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MiFID II - Investment firms from third countries with eligible counter parties or professional investors as clients

Investment firms from third countries may be active in the Netherlands under 3 different conditions. These conditions are described underneath.

An additional exemption may be made available for firms who only carry out certain investment activities.

Third-Country firm access following and equivalence decision by the European Commission (EC)

In the future, the EC may designate countries that are not Member States ('third countries') that carry out the supervision of investment firms in an equivalent and effective manner. Investment firms from these designated third countries will be able to provide investment services or carry out investment activities in the Netherlands directly (with or without a branch office) without an AFM licence and without a European passport.

These investment firms must, however, satisfy 3 conditions:

  1. They are registered in a register maintained by ESMA.
  2. They only provide investment services to or carry out investment activities to  professional investors as referred to in section I, Annex II of MiFID II.
  3. They inform their clients that they are not subject to European supervision.

These investment firms are thus not subject to supervision by the AFM, they are subject to the supervision of the designated third country where the investment firm has its registered office. Currently there are no countries declared equivalent by the EC.

Investment firms from third countries with non-professional investors as clients

Investment firms with their registered offices in third countries that provide investment services to or carry out investment activities with non-professional investors in the Netherlands will be required to open a branch office in the Netherlands and need to apply for a licence with the AFM.

Investment firms from third countries without equivalent supervision (at present), with professional clients

All firms from third countries with a branch office require a license. However if the EC has not (yet) designated a third country as a state that supervises investment firms in an equivalent and effective manner, Member States may determine themselves how they wish to deal with investment firms without a branch. In the Netherlands these investment firms must have a licence.

There are some exemptions to the license requirement.

a. Investment firms that only trade for their own account in the Netherlands may be exempted from supervision in the Netherlands. This is regulated in Article 10a Exemption Regulation Wft.

b. The exemption for investment firms acting from Switzerland, Australia and the USA is applicable for investment firms with only professional clients or eligible counter parties, as long as these countries are not designated as equivalent by the EC. Investment firms for other countries than Switzerland, Australia and the USA will likely require a license according to section 2:99 AFS or section 2:99a AFS. These investment firms must meet the usual requirements (for example integrity and suitability of directors, minimum of two day to day policy makers, sound business operations) and a branch in the Netherlands (if investment services are offered or performed to non-professional clients) or a representative.

If you only offer and perform investment services to professional clients or eligible counterparties and you still want to make use of the exemption in accordance with section 10, subsection 1 of the Exemption Regulation of the Financial Supervision you need to notify the AFM according to section 10, subsection 5 of the Exemption Regulation of the Financial Supervision no later than 1 January 2019 through the notification form ‘Notification form for third country investment firms as mentioned in article 10 section 5 of the Exemption Regulation Financial Supervision Act’.

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