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Securities Markets (incl. MIFID2/MIFIR, EMIR)

Background

At the end of October 2011, the European Commission adopted proposals for a review of the Markets in Financial Instruments Directive (MiFID), splitting it into a Directive (MiFID2) and a Regulation (MiFIR). While a Directive provides Member States with a certain level of flexibility in implementation, a Regulation should be applied directly and without any national specificities. As in other pieces of EU financial services, the split reflects the need to achieve a uniform set of rules in some areas, while allowing for national specificities in others.

An agreement on MiFID2/MIFIR was reached on 14 January 2014. The European Securities Markets Authority (ESMA) has since started working on the many Level 2 measures needed to implement this legislation. This work will continue until the application of the new rules in 2018.

Invest Europe Position

Although private equity was not at the core of the MiFID review it does have implications for the industry given the wide scope of this measure and the extent to which other pieces of legislation – including AIFMD – cross-refer to its provisions.

The issues of most interest to Invest Europe have been the definition of professional client; the corporate governance provisions; the rules on inducements; and the third country provisions.

The final compromises reached by the European Parliament and Council moved some way to meet the interests of the private equity industry. For example, on corporate governance the rules on the number of directorships allowed were relaxed a little, making it easier for private equity managers to hold multiple roles.

The final text allows operators based in third countries whose rules are equivalent to the new EU rules to benefit from an “EU passport” when providing services to professionals. The harmonised regime applies only to the cross-border provision of investment services and activities provided to professional and eligible counterparties. For a transitional period of three years (from 2018) and then pending equivalence decisions by the Commission, national third-country regimes will continue to apply.