Establishment of a branch - MiFID 2 Provision

MiFID 2 Anatomy™ →Go uptown In a Nutshell™ Section 39: Article 39 Establishment of a branch 1. A Member State may require that a third-country firm intending to provide investment services to clients in its territory establishes a branch in that Member State. 2. If so, the branch must have the necessary regulatory authorisation in the relevant Member State including: (a) Sufficient local recognition esp. re AML: The third-country firm is appropriately regulated for the services in question in its own jurisdiction, and its local regulator has anti-money laundering rules consistent with FATF recommendations; (b) Information sharing between regulators: The third-country firm’s home regulator co-operates and shares information with competent authorities in the relevant Member State; (c) Sufficient capitalisation: Sufficient initial capital is at free disposal of the branch; (d) Responsible individuals: there is at least one responsible manager of the branch and all who are responsible complies with the requirement of Article 9(1); (e) Tax sharing: The third-country firm’s home jurisdiction shares necessary tax information with the relevant Member State in compliance with Article 26 of the OECD Model Tax Convention on Income and on Capital ; (f) Investor compensation schemes: The third-country firm belongs to an investor-compensation scheme recognised under the Investor Compensation Schemes Directive (97/9/EC (EUR Lex)). 3. The third-country firm applies to the competent authority in the relevant Member State. view template Full wikitext: Article 39 Establishment of a branch 1. A Member State may require that a third-country firm intending to provide investment services or perform investment activities with or without any ancillary services to retail clients or to professional clients within the meaning of Section II of Annex II in its territory establish a branch in that Member State. 2. Where a Member State requires that a third-country firm intending to provide investment services or to perform investment activities with or without any ancillary services in its territory establish a branch, the branch shall acquire a prior authorisation by the competent authorities of that Member State in accordance with the following conditions: (a) the provision of services for which the third-country firm requests authorisation is subject to authorisation and supervision in the third country where the firm is established and the requesting firm is properly authorised, whereby the competent authority pays due regard to any FATF recommendations in the context of anti-money laundering and countering the financing of terrorism; (b) cooperation 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 competent authorities in the Member State where the branch is to be established and competent supervisory authorities of the third country where the firm is established; (c) sufficient initial capital is at free disposal of the branch; (d) one or more persons are appointed to be responsible for the management of the branch and they all comply with the requirement laid down in Article 9(1); (e) :the third country where the third-country firm is established has signed an agreement with the Member State where the branch is to be established, which fully comply with the standards laid down in Article 26 of the OECD Model Tax Convention on Income and on Capital and ensures an effective exchange of information in tax matters, including, if any, multilateral tax agreements; (f) the firm belongs to an investor-compensation scheme authorised or recognised in accordance with Directive 97/9/EC. 3. The third-country firm referred to in paragraph 1 shall submit its application to the competent authority of the Member State where it intends to establish a branch. view template MiFID 2: Less fondly known as EU Directive 2014/65/EU (EUR Lex) | MiFID 1Articles: 16(7) (Recording of Communications) Tell me more Sign up for our newsletter — or just get in touch: for ½ a weekly 🍺 you get to consult JC. Ask about it here.

This is the basic premise for third-country firms under MiFID 2 — being those who don't have the vaunted EU passport, such as all UK firms from April 2019. Useful when read in conjunction with 42 about reverse inquiry.

“In its territory”

Will depend to some extent on the regulatory perimeter of the EU Member State in question. This inevitably will raise the great question of reverse inquiry, enshrined as a thing in MiFID 2.

See also

• Reverse inquiry
• Art. 42.