined in point (3) of Article 2(1) of Directive 2014/49/EU of the European Parliament and of the Council, which is fully repayable at maturity on terms under which interest or a premium will be paid or is at risk, according to a formula involving factors such as:

• (a) an index or combination of indices, excluding variable rate deposits whose return is directly linked to an interest rate index such as Euribor or Libor,

• (b) a financial instrument or combination of financial instruments,

• (c) a commodity or combination of commodities or other physical or non-physical non-fungible assets, or

• (d) a foreign exchange rate or combination of foreign exchange rates;

“structured finance products” means structured finance products as defined in Article 2(1)(28) of Regulation (EU) No 600/2014;

“subsidiary” means a subsidiary undertaking within the meaning of Articles 2(10) and 22 of Directive 2013/34/EU, including any subsidiary of a subsidiary undertaking of an ultimate parent undertaking;

“systematic internaliser” means an investment firm which, on an organised, frequent systematic and substantial basis, deals on own account when executing client orders outside a regulated market, an MTF or an OTF without operating a multilateral system and paragraphs (3) and (4) supplement this definition;

“trading venue” means a regulated market, an MTF or an OTF;

“third country” means a country that is not in the European Economic Area;

“third-country firm” means a firm that would be a credit institution providing investment services or performing investment activities or an investment firm if its head office or registered office were located within the European Economic Area;

“tied agent” means a natural or legal person who, under the full and unconditional responsibility of only one investment firm on whose behalf it acts, promotes investment or ancillary services (or both) to clients or prospective clients, receives and transmits instructions or orders from the client in respect of investment services or financial instruments, places financial instruments or provides advice to clients or prospective clients in respect of those financial instruments or services;

“transferable securities” means those classes of securities which are negotiable on the capital market, with the exception of instruments of payment, such as:

• (a) shares in companies and other securities equivalent to shares in companies, partnerships or other entities, and depositary receipts in respect of shares,

• (b) bonds or other forms of securitised debt, including depositary receipts in respect of such securities, or

• (c) any other securities giving the right to acquire or sell any such transferable securities or giving rise to a cash settlement determined by reference to transferable securities, currencies, interest rates or yields, commodities or other indices or measures;

“UCITS management company” means a management company as defined in point (b) of Article 2(1) of Directive 2009/65/EC of the European Parliament and of the Council;

“wholesale energy product” means a wholesale energy product as defined in point (4) of Article 2 of Regulation (EU) No 1227/2011.

• (2) For the purposes of the definition of “investment firm” in paragraph (1), where a natural person provides services involving the holding of third parties’ funds or transferable securities, the natural person may be considered as an investment firm for the purposes of these Regulations and of Regulation (EU) No 600/2014 only if, without prejudice to the other requirements imposed by these Regulations, by Regulation (EU) No 600/2014 and by Directive 2013/36/EU, he or she ensures that the following conditions are fulfilled:

• (a) the ownership rights of third parties in instruments and funds must be safeguarded, especially in the event of the insolvency of the investment firm or of its proprietors, seizure, set-off or any other action by creditors of the firm or of its proprietors;

• (b) the investment firm must be subject to rules designed to monitor the firm’s solvency and that of its proprietors;

• (c) the investment firms annual accounts must be audited by one or more persons empowered, under the law of the State or another Member State, to audit accounts;

• (d) where the investment firm has only one proprietor, he or she must make provision for the protection of investors in the event of the investment firms cessation of business following his or her death incapacity or any other such event.

• (3) Without prejudice to paragraph (4), for the purposes of the definition of “systematic internaliser” in paragraph (1)—

• (a) the frequent and systematic basis (referred to in that definition) shall be measured by the number of OTC trades in the financial instrument carried out by the investment firm on own account when executing client orders, and

• (b) the substantial basis (referred to in that definition) shall be measured either by the size of the OTC trading carried out by the investment firm in relation to the total trading of the investment firm in a specific financial instrument or by the size of the OTC trading carried out by the investment firm in relation to the total trading in the Union in a specific financial instrument.

• (4) The definition of “systematic internaliser” in paragraph (1) shall apply only where the pre-set limits for a frequent and systematic basis and for a substantial basis are both crossed or where an investment firm chooses to opt-in under the systematic internaliser regime.

• (5) A reference in these Regulations to an investment firm is, unless the context otherwise requires, a reference to an authorised investment firm.

