SECTION 1: Market outlook
1.1 Please clarify which products or markets your
jurisdiction hosts that are affected by Mifid II.
Mifid II will affect Irish investment firms (such as
brokers, asset managers, wealth managers and corporate advisory
firms) and market operators, data reporting service providers
and banks carrying out Mifid investment services. The Irish
funds industry is a major part of the Irish financial services
offering. Ireland has over 800 fund managers from 50+ countries
with assets administered in Ireland. At an international level,
Ireland offers offshore managers access to the EU, with the
EU-wide marketing passport for Undertakings for collective
investment in transferable securities (Ucits) and alternative
investment funds (AIFs).
The far reaching indirect impact of Mifid II on the asset
management industry and funds industry will introduce important
changes to the regulatory environment in Ireland as Ucits
management companies (mancos) and AIF managers (AIFMs) not
authorised to carry out Mifid investment services will now be
required to comply with certain requirements so that Ucits and
AIFs can continue to be sold in the EU.
SECTION 2 (a) – EU member states:
2.1 Outline the possible key differences in (a)
gold-plating; and (b) exercise of national discretion, where
provided for in Mifid II in your jurisdiction
(a) Gold Plating
The legislative body responsible for transposing Mifid II
into Irish law, the Department of Finance, will be implementing
Mifid II directly and will not be introducing any gold plating
requirements. The national competent authority in Ireland, the
Central Bank of Ireland (the Central Bank) has confirmed it
will be relying on guidance from European Securities and
Markets Authority (Esma).
(b) Exercise of National Discretion
Safe Harbour Regime
The current Irish Safe Harbour regime for third countries
carrying out wholesale investment services will be retained.
Firms will continue to be considered not to be operating in
Ireland where certain conditions are met. However, the
application of this Safe Harbour will be limited under Mifid II
to eligible counterparties and professionals and will not apply
in certain circumstances. The narrowing of the Safe Harbour
regime means that some third country firms may no longer be
able to provide investment services in Ireland without being
authorised by the Central Bank. Prior to the implementation of
Mifid II, firms that wish to provide such services under the
Safe Harbour must ensure their clients are properly classified
as professional clients or eligible counterparties for Mifid II
and that their home country meets the new requirements.
National discretion will be exercised in respect of the
optionally exempt firms qualifying under Article 3 (1) (a), (b)
and (c) (Exempt Firms) from Mifid II, though these Exempt Firms
must still meet the Mifid II requirements in Article 3(2).
Third Country Branches
The branch requirement when a third country firm intends to
provide investment services to retail and elect-up professional
clients in Ireland will be transposed into Irish law. This
requirement provides greater protection for retail clients and
ensures a level playing field in respect of investment firm
National discretion will be exercised to implement criminal
sanctions for infringements of Mifid II. Maximum fines of
€5 million for national persons and €10 million for
legal persons will be imposed. These sanctions are aligned with
fines under the Central Bank's Administrative Sanctions
2.2 What is the biggest concern in respect of these
variations and possible types of divergences?
There is a significant discrepancy between the requirements
in Article 3(2) of Mifid II and the current domestic provisions
under the Investment Intermediaries Act 1995 (the IIA) and the
Central Bank's Consumer Protection Code (the CPC). The Mifid II
investor protections will not apply to Exempt Firms, and these
firms will only be subject to investor protection requirements
under the CPC. To address the potential for any regulatory
arbitrage, the CPC will be amended so that Exempt Firms will be
subject to certain enhanced CPC investor protections, similar
to the Mifid II Protections. The Exempt Firms will be held to
the same standards as Mifid II in respect of product
governance, remuneration requirements, suitability assessments
and disclosure requirements, amongst other provisions. This
will ensure the end client will be afforded sufficient
protection regardless of the applicable regulatory regime.
The Investment Intermediaries Act 1995 will be amended for
Exempt Firms in order to improve consumer protection in
relation to retail investment products, while providing for
proportionate treatment for relevant investment service
providers, which otherwise would be subject to full Mifid II
2.3 What are the most important extraterritorial issues
regarding Mifid II in your jurisdiction?
