ESMA Issues Guidelines on Reverse Solicitation

The European Securities and Markets Authority (ESMA ESMA European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of t European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of t Read this Term) addressed the issues related to a few questionable operations by the companies around reverse solicitation in the region. The regulatory authority mentioned that the services provided by a third-country firm to the clients in the EU region “should not be deemed as a service provided at the own exclusive initiative of the client.”

According to the official announcement, ESMA warned that investors may lose protection under the EU rules if they use services of an investment service provider that is not authorized under EU and Member States’ law.

The recent announcement by the regulatory authority came after the end of the UK’s transition period on 31 December 2020. ESMA mentioned that some companies are trying to find a way around the MiFID II requirements by making some changes in their general clauses.

“ESMA reminds firms that 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. This is true regardless of any contractual clause or disclaimer purporting to state, for example, that the third-country firm will be deemed to respond to the exclusive initiative of the client," the regulator mentioned.

ESMA and Brexit Brexit Brexit stands for British Exit, or in reference to the United Kingdom’s decision to formally leave the European Union (EU) as declared in a June 23, 2016 referendum. In a more immediate sense, a tight vote and unexpected result helped drive British pound (GBP) to lows that had not been seen in decades.The day following the referendum, former Prime Minister David Cameron resigned from office where he was replaced by Theresa May, who later resigned from office on June 7th, 2019. Active Prime Minis Brexit stands for British Exit, or in reference to the United Kingdom’s decision to formally leave the European Union (EU) as declared in a June 23, 2016 referendum. In a more immediate sense, a tight vote and unexpected result helped drive British pound (GBP) to lows that had not been seen in decades.The day following the referendum, former Prime Minister David Cameron resigned from office where he was replaced by Theresa May, who later resigned from office on June 7th, 2019. Active Prime Minis Read this Term

Brexit had a massive impact on financial firms across Europe and the UK as many brokers are still trying to figure out solutions to the regulatory problems caused by the transition. In 2020, ESMA proposed changes to the reporting regimes under MiFIR. ESMA addressed the recent issues to clear doubt regarding reverse solicitation rules in the region.

“With the end of the UK transition period on 31 December 2020, some questionable practices by firms around reverse solicitation, where the product or service is marketed at the client´s own exclusive initiative, have emerged. For example, some firms appear to be trying to circumvent MiFID II requirements by including general clauses in their Terms of Business or through the use of online pop-up 'I agree' boxes whereby clients state that any transaction is executed on the exclusive initiative of the client,” the authority mentioned in the official announcement.