• (6) A reference in these Regulations to a company incorporated under the Companies Act 2014 (No.38 of 2014) includes a reference to an existing company within the meaning of that Act.

• (7) For the avoidance of doubt, “devise or otherwise create”, where used in these Regulations in relation to a financial instrument, is equivalent to the expression “manufacture” used in the Directive and includes the creation, development, issuance or design of a financial instrument.

• (8) A word or expression that is used in these Regulations and is also used in the Directive, the Commission Delegated Directive (EU) 2017/593 of 7 April 2016 or Regulation (EU) No 600/2014 shall have the meaning in these Regulations that it has in the Directive, that Delegated Directive or that Regulation, as the case may be.

• (9) References in Schedules 3, 4 and 5 to investment firms and financial instruments include references to credit institutions and structured deposits in relation to all the requirements referred to in Regulation 2(2) and (3).

Exemptions

• (a) insurance undertakings or undertakings carrying out the reinsurance and retrocession activities referred to in Directive 2009/138/EC when carrying out the activities referred to in that Directive and the exemption conferred by this subparagraph is not dependent on the insurance undertaking or other foregoing undertaking meeting the conditions specified in subparagraph (c);

• (b) persons which provide investment services exclusively for their—

• (i) parent undertakings,

• (ii) subsidiaries, or

• (iii) other subsidiaries of their parent undertakings;

• (c) persons dealing on their own account in financial instruments other than commodity derivatives or emission allowances or derivatives thereof and not providing any other investment services or performing any other investment activities in financial instruments other than commodity derivatives or emission allowances or derivatives thereof, unless the persons—

• (i) are market makers,

• (ii) are members of or participants in a regulated market or an MTF or have direct electronic access to a trading venue,

• (iii) apply a high-frequency algorithmic trading technique, or

• (iv) deal on own account when executing client orders,

but clause (ii) does not apply to non-financial entities who execute transactions on a trading venue which are objectively measurable as reducing risks directly relating to the commercial activity or treasury financing activity of those non-financial entities or their groups;

• (d) operators with compliance obligations under Directive 2003/87/EC who, when dealing in emission allowances, do not execute client orders and who do not provide investment services or perform any investment activities other than dealing on own account, provided that those persons to not apply a high-frequency algorithmic trading technique;

• (e) persons who provide investment services consisting exclusively in the administration of employee-participation schemes;

• (f) persons who provide investment services which only involve both administration of employee-participation schemes and the provision of investment services exclusively for their parent undertakings, for their subsidiaries or for other subsidiaries of their parent undertakings;

• (g) the members of the European System of Central Banks, the National Treasury Management Agency and other public bodies charged with or intervening in the management of the public debt in the Union and international financial institutions established by two or more Member States which have the purpose of mobilizing funding and providing financial assistance to the benefit of their members that are experiencing or threatened by severe financing problems;

• (h) any of the following who acts on behalf of the National Treasury Management Agency:

• (i) An Post, including any postmaster acting on its behalf, or any agent appointed by the NTMA to administer and distribute State Savings, and this clause shall be construed as operating also to exempt from these Regulations such an agent with respect to any services provided by the agent that are incidental to, or consequential on, the administration and distribution of State Savings;

• (ii) the Prize Bond Company Ltd. or any successor to the Prize Bond Company Ltd., as operator of the Prize Bond scheme;

• (i) any Fund investment vehicle (within the meaning given by section 37 of the National Treasury Management Agency (Amendment) Act 2014 );

• (j) the National Pensions Reserve Fund Commission;

• (k) persons—

• (i) dealing on own account, including market makers, in commodity derivatives or emission allowances or derivatives thereof, excluding persons who deal on own account when executing client orders, or

• (ii) providing investment services (other than dealing on own account) in commodity derivatives or emission allowances or derivatives thereof to the customers or suppliers of their main business,

where-

• (I) for each of those cases individually and on an aggregate basis this is an ancillary activity to their main business, when considered on a group basis, and that main business is not the provision of investment services within the meaning of these Regulations or banking activities under Directive 2013/36/EU, or acting as a market-maker in relation to commodity derivatives,

• (II) those persons do not apply a high-frequency algorithmic trading technique, and

