Guidance Note for Authorisation under MiFID

Transcription

1 July 2015 Guidance Note for Authorisation under MiFID Guidance on completing an Application for Authorisation under Regulation 11 of the European Communities (Markets in Financial Instruments) Regulations 2007 and Commission Regulation (EC) No. 1287/2006 of 10 August

2 Contents 1.0 Introduction Application Process Level 1 Applicant Firms Level 2 Applicant Firms Obligations of an Investment Firm Post Authorisation Application Form Section A Core Details (Applicable to all applicant firms) Structure and Head Office General Business Information Financial Information Capital Requirements Organisational Structure Shareholders/Partners/Members and Qualifying Shareholders Regulatory Background Section B (Level 2 only) Key Policies Conduct of Business 44 Appendix 1 Client Assets 51 Appendix 2 Operation of a Multilateral Trading Facility 59 Appendix 3 Key Facts Document Template 61 Page 2 of 63

3 This document provides guidance in relation to the process and requirements of the Central Bank of Ireland ( the Central Bank ) for establishing an investment firm in Ireland. It does not constitute legal advice nor does it seek to interpret relevant legislation. 1.0 Introduction MiFID Regulations The European Communities (Markets in Financial Instruments) Regulations 2007 (as amended) [ S.I. No. 60 of 2007 / the MiFID Regulations ] and Commission Regulation (EC) No 1287/2006 of 10 August 2006 ( Regulation ), together the MiFID legislation, provide a comprehensive regulatory regime for investment firms and regulated markets in Ireland. Regulation 3(1) provides that Investment firm means, subject to Regulation 3(2) of S.I. No. 60 of , any person, other than a tied agent, which person s regular occupation or business is the provision of one or more investment services to third parties on a professional basis, or the activity of dealing on own account on a professional basis, but does not include a natural person unless: (a) his or her legal status ensures a level of protection for third parties interests equivalent to that afforded by legal persons, (b) he or she is subject to equivalent prudential supervision appropriate to his or her legal status, and, (c) if Regulation 3(3) of S.I. No. 60 of 2007 is applicable, he or she ensures that the conditions set out in Regulation 3(3) 2 are fulfilled. 1 For the purposes of the definition of investment firm, where an individual - (a) provides an investment or ancillary service, or (b) carries on the activity of dealing on own account, and the service or activity is carried on solely for the account of and under the full and unconditional responsibility of an investment firm, an insurance undertaking or a credit institution, the activity or service, as the case may be, shall be regarded as that of the investment firm, insurance undertaking or credit institution itself. 2 For the purposes of the definition of investment firm where a natural person provides services involving the holding of third parties funds or transferable securities, the natural person may be considered as an investment firm only if, without prejudice to the other requirements imposed in the Regulations and in Directive 2006/49/EC, he or she ensures that the following conditions are fulfilled: (a) the ownership rights of third parties in instruments and funds must be safeguarded, especially in the event of the insolvency of the investment firm or of its proprietors, seizure, set-off or any other action by creditors of the firm or of its proprietors; Page 3 of 63

4 It is an offence to act as an investment firm unless authorised to do so 3. The Central Bank is the competent authority in Ireland for the authorisation of such entities. Responsibility for the proper management and control of an investment firm, and the integrity of its systems, rests with the board of directors and its senior management. Ethical behaviour and transparency in business dealings are key values expected of boards and senior management. The Central Bank will be responsible for the supervision of investment firms compliance with the relevant legislation. The Central Bank welcomes applications where the proposed investment firm (hereinafter referred to as applicant / applicant firm / the firm ) can meet the legislative requirements relating to investment firms and all other, current, published requirements (including the recommendations and guidance issued by the European Banking Authority ( EBA ) and the European Securities and Markets Authority ( ESMA ) which are available on their websites and all new requirements issued by the Central Bank, details of which are published on the Central Bank website - Each potential applicant must also consider whether it and its proposed activities / business model: requires authorisation under the MiFID Regulations; can comply with the MiFID Regulations; can comply with the Central Bank s requirements and any other relevant financial services law; and is capable of complying with, and adhering to, the requirements that must be satisfied on an on-going basis. The provisions of Regulation 21 of S.I. No. 60 of 2007 regarding the Central Bank withdrawing an authorisation should be borne in mind when considering whether or not to submit an application for authorisation. (b) the investment firm must be subject to rules designed to monitor the firm s solvency and that of its proprietors; (c) the investment firm s annual accounts must be audited by one or more persons empowered, under Irish law, to audit accounts; (d) where the investment firm has only one proprietor, he or she must make provision for the protection of investors in the event of the investment firm s cessation of business following his or her death, incapacity or any other such event. 3 See Regulation 7 of S.I. No. 60 of Page 4 of 63

