In absence of a comprehensive bilateral agreement between Switzerland and the EU, opening the doors to the European financial market can be equal parts stressful and complex for Swiss firms. This article aims to help Swiss businesses that wish to expand their investment activities to the EU navigate their way through the regulatory maze of the second iteration of the Markets in Financial Instruments Directive (MiFID II) and the Markets in Financial Instruments Regulation (MiFIR).
Firms providing outbound ‘investment services and activities’ in the sense of the MiFID II in the EU are subject to the MiFID requirements, which comprise more than 30.000 pages of complex rules.
Such investment services and activities are defined in Section C Annex I MiFID II and include the following:
Under MiFIR, a third-country firm will be able to provide cross-border services into the EU to per se professional clients and eligible counterparties established in the EU without the obligation to establish a branch, provided that:
In the absence of an equivalence decision from the Commission or where such a decision is no longer in effect, Member States may allow third country firms to provide investment services to per se professional clients and eligible counterparties in their territory in line with national law. So far, such implementing acts have been rare and strictly sectoral, as is the Commission Implementing Decision (EU) 2018/2047 of 20 December 2018 on the equivalence of the legal and supervisory framework applicable to stock exchanges in Switzerland, which extended the equivalence treatment until 30 June 2019.
MiFID II does not contain any clauses permitting non-EU firms to provide cross-border services to retail clients or retail clients who have elected to become professional clients. As a result, where a non-EU firm wishes to provide services to such clients, it must refer to the specific Member State law (opt-in system), which may require the establishment of a branch (as is the case in e.g. France or Italy).
According to Article 42 MiFID II, where a retail client or professional established or situated in the Union initiates at its own exclusive initiative (‘reverse solicitation’) the provision of an investment service or activity (as defined above) by a third-country firm, the third country firm is not obliged to establish an EU branch. As provided in Recital 111 MiFID II, “where a third-country firm solicits clients or potential clients in the Union or promotes or advertises investment services or activities together with ancillary services in the Union, it should not be deemed as a service provided at the own exclusive initiative of the client”. ESMA is of the view that every communication such as press releases, advertising on internet, brochures, phone calls and meetings should be considered to determine if the client has been subject to any solicitation on the firm’s investment services or activities.
In a nutshell, you should distinguish between the three following cases: