On 2 February 2022, the ESMA released a Supervisory Briefing on supervisory expectations in relation to credit institutions and investment firms (the “Firms”) using tied agents in the MiFID framework (the “Briefing”). The Briefing aims at providing a common understanding between ESMA and national competent authorities with regard to the supervision of Firms using tied agents to provide investment services/activities. The Briefing does not constitute a new policy, is not exhaustive and not binding, however, serves to promote common supervisory approaches and practices.
Content-wise, the Briefing reminds that “a tied agent is a natural or legal person who, under the full and unconditional responsibility of only one firm on whose behalf the tied agent acts, promotes investment and/or ancillary services to clients or prospective clients, receives and transmits instructions or orders from the client in respect of investment services or financial instruments, places financial instruments or provides advice to clients or prospective clients in respect of those financial instruments or services”. In practice, a Firm may therefore rely on a tied agent for the provision of certain investment services/activities on its behalf. The tied agent may be established in the same Member State (“MS”) as the Firm itself or in another MS.
The Briefing focuses on supervisory expectations (i) when a Firm appoints tied agents and (ii) in its ongoing activities with its tied agents. The Briefing further provides details relating to staffing requirements at the level of the relevant tied agent which are of particular relevance in a post Brexit scenario.
Indeed, before appointing tied agents, the relevant Firm should assess notably whether the number of persons within the tied agent who will be responsible for the provision of activities on behalf of the Firm is appropriate to the activities to be carried out. In this respect, the Firm should assess the place from which the employees of the tied agent, or any natural persons whose services are at the disposal and under the control of the tied agent, will provide activities on behalf of the Firm and how such employees or natural persons are monitored.
More specifically, ESMA considers that Firms should avoid appointing a tied agent which is a legal person and whose employees involved in the activities on behalf of the Firm are also at the disposal or under the control of other entities, including third-country entities. This may be the case as a result of arrangements with another entity such as staff sharing agreements or secondment. In order to ensure compliance with the duty of the Firm to monitor the activities of the tied agent, it is expected that tied agents have sufficient substance in the EU and do not mainly rely on resources based outside of the EU in the provision of activities on behalf of the appointing Firm.
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