Collective investment undertakings and their managers are
exempt from Mifid II. However, most Irish Ucits mancos and
AIFMs follow the 'delegated' model, whereby the day-to-day
asset management, marketing and distribution of a fund is
delegated to third party asset manager(s) or distributors which
are either authorised in the EU to provide Mifid individual
portfolio management or advisory services and/ or receipt and
transmission of orders, or are subject to an equivalent regime
outside the EU. Ucits mancos and AIFMs will be impacted because
the relevant service providers will need information (such as
product costs and charges, and target market information) and
other support in order to meet their obligations under Mifid
II. Other services providers to Ucits and AIFs not directly
affected by Mifid II may also be requested to provide
information as part of the provision of this support (e.g. fund
administrators/transfer agents). Therefore, Ucits mancos, AIFMs
and Mifid firms will be expected to work together to ensure all
the necessary Mifid II information is available so that the end
client receives the Mifid II investor protections.
Non-Mifid firms may also be required to facilitate Mifid
firms in respect of the payment for investment research under
Mifid II. These requirements will increase the administrative
burden of non-Mifid firms in dealing with Mifid firms.
SECTION 3: Research
3.1 Please summarise the challenges Mifid II will pose in
your jurisdiction with regards to research.
The investment research rules require those on the buy-side
to determine whether they will pay for research directly or if
they will pass the cost onto their clients. This will impact
the broker-dealer and asset management industry in Ireland.
Fund boards and management companies will be indirectly
impacted by the research rules and should engage with any Mifid
investment managers to understand the proposed model for
3.2 Is pricing research compatible with market practices
and existing legal frameworks?
In deciding how to price research the market practice is
still being developed in Ireland. The Irish market tends to
look to UK market practices, due to the similar regulatory and
legal systems. In the asset management sector, it is common for
portfolio management services and other fund service providers
to be delegated to the UK under the 'delegated' model.
However, the FCA has applied gold-plating for the research
and inducement requirements. The effect of this is that the
Irish research pricing model will be different to the UK
3.3 Is there clarity on how to resolve challenges in
unbundling research and complying with Mifid II in this
The Central Bank has indicated that it does not intend to
issue guidance to industry beyond what is produced by Esma, in
the interest of encouraging supervisory convergence on a
The Central Bank encourages investment firms to take
advantage of Esma's Q&A Tool, to allow stakeholders to
submit questions directly for consideration.
SECTION 4: Trading/market structure
4.1 Which areas of trading / type of instruments will be
most impacted by Mifid II in your jurisdiction and how might
they be impacted?
The pre- and post-trade transparency regime will be
applicable to non-equity instruments, including structured
finance products bonds, emissions allowances and derivatives
and will impact the trading of these products in Ireland.
Position limits for commodity derivatives will apply to
investment funds and clients of portfolio managers at fund
level rather than at the level of the manager. This will impact
the funds industry (excluding Ucits) where the investment
manager is trading in commodities on behalf of a number of fund
clients to a limited extent.
These trading changes under Mifid II apply at an EU level
and Ireland will not apply any additional gold-plating
The new requirements that apply to structured deposits under
Mifid II will impact the current regulatory regime of
structured deposits in Ireland under domestic legislation, the
IIA and the CPC. A structured deposit under Mifid II must be
fully repayable, and if this is not the case, it will likely be
However, under the Irish regulatory regimes, structured
deposits with 100% capital protected and also deposits with
less than 100% capital protected are categorised as tracker
bonds. These products are investment instruments regulated by
the IIA and the CPC, and are not subject to Mifid.
4.2 What will be the key challenges with regards to
transaction reporting and pre-trade transparency?
Mifid II has expanded the scope and level of prescription of
investment firms' transaction reporting obligations. The
transaction reporting requirements will apply to firms
receiving and transmitting orders to third party brokers for
execution. This will be a challenge for Irish firms, which rely
upon brokers located in other member states or non-EU brokers
to execute their client orders. Such firms must assess how to
discharge their transaction reporting obligations in accordance
with Mifid II. The pre-trade transparency requirements
applicable to non-equity instruments will present a challenge,
as firms will have to ensure they have sufficient procedures in
As these requirements co-exist with the reporting
requirements under the Regulation on Wholesale Energy Market
Integrity and Transparency (Remit), European Market
Infrastructure Regulation (Emir) and the Short Selling
Regulation, it will be challenging for firms to ensure that
they comply with the appropriate standards in respect of each
transaction. It will also be important for firms to ensure that
their IT systems are capable of tracking each transaction
4.3 What are the main considerations that trading venues
and exchanges will have to make?
