Brexit Prompts EU Push to Tighten MiFID Rules for Foreign Firms

(Bloomberg) -- The European Union is looking at tightening the screws on the City of London -- again.

The European Securities and Markets Authority called for stricter oversight of how banks and investment firms located outside the EU do business with clients inside the bloc under the MiFID II rules that came into force at the start of the year. MiFID II is crucial for the post-Brexit plans of firms based in London as it sets out how non-EU companies can sell their services inside the single market.

ESMA’s view, set out in a Sept. 26 letter to the European Commission, followed a similar call from Robert Ophele, chairman of France’s markets regulator, to rework the revised Markets in Financial Instruments Directive. ESMA said MiFID II could be reworked to:

  • ensure some direct supervisory powers by national EU authorities over investment services provided by foreign firms to professional clients based in the bloc;
  • increase coordination among EU member states to oversee business provided to retail clients;
  • review the system of so-called reverse solicitation, in which EU-based clients seek business from foreign firms without the full MiFID II rule book applying;
  • increase oversight of business that is outsourced to London or any foreign city from a firm’s office in the EU.

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