“Class 1 Firms” Now Subject to the CRD / CRR Regime in Ireland

PUBLISHED: 21st July 2022

Three new sets of Regulations have been published that finalise the implementation of Directive (EU) 2019/2034 (the Investment Firms Directive or IFD) and the implementation of Regulation (EU) 2019/2033 (the Investment Firms Regulation or IFR) into Irish law.  

The Regulations apply from 27 June 2022.

Context

The IFD and IFR establish a new prudential framework for investment firms authorised under the Markets in Financial Instruments Directive (MiFID II).  However, certain large systemic investment firms (referred to as Class 1 Firms) will remain subject to the prudential requirements of the Capital Requirements Directive and Regulation (CRD/CRR).  

In addition, Article 62(6) of IFD requires Member States to impose an obligation on Class 1 Firms to obtain a Class 1 authorisation / licence as a credit institution.  This will mean that investment firms that fall within the definition of a Class 1 Firm, will need to reapply for a Class 1 authorisation / licence. 

The Regulations

S.I. No. 302 of 2022:  European Union (Investment Firms) (Amendment) Regulations 2022

These Regulations introduce the prohibition of certain investment services and activities in Ireland by Class 1 Firms operating without the requisite Class 1 authorisation / licence as a credit institution. They also set out the application process for a Class 1 authorisation / licence, the associated authorisation conditions and the process and grounds for the withdrawal of a Class 1 authorisation / licence.

S.I. No. 303 of 2022:  European Union (Investment Firms) (No. 2) (Amendment) Regulations 2022

These Regulations require investment firms, that meet the definition of a Class 1 Firm, and which have been authorised under European Union (Markets in Financial Instruments) Regulations 2017 (S.I. No. 375 of 2017) (MiFID II Regulations), to apply for re-authorisation as a Class 1 Firm.  They also specify requirements for the Central Bank in relation to these applications. There are also some amendments to the European Union (Investment Firms) Regulations 2021 (S.I. No. 355 of 2021) to update internal referencing. 

S.I. No. 304 of 2022:  European Union (Markets in Financial Instruments) (Amendment) (No. 2) Regulations 2022

These Regulations provide that once an applicant firm has been granted a Class 1 authorisation / licence as a credit institution, any additional authorisation as an investment firm shall be deemed to be withdrawn. 

In addition, they require the Central Bank to be satisfied that an applicant firm for a Class 1 authorisation / licence as a credit institution, that intends to provide investment services or perform investment activities, will comply with the relevant provisions of the MiFID II Regulations. 

Relevance

New applicants, or existing investment firms meeting the definition of a Class 1 Firm are required to authorise, or re-authorise, as credit institutions, subject to direct supervision by the European Central Bank under the Single Supervisory Mechanism.  Class 1 Firms are regulated from a prudential perspective under, and subject to the ongoing capital requirements of, the existing CRD / CRR regulatory framework.