EU Technical Standards on Investment Firm Authorization Published

A Commission Delegated Regulation with Regulatory Technical Standards on information and requirements for the authorization of investment firms under the revised Markets in Financial Instruments Directive has been published in the Official Journal of the European Union. MiFID II provides the requirements and conditions for authorization of an investment firm. The RTS set out the information that a firm applying for authorization as an investment firm must submit to the relevant national regulator. The information includes general corporate information, information on the applicant's sources of capital and financial situation, information on the applicant's shareholders, management body and persons who direct the business and information on the organization of the firm.

MiFID II prescribes that a national regulator should refuse authorization if it is not satisfied that the shareholders and members with qualifying holdings are suitable and, where the applicant firm has any close links with a natural or legal person, if the close links prevent the regulator's supervision of the firm. A qualifying holding is a direct or indirect holding in an investment firm of 10% or more of the capital or voting rights. Close links refers to a situation where two or more natural or legal persons are linked by participation in ownership or by control. The RTS require national regulators to assess the proposed shareholders and members with qualifying holdings against certain criteria, such as reputation, financial soundness and anti-money laundering risks. Regulators must take into account the likely influence on the investment firm of each shareholder and qualifying member. The RTS also provide that a group structure will be considered to be an obstacle to effective supervision by a national regulator if the structure is complex or insufficiently transparent, if the structure has a geographical location of group entities or if the activities of the group entities may prevent the regulator from assessing the suitability of shareholders and members with qualifying holdings or the influence of close links.

A Commission Implementing Regulation setting out Implementing Technical Standards on the notifications by and to an applicant for authorization and authorized investment firms has also been published in the Official Journal of the European Union. The ITS set out the notifications required and the timeframes for notifications to be provided by a national regulator. The ITS further provide the template for an application for authorization as an investment firm, the list of members of a management body of an applicant and the notification of an authorized firm of a change to the members of its management body.

The RTS and the ITS enter into force on November 15, 2017 and apply from January 3, 2018.

View the RTS on information requirements for authorization of investment firms.

View the ITS on notifications for authorization of investment firms.