• (III) those persons notify annually the Bank that they make use of this exemption and upon request report to the Bank the basis on which they consider that their activity under clauses (i) and (ii) is ancillary to their main business;

and the exemption conferred by this subparagraph on those persons is not dependent on their meeting the conditions specified in subparagraph (c);

• (l) persons providing investment advice in the course of providing another professional activity not covered by these Regulations if the provision of the advice is not specifically remunerated;

• (m) a personal representative, within the meaning of the Succession Act 1965 , in respect of actions as personal representative of a deceased person;

• (n) a trustee, within the meaning of the Trustee Act 1893 , in respect of actions as trustee of a trust, unless the principal objective of the trust is to provide investment services to members of the public;

• (o) notwithstanding the obligations imposed on liquidators and receivers under these Regulations, a person appointed as a liquidator or receiver of the property of a company in respect of activities relating to the liquidation or receivership;

• (p) collective investment undertakings and pension funds whether coordinated at Union level or not and the depositories and managers and the exemption conferred by this subparagraph is not dependent on the undertaking, fund, depositary or, as the case may be, manager meeting the conditions specified in subparagraph (c);

• (q) a practising member of an approved professional body within the meaning of Part VII of the Investment Intermediaries Act 1995 , not being a certified person within the meaning of that Part, who holds at the member’s principal place of business, on behalf of clients, share certificates in private companies limited by shares owned by those clients where—

• (i) the member holds the share certificates only in order to facilitate the orderly management of the accounting records of the private company limited by shares, and

• (ii) the holding of the share certificates arises from the provision of professional services by the member to the client;

• (r) CSDs that are regulated as such under Union law, to the extent that they are regulated under that Union law;

• (s) persons who perform investment activities or provide investment services relating to commodity derivatives, except with regard to the operation of a secondary market, including a platform for secondary trading in financial transmission rights, in order to carry out the following activities—

• (i) transmission system operators as defined in Article 2(4) of Directive 2009/72/EC or Article 2(4) of Directive 2009/73/EC when carrying out their tasks under those Directives, under regulation (EC) No 714/2009, under Regulation (EC) No 715/2009 or under network codes or guidelines adopted pursuant to those Regulations,

• (ii) acting as service providers on their behalf to carry out their task under those legislative acts or under network codes or guidelines adopted pursuant to those Regulations, or

• (iii) any operator or administrator of an energy balancing mechanism, pipeline network or system to keep in balance the supplies and uses of energy when carrying out such tasks;

• (t) branches of third country firms established in the State, save as otherwise provided for in Regulation 48.

• (2) The rights conferred by these Regulations do not extend to the provision of services as counterparty in transactions carried out—

• (a) by public bodies dealing with public debt,

• (b) by members of the European System of Central Banks,

• (i) performing their tasks as provided for by the Treaty and the Statute of the European System of Central Banks and of the European Central Bank, or

• (ii) performing equivalent functions under the law of the State or another Member State.

• (3) These Regulations do not apply to persons whose activities are regulated by the Bank, if the persons—

• (a) are not allowed to hold clients’ funds or securities and therefore are not allowed at any time to place themselves in debit with their clients,

• (b) are not allowed to provide any investment service except as follows:

• (i) receiving and transmitting orders in transferable securities and units in collective investment undertakings;

• (ii) providing investment advice in relation to those securities and units,

and

• (c) in the course of providing the services referred to in clause (i) of subparagraph (b) are allowed to transmit orders only to any or all of the following:

• (i) investment firms authorised in accordance with the Directive or these Regulations;

• (ii) credit institutions authorised in accordance with Directive 2013/36/EU;

• (iii) branches of investment firms or of credit institutions authorised in a third country and which are subject to and comply with prudential rules considered by the competent authorities to be at least as stringent as those specified in the Directive, the European Union (Capital Requirements) Regulations 2014 ( S.I. No. 158 of 2014 ) or the European Union (Capital Requirements) (No. 2) Regulations 2014 ( S.I. No. 159 of 2014 );

• (iv) collective investment undertakings authorised under the law of a Member State to market units to the public and to the managers of the undertakings;

• (v) investment companies with fixed capital, as defined in Article 17(7) of Directive 2012/30/EU of the European Parliament and of the Council, the securities of which are listed or dealt in on a regulated market in a Member State.