5 Firms are advised to seek professional advice for questions relating to legislation and its applicability to an application. Scope of Authorisation Pursuant to Regulation 20(1) of S.I. No. 60 of 2007, applicants who propose to engage in non- MiFID services/activities 4 may seek to have their authorisation extended to include the provision of these investment business services, or cover these investment instruments, as defined in the Investment Intermediaries Act, 1995 (as amended) [the IIA ]. Freedom of Services A key element of the MiFID legislation is that it enables investment firms to carry on business covered by their authorisation throughout the EEA (by opening a branch or passporting services) without seeking further authorisation in another member state. Applicant firms must read this Guidance Note in full prior to filling out the Application Form pertaining to it. Applicant firms are expected to have a working knowledge of the MiFID legislation and where an applicant is unsure of the legislation or completing any part of the process in applying for authorisation, their own professional advice should be obtained. Application documentation is available on the Central Bank s website. 4 Investment Business Services provided in Regulation 2(1) of the IIA that are not provided for in Schedule 1 of S.I. No. 60 of 2007 Page 5 of 63

6 2.0 Application Process The Central Bank applies a risk based process for the authorisation of investment firms based on the investment services proposed, the level of risk and complexity that the investment firm s business model would yield. There are two levels to the process and they are as follows: Level 1: Level 1 comprises small firms with non-complex investment strategies that have an initial capital requirement of 50,000 or 125,000 who provide any combination of the following investment services: Reception and transmission of client orders; Execution of orders, Portfolio management; Investment advice; and/or Placing of financial instruments without a firm commitment. Level 2: Level 2 comprises: (a) Larger firms including those with complex investment strategies that have an initial capital requirement of 50,000 or 125,000 which provide any combination of the following services: Reception and transmission of client orders. Execution of orders Portfolio management Investment advice; and/or Placing of financial instruments without a firm commitment. (b) Operation of a Multilateral Trading Facility; (c) All investment firms with an initial capital requirement of 730,000 providing the following investment services: Dealing on own account; and/or Underwriting of financial instruments or placing of financial instruments on a firm commitment basis; and (d) Market Operator of a Regulated Market 5. 5 While a Market Operator of a Regulated Market will be a Level 2 application, it falls outside the scope of this application process and therefore applicants seeking this service must contact the Central Bank s MiFID Authorisation team for details. Page 6 of 63

7 (e) Any applicant firm that proposes to hold Client Assets An application with a client assets aspect will always be classified as Level 2. Please note: the determination of the appropriate Level will be based on a subjective analysis of the application. The decision on the applicable Level will be made solely by the Central Bank, taking into account all of the above criteria. The application process is determined by the level which the application falls within. Page 7 of 63

8 2.1 Level 1 Applicant Firms The following process applies to the authorisation of Level 1 Applicant Firms: Process 1. Key Facts Document ( KFD ) (a) Applicant firms must complete a KFD (see Appendix 3 attached) (b) The Central Bank will review the KFD and - i. Revert to the applicant firm in writing with any comments on the KFD as soon as possible but expected to be no later than within 20 working days; and ii. Arrange a preliminary meeting with the applicant as soon as possible but expected to be no later than 20 working days of receiving an acceptable KFD. The meeting will be scheduled for the earliest possible date. If the KFD does not contain, or is deficient in relation to, the information required it will not be considered and the applicant firm will be asked to revise and resubmit it with the appropriate level of detail. 2. Preliminary Meeting A preliminary meeting will be held with all applicant firms in advance of an application being made. (a) The KFD will form the basis for the preliminary meeting. (b) The Central Bank will confirm to the applicant the level, at which the application will fall under. (c) The applicant firm will be informed of the Central Bank s authorisation process and timeframes. (d) The Central Bank will advise the applicant of significant issues that are apparent at this juncture that would negatively impact the Central Bank s determination of the application if the firm wishes to proceed to make an application for authorisation (e) It is expected that no more than one preliminary meeting will be held between the Central Bank and the applicant firm. Page 8 of 63