Trading venues and exchanges, such as the Irish Stock
Exchange, will need to ensure that firms executing orders
submitted accurate and up to date Legal Entity Identifiers
(LEI). LEI issuing organisations including the Irish Stock
Exchange will have to decide if they will issue LEIs for
entities, such as pension schemes and trusts who do not fall
within the definition of a legal person.
Trading venues that issue LEIs need to have procedures in
place to ensure the increased number of application for LEIs
can be processed by January 3 2018, and that the annual renewal
process required to ensure LEIs remain active is in place.
SECTION 5: Investor protection
5.1 Explain the impact of heightened investor protection
obligations in your jurisdiction
As Mifid II will introduce increased investor protections
for Mifid firms in Ireland, there is potential that
IIA-authorised brokers carrying out similar investment
activities in relation to similar products will not be
providing equivalent protections to their clients.
By amending domestic legislation (the IIA and the CPC) to
impose certain Mifid II requirements upon non-Mifid II firms,
there will be a higher degree of protection afforded to
5.2 Which area of focus within investor protection is of
most concern/importance to your jurisdiction?
The regulation of products under Mifid II will enhance
investor protection in Ireland. The product governance regime
applicable to manufacturers and distributors of financial
instruments will require manufacturers to take responsibility
for product design, and to co-operate with distributors to
ensure that products are sold into designated target
Whilst the Mifid product governance regime is not explicitly
extra-territorial (given the rules only apply to Mifid firms)
these obligations lead to a measure of extra-territorial
The enhanced suitability and appropriateness requirements
will also create considerable challenges due to the large
retail market in a wealth management context. This extensive
retail market presents a large administrative burden, as
investment firms must obtain a significant amount of
information from their clients in respect of their knowledge
and experience, financial situation and investment objectives
in order to determine the suitability of products.
SECTION 6: Outlook 2017
6.1 What are the overall risks or opportunities that Mifid
II might bring to your market? Will Mifid II impact the
competitiveness of your market?
Firms should fully understand the effect this legislation
will have on both their businesses and on the industry as a
whole and should engage with other market participants and
their legal advisors to ensure they implement Mifid II in line
with industry best practice and in a manner that works for
their business model.
The Central Bank expects firms to manage regulatory
amendments proactively as by preparing for and understanding
the changes that are about to occur, firms put themselves in
the best position possible to take advantage of opportunities
that arise. Firms that do not prepare may find themselves
unable to adapt to the new regulatory environment and face
significant challenges in respect of continuing ordinary
However, even full engagement with the Mifid II regime has
its challenges. The Central Bank has noted that even firms with
"significant Mifid II budgets" are facing time pressures to
ensure that they are fully compliant by the implementation
6.2 What are the next steps – what should market
participants be doing now to best prepare themselves?
With the implementation date looming, firms directly and
indirectly impacted should:
- Be fully resourced to meet their
- Be advanced in terms of implementing their
project plans, with key decisions made at this point;
- Have fully considered the implications of
Mifid II on their businesses and have made the changes to
their systems, policies and procedures.
T: +353 1 232 2101
F: +353 1 232 3333
Joe Beashel is a partner in the financial
institutions group and is head of the regulatory risk
management and compliance team at Matheson. He has over
twenty years' experience in the financial services
sector. Before joining Matheson in 2004, he was the
managing director of the Irish fund administration unit
of a leading international investment manager
T: +353 1 232 2094
F: +353 1 232 3333
Louise Dobbyn is an associate in the financial
institutions group, specialising in financial services
regulation. Dobbyn regularly advises banks, Mifid
investment firms and financial institutions on all
aspects of financial regulation and compliance and
Dobbyn is dual qualified and has practiced as a
financial services solicitor in Ireland and England.
Prior to joining Matheson, Dobbyn was legal counsel for
a Swiss bank in London and a financial services
associate at a silver circle firm in London.