• (4) A certified person, within the meaning of Part VII of the Investment Intermediaries Act 1995 is not required to hold an authorisation under these Regulations while—

• (a) that person remains a certified person, and

• (b) any investment advice and investment services are provided by that person in an incidental manner and within the limits, conditions or constraints of the certificate granted by that persons approved professional body.

• (5) In paragraph (4)(b)—

“investment advice” includes investment advice within the meaning of that expression as used in Part VII of the Investment Intermediaries Act 1995 in relation to a certified person;

“investment services” includes investment business services within the meaning of that expression as used in Part VII of the Investment Intermediaries Act 1995 in relation to a certified person.

PART 2 AUTHORISATION OF INVESTMENT FIRMS

Requirement for authorisation (and certain provisions concerning MTFs and OTFs)

• (a) is an authorised investment firm, or

• (b) is authorised to do so (in accordance with the Directive) by a competent authority in another Member State,

and is acting as authorised.

• (2) A person who, immediately before 3 January 2018, is an authorised investment firm under the European Communities (Markets in Financial Instruments) Regulations 2007 ( S.I. No.60 of 2007 ) is deemed, for the purposes of these Regulations, to be an authorised investment firm.

• (3) A market operator of a regulated market may operate an MTF or an OTF in the State, subject to the prior verification by the Bank of the market operator’s compliance with the provisions of Parts 2 and 3 relating to MTFs and OTFs.

• (4) For the purposes of paragraph (1), an investment firm shall not be regarded as operating in the State if the firm provides investment services or performs investment activities, with or without any ancillary services, to eligible counterparties or to professional clients within the meaning of Schedule 2 without the establishment of a branch in the State and—

• (a) the firm’s head or registered office is—

• (i) in a third country, or

• (ii) in a Member State other than the State and the firm does not provide any investment services in respect of which it is required to be authorised in its home Member State for the purposes of the Directive, or

• (b) the firm is authorised in a Member State other than the State, under the Directive, but provides only investment services of a kind for which authorisation under the Directive is not available during the provision of the investment services.

• (5) A third country investment firm providing investment services or performing investment activities in the State shall not be able to do so on the basis of the firm relying on paragraph (4) unless the following conditions are met:

• (a) the firm is subject to authorisation and supervision in the third country where the third-country firm is established and the third-country firm is authorised so that the competent authority of the third country pays due regard to any recommendations of FATF in the context of anti-money laundering and countering the financing of terrorism, and

• (b) co-operation arrangements that include provisions regulating the exchange of information for the purpose of preserving the integrity of the market and protecting investors are in place between the Bank and the competent authorities where the third-country firm is established.

• (6) Without prejudice to the rights of third country investment firms to provide investment services or perform investment activities in the State in accordance with the second subparagraph of Article 46(5) of Regulation (EU) No 600/2014, the Bank may issue a direction to a third country investment firm, being a third country investment firm whose registration has been withdrawn by ESMA in accordance with Article 48 of Regulation (EU) No 600/2014, that it shall not provide investment services or perform investment activities in the State irrespective of its compliance with paragraphs (4) and (5).

• (7) The Bank, after consultation with the Minister, may make rules requiring persons who provide investment services or perform investment activities on the basis of relying on paragraph (4) to notify the Bank in writing of such particulars as the Bank considers necessary or expedient to enable the Bank to verify that the conditions in paragraphs (4) and (5) are being met.

• (8) An investment firm falling within the definition of “systematic internaliser” in Regulation 3(1) shall notify the Bank, without delay, of that fact. Such notification shall be transmitted to ESMA by the Bank.

Bank to establish and maintain register of authorised investment firms

• (a) establish and maintain a register of all authorised investment firms for which the Bank is the competent authority,

• (b) ensure that the register is publicly accessible and regularly updated and contains information on the investment services or activities for which the investment firms are authorised,

• (c) notify ESMA of all authorised investment firms, and

• (d) publish on that register all withdrawals of authorisation in accordance with Regulation 13(1)(d), (e) or (g), and the requirement under this paragraph to publish on that register such matters shall be construed as requirement to keep those matters so published for a period of 5 years after the date of the withdrawal concerned.

Requirements of investment firm authorisations

• (a) it has its head office in the State, and

• (b) if it is required to have a registered office, it also has its registered office in the State.

Application to Bank for authorisation

• (2) The Bank may grant or refuse an application for authorisation.

• (3) An application for authorisation may be granted—

• (a) unconditionally, or

• (b) subject to such conditions or requirements as the Bank sees fit.

• (4) The Bank may from time to time vary conditions or requirements subsequent to granting an application for authorisation.

• (5) Without prejudice to paragraphs (3)(b) and (4), the Bank may impose conditions or requirements (or both) in respect of the level of capital to be maintained by an investment firm where—

• (a) the Bank has identified particular risks that cannot be addressed other than by way of an additional capital requirement; or

• (b) the sole application of other measures is unlikely to address particular risks identified by the Bank, sufficiently or within an appropriate timeframe,

but, in either case, only if the imposition of such conditions or requirements (or both) is proportionate so as to address the particular risks identified.

• (6) For the purpose of paragraph (5) “particular risks” means any risks which, in the Bank’s opinion, could undermine the sound and prudent management of an investment firm or the interests of its clients or the integrity of the market.

Prerequisites to granting authorisation

• (a) that it is—

• (i) a company incorporated by statute or under the Companies Act 2014 ,

• (ii) incorporated outside the State,

• (iii) a company established by Royal Charter,

• (iv) a partnership,

• (v) an industrial and provident society, or

• (vi) an individual,

• (b) that the memorandum of association and articles of association or other constituting documents of the investment firm (if any) contain sufficient provision to enable it to operate in accordance with—

• (i) these Regulations, and

• (ii) any conditions and requirements imposed by the Bank,

• (c) as to the probity and competence of each person who is a director or manager of the investment firm,

• (d) as to the organisational structure of the investment firm and that adequate levels of staff and expertise will be employed to carry out the investment firm’s proposed activities,

• (e) as to the resources, procedures and arrangements for the provision of services and performance of activities, taking into account the nature, scale and complexity of its business and all the requirements the investment firm has to comply with,

• (f) that the investment firm has followed and will follow established procedures to enable—

• (i) the Bank to be supplied with all information necessary for the Bank’s supervisory functions, and

• (ii) the public to be supplied with any information which the Bank may specify,

• (g) that the organisation of the business structure of the investment firm is such that it and any of its related undertakings are capable of being supervised adequately by the Bank,

• (h) as to the conduct of—

• (i) the investment firm’s business and financial resources, and

• (ii) any other matters which the Bank considers necessary in the interests of the proper and orderly regulation and supervision of investment firms or in the interests of the protection of investors.

• (2) The Bank shall not grant an application for authorisation by an investment firm unless it is satisfied that the members of the management body of the investment firm—

• (a) are of good repute,

• (b) possess sufficient knowledge, skills and experience, and

• (c) will commit sufficient time to perform their functions in the investment firm,

so as to ensure the effective, sound and prudent management and operation of the investment firm and the adequate consideration of the interests of its clients and the integrity of the market.

• (3) Without prejudice to paragraph (2), the Bank shall not grant an application for authorisation by an investment firm if there are objective and demonstrable grounds for believing that the management body of the firm may pose a threat to the effective, sound and prudent management of the investment firm and to the adequate consideration of the interests of their clients and the integrity of the market.

• (4) The Bank shall not grant an application for authorisation by an investment firm unless, after taking into account the need to ensure sound and prudent management of investment firms, the Bank is satisfied as to the suitability of the shareholders or members that have qualifying holdings in the investment firm.

• (5) For the purposes of paragraph (4) in determining whether the criteria for a qualifying holding are fulfilled, there shall not be taken into account—

• (a) voting rights, or

• (b) shares,

which investment firms or credit institutions may hold as a result of providing the underwriting of financial instruments or the placing of financial instruments on a commitment basis as included under paragraph 6 of Part 1 of Schedule 1 provided that those rights are—

• (i) not exercised or otherwise used to intervene in the management of the issuer, and

• (ii) disposed of within one year of acquisition.

• (6) Where close links exist between the investment firm and other persons, the Bank shall grant an application for authorisation only if those links do not prevent the effective exercise of the supervisory functions of the Bank.

• (7) The Bank shall not grant an application for authorisation by an investment firm if the laws, regulations and administrative provisions of a third country governing one or more natural or legal persons with which the investment firm has close links, or difficulties involved in their enforcement, prevent the effective exercise of its supervisory functions.

• (8) The Bank shall not grant an application for authorisation by an investment firm unless it is satisfied that the investment firm will meet its obligations under the Investor Compensation Act 1998 (No. 37 of 1998).

