ESMA calls for MiFIR to apply to wider range of firms

ESMA says there could be consequences to excluding certain fund management companies from the scope of MiFIR powers.
By Paul Walsh
The European Securities and Markets Authority (ESMA) has called for consistency in the application of product intervention powers under the Markets in Financial Instruments Regulation (MiFIR).

These powers can be exercised by both national competent authorities (NCAs) and ESMA from 3 January 2018.

Currently, the powers only apply to MiFID investment firms marketing products which pose risks to retail investors, market integrity, and financial stability in the EU.

The powers do not cover UCITS management companies and Alternative Investment Fund Managers (AIFMs).

ESMA’s statement outlines the potential consequences linked to the exclusion of fund management companies from the scope of the powers.

These include the risk of arbitrage, where a type of fund that is restricted or banned under MiFIR could be distributed through fund management companies if they decided to market or distribute the funds themselves.

ESMA is concerned about the potential for regulatory arbitrage and the potential reduction in effectiveness of future intervention measures, and believes that the EU’s institutions should address this issue.

“ESMA believes that including fund management companies in scope of the MiFIR intervention regime would ensure a harmonised framework across entities and instruments,” said Steven Maijoor, chair of ESMA.

“This would create a level-playing field between MiFID firms and fund management companies, ensuring we appropriately address risks to investors and financial stability.”