On 13 January 2021, ESMA issued a Public Statement, "reminding"(!) firms of the MiFID II rules on reverse solicitation. It re-states the law and guidance and includes the following:
"[ESMA has noted] some questionable practices by firms around reverse solicitation have emerged", for example firms "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".
ESMA has reiterated the following principles:
- Art. 42 MiFID II: where a retail or professional client established in the EU initiates at its own exclusive initiative the provision of an investment service or activity by a third country firm, that firm is not required to establish a branch in the EU jurisdiction under Art. 39 MiFID II;
- ESMA Guidance: firms should apply the guidance provided by ESMA in its Q&As on MiFID II and MiFIR investor protection and intermediaries topics, in relation to the application of the concept of "own exclusive initiative";
- Recital 111 MiFID II: where a third country firm solicits clients or potential clients in the EU, or promotes or advertises investment services or activities in the EU, such services should not be deemed to have been provided at the own exclusive initiative of the client, regardless of any contractual clauses or disclaimer to the contrary;
- Means of solicitations: every means of communication used (including press releases, internet advertisings, brochures, phone calls) should be considered to determine whether the client or potential client has been subject to solicitation, promotion or advertising in the EU. Such activities should be considered regardless of the person through whom it is issued, whether by the firm itself, an entity acting on its behalf or having close links with the firm.
This is not in itself "new news". But the point is clear. UK firms are (again) on notice of behaviour that ESMA views as not complying with law, and certain EU NCAs may feel empowered (or obliged) to look to take action relating to such behaviour.