• (9) In relation to structured deposits, the obligation specified in paragraph (8) shall be met where the structured deposit is issued by a credit institution which is a member of a deposit guarantee scheme recognised under European Union (Deposit Guarantee Schemes) Regulations 2015 ( S.I. No. 516 of 2015 ).

• (10) The Bank shall not grant an application for authorisation by an investment firm unless the investment firm has sufficient initial capital in accordance with the requirements of Regulation (EU) No 575/2013 and the European Union (Capital Requirements) Regulations 2014 ( S.I. No. 158 of 2014 ), having regard to the nature of the investment services it seeks authorisation to provide.

• (11) In this Regulation “related undertaking”, in relation to an investment firm (“the first-mentioned person”), means—

• (a) if the first-mentioned person is a company, another company that is related within the meaning of the Companies Act 2014 to it,

• (b) a partnership of which the first-mentioned person is a member,

• (c) if the businesses of the first-mentioned person and another person have been so carried on that the separate business of each of them, or a substantial part thereof, is not readily identifiable, that other person,

• (d) if the decision as to how and by whom the businesses of the first-mentioned person and another person shall be managed can be made either by the same person or by the same group of persons acting in concert, that other person,

• (e) a person who performs a specific and limited purpose by or in connection with the business of the first-mentioned person, or

• (f) if provision is required to be made for the first-mentioned person and another person in any consolidated accounts compiled in accordance with Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013, that other person.

Time limits for grant or refusal of applications for authorisation

• (a) within 6 months after the receipt by the Bank of the complete application, or

• (b) where further information or records have been requested by the Bank in relation to the application (which request the Bank has, by virtue of this Regulation, power to make) within 6 months after the receipt by the Bank of the further information or records.

• (2) If the applicant does not provide a complete application within 12 months after the initiation of the application, the Bank may refuse the application for an authorisation.

Unincorporated investment firms — special provisions

• (2) The Bank may impose conditions or requirements (or both) on an investment firm which is constituted as an unincorporated body of persons or which is a natural person in order to achieve an equivalent level of supervision to that pertaining to an investment firm which is constituted as a corporate body.

Scope of authorisation

• (a) shall specify the investment services or activities which the firm is authorised to provide,

• (b) may cover one or more ancillary services but may not cover only the provision of ancillary services, and

• (c) may—

• (i) extend to the provision of any investment business services, or

• (ii) cover any investment instruments,

as defined in the Investment Intermediaries Act 1995 .

• (2) An investment firm seeking authorisation to extend its business to additional investment services or ancillary services for which the firm is not authorised shall apply to the Bank for the appropriate extension of the firm’s authorisation and the Bank may grant the extension if the Bank considers it appropriate in the circumstances.

• (3) An authorisation granted to an investment firm under this Part, together with any extension under paragraph (2)—

• (a) is valid for the entire European Union, and

• (b) allows an investment firm or a branch established by it to provide the services or perform the activities for which the firm has been authorised throughout the European Union, either through the right of establishment, including through a branch, or through the freedom to provide services.

Withdrawal of authorisation by Bank

• (a) fails to operate as an investment firm during the 12 month period after the date of the authorisation,

• (b) has not provided investment services or performed investment activities for the immediately preceding 6 months unless the Bank has provided for the authorisation to lapse in such cases,

• (c) expressly renounces the authorisation,

• (d) obtained the authorisation by making false statements or by any other irregular means,

• (e) no longer meets the conditions under which the authorisation was granted or the conditions of authorisation listed in Regulation (EU) No 575/2013,

• (f) is being wound up, or

• (g) has contravened any provision of these Regulations or Regulation (EU) No 600/2014 that governs the operation of investment firms and the contravention or contraventions is or are, in the opinion of the Bank, of a serious and systematic nature.

• (2) Where the Bank has withdrawn an authorisation in accordance with paragraph (1) the Bank shall notify ESMA of the withdrawal.

Revocation of authorisation by Court

• (a) in the interests of the proper and orderly regulation and supervision of investment firms,

• (b) in order to protect investors, or

• (c) in one or more of the circumstances described in paragraph (2),

and on the making of such an application the Court may grant such an order accordingly.

• (2) The circumstances referred to in paragraph (1) are as follows:

• (a) the investment firm has been convicted on indictment of any offence—

• (i) under these Regulations,