After the Brexit transition period ran out on New Year’s Eve, the European Securities and Markets Authority is observing UK investment services firms trying to fly under the retail rules radar of MiFID II – by pretending clients came to them all spontaneously.

“Reverse solicitation” is the concept in focus as the European financial markets watchdog barks at some of the firms that just left its jurisdiction.

“Questionable practices”

“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,” ESMA writes in the press release that accompanies a recent public statement.

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“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.”

Disclaimers make no difference

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,” ESMA cautions, and points out that this will not be changed by “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”.