In June, EBA and ESMA published a Discussion Paper on the call for evidence regarding the prudential framework for investment firms. From DUFAS, we responded to this call for evidence addressing in particular the inclusion in the scope of IFR and IFD of activities of fund managers authorized to provide MiFID services.
Given the experience in the Netherlands and the specific risks associated with (providing) MiFID services, we believe that these risks are similar regardless of whether the services are provided by a MiFID investment firm or by a fund manager authorized to provide MiFID services. For this reason, we support any initiative to include the relevant activities of fund managers authorized to provide MiFID services in the scope of IFR and IFD. However, this should be done in a proportionate manner, aligning the framework with the actual risk profile of these firms and taking into account the applicability of sectoral provisions laid down in the AIFMD and UCITSD.
We emphasize that the inclusion of fund managers authorized to provide MiFID services within the IFR/IFD framework must be proportionate and meet the following conditions:
- There should be a clear separation and clarification that 1) all fund management activities are subject to the capital requirements of the AIFMD/UCITSD, and 2) all MiFID services are subject to the IFD/IFR - without overlap, to avoid duplication.
- For firms with an AIFMD or UCITSD license, all organizational requirements - including the management of capital risk - must fall under the AIFMD/UCITS regime as part of the master license. While the capital amount for MiFID services may be determined under the IFD/IFR, the manner in which this capital is managed and held within the organization must fall under the master license. This prevents certain rules of both MiFID and AIFMD or UCITSD, such as remuneration and governance rules, from applying at the same time. Avoiding conflicting rules is crucial, and it should be clear that only the governance and remuneration requirements of AIFMD or UCITSD, for example, apply.
- Only the relevant provisions of IFR (and IFD) should apply, namely the rules relating to those specific MiFID services that licensed fund managers may provide.
Taking this approach will ensure a level playing field within Europe and a consistent approach to capital requirements for financial institutions providing investment services.
