Third country access

Impact Red traffic light

High impact for
third country firms

Other areas to consider


Current MiFID rules

Access of third country firms to EU markets is not harmonised under MiFID but is left to the discretion of member states, provided that national law does not treat third country firms more favourably than European firms. In practice, third country firms must be subject to a regime that is at least equivalent to that under MiFID.


MiFID Level 1 Directive Recital: 28

FSA rules


Proposed changes
Draft Directive
Recitals (5),

(72) to (74)
Articles 41 – 46

Article 36

In light of the global nature of the financial markets and the consequences to EU markets of persons in third countries (e.g. Madoff and Lehmans), the draft Directive is introducing a passporting regime for firms and market operators based in jurisdictions with equivalent regulatory regimes.


Provision of services with an EU branch


The draft Directive provides that a non-EU firm wishing to provide investment services/activities to retail clients shall be required to establish an EU branch, and obtain authorisation for the branch from the competent authority where branch is situated. There are a number of conditions to be fulfilled before the competent authority will grant authorisation, including that the services for which the non-EU firm requires authorisation is subject to authorisation and supervision in the third country where the non-EU firm is situated and the firm is authorised there, the third country where the third country firm is established is not listed as a non-cooperative country and territory by the Financial Action Task Force, along with a number of other requirements (such as the firm complies with legal requirements in its third country regarding corporate governance and capital requirements).


The draft Directive also requires that cooperation arrangements are in place between the Member State concerned and the supervisory authorities of the third country where the firm is established including provisions relating to the exchange of information.


Once a non-EU firm has obtained authorisation for its EU branch and fulfilled the conditions specified in the draft Directive it can provide investment services and activities across the EU from its branch on the basis of a cross-border passport.


Provision of services on a cross-border basis


The draft Directive also provides for non-EU firms to provide certain services to eligible counterparties across the EU without first establishing a branch on the basis of a prior authorisation from the competent authority in one Member State.


As with the branch passport, there are a number of legal and other requirements that must be fulfilled.




Member States are required to register third country firms authorised/recognised, which should be publicly accessible.