MiFID Top-Up permissions

Introduction

Any authorised AIFM may apply to their home regulator  “MiFID Top-Up” permissions, i.e. authorisation to provide certain additional investment services as per Article 6 of AIFMD.

MiFID Top-Up permissions enable an authorised AIFM to manage and market discretionary mandates, or market and provide investment advice regarding funds not currently managed by such AIFM, thereby significantly expanding the scope of its operations.

Scope of additional MiFID services

Using the MiFID Top-Up permissions, the authorised AIFM will be able to provide the core service of the management of portfolios of investments, including those owned by pension funds, in accordance with mandates given by investors on a discretionary, client-by-client basis, where such portfolios include one or more financial instruments. Financial instruments are those listed in Section C of Annex I of MiFID II.

In addition to this core service, an authorised AIFM may, in addition, become authorised to provide one or all of the following non-core services:

  • investment advice concerning one or more financial instruments;
  • safe-keeping and administration in relation to shares or units of collective investment undertakings; and
  • reception and transmission of orders in relation to financial instruments.
AIFMD II

AIFMD II will expand this list to also include the following non-core service:

(iv) any other function or activity which is already provided by the AIFM in relation to an AIF that it manages, or in relation to services that it provides in accordance with Article 6 of AIFMD, provided that any potential conflict of interest created by the provision of that function or activity to other parties is appropriately managed.

Also, as noted on the “Authorisation Requirements” page, AIFMs will be able to be authorised to administer benchmarks in accordance with Regulation (EU) 2016/1011, and provide credit servicing activities in accordance with Directive (EU) 2021/2167. However, AIFMs will not be able to administer benchmarks used in the AIFs that they manage.

Regulatory application in Luxembourg

Application and supporting documentation

There is a CSSF template form which needs to be completed with respect to obtaining a MiFID Top-Up licence. 

In a nutshell, the application will typically include:

  • the background regarding the application and an overview of the nature of the business currently conducted by the AIFM;
  • a description of the additional MiFID II services that the AIFM proposes to undertake and how the AIFM will increase its resources (e.g. staff, internal procedures) to carry out such activities;
  • a description of whether it is contemplated to delegate the new services, and a presentation of the delegation setup;
  • a confirmation of compliance with the newly applicable capital adequacy and MiFID II rules; and
  • a confirmation of adherence to the Système d’indemnisation des investisseurs Luxembourg, the Luxembourg investor compensation scheme.

In addition, supporting documents need to be prepared and included in the main application to the CSSF (e.g. programme of activities, updated articles of incorporation, draft agreements, etc.).

Timing considerations

Approval times can widely vary, depending on the complexity of the proposed setup and the quality of the application file. CSSF approval can hence take from approximately four to twelve months.