9 3. Receipt and Acceptance of a complete Application (a) Acknowledgement of complete applications will issue by the Central Bank within 5 working days with any comments to follow subsequently within the specified timeframe (see below). (b) Incomplete applications will be returned within 5 working days (see below re. complete application ). The Central Bank will set out why the application is incomplete in this correspondence. 4. Review of the Application (a) The Central Bank will issue comments to the applicant firm within 20 working days of receipt of the application; (b) The applicant firm must respond within 10 working days of receiving first comments; (c) Final comments will be issued to the applicant firm within 10 working days; and (d) The applicant firm must respond within 10 working days of receiving final comments. It is expected that all issues / comments will be addressed in the applicant firm s second submission and therefore the Central Bank will not review more than three submissions before reaching a decision on the application. In order to be in a position to meet its targets on an application for authorisation, the Central Bank cannot engage in an exhaustive analysis of the information provided and therefore the onus is on the applicant firm to ensure all information meets with the relevant requirements in the application form and where applicable this should be verified by the applicant prior to making its filing. 5. Decision on the Application A determination will be made on the application within 60 working days of receipt of a complete application. Page 9 of 63

10 Complete Application An application will not be accepted by the Central Bank unless it is complete, i.e., includes the following: 1. Fully completed (all tick boxes and page references must be filled in where applicable) and signed Application Form; 2. A Business Plan which must include details of each of the following: (a) Business strategy along with a business model that illustrates the regulated investment service(s) to be provided to clients (See Sub-Section 2.5 of the Application Form); (b) High level overview of any non-iia / non-mifid activity to be carried out (if applicable) [See Sub-Section 2.7 of the Application Form]; (c) Organisational structure chart along with staff numbers, their roles, responsibilities and reporting lines, Pre-Approval Controlled Functions ( PCF ) and details of their experience (See Sub-Section and Sub-Section of the Application Form); (d) Corporate Governance Arrangements, e.g., board of directors, committees (if any) [See Sub-Section 5.1.3, Sub-Section and Sub-Section of the Application Form]; 3. Fully completed on-line Individual Questionnaires ( IQs ) 6 for all PCFs including directors and hard-copy IQs for individual qualifying shareholders; 4. Shareholder information including group structure and required supporting documentation (see Sub-Section 6 of the Application Form). This should also include the impact of close links and applicability of consolidated supervision; 6 Regulatory Transactions ( RTD ) is a division within the Central Bank whose responsibilities include managing and improving current processes as well as the fitness and probity process for new Pre- Approval Controlled Function ( PCF ) holders. As part of the MiFID application process but after the preliminary meeting, once the applicant firm communicates to the Central Bank that it wishes to proceed with submitting a MiFID Application Form, the applicant firm must the following information to the Central Bank pertaining to its nominated Systems Administrator: - Name of proposed person; - Telephone Number of proposed person; and - Address of proposed person. The nominated System Administrator will then have the capability to file IQs on-line that pertain to the applicant firm s PCFs. RTD will contact the applicant firm to notify it that the Systems Administrator has received the requisite capability in order for the filing to commence. Page 10 of 63

11 (Note: IQs for individual Qualifying Shareholders must be submitted in paper based hard copy format) 5. Financial Projections for the first 3 years of operation (with detailed notes explaining each line item). This must include: (a) P&L and Balance Sheet for the first three years (year 1 of the P&L account to be in monthly format); (b) Audited Accounts and latest management accounts (where applicable); (c) Regulatory Capital Calculations for year 1; and (d) Details of any charges, guarantees, indemnities or other security to third parties; 6. National Discretion / Derogation requests under the Capital Requirements Regulations and S.I. No. 158 of Required Client Asset Documentation specified at Appendix 1 (if applicable); and 8. Arrangements for both the orderly and forced winding down of the firm which ensures the protection of client assets and fair treatment of clients. Return of Application The Central Bank will return the application to the firm if it is incomplete on receipt. The timeframe undertaken by the Central Bank to make a determination on the application will not commence until a complete application is submitted. Stopping / Starting the Central Bank s determination timeframe Without prejudice to Regulation 15 of the MiFID Regulations, upon receiving a complete application, the Central Bank s determination timeframe as set out on Page 9, No. 5 of this Guidance Note will be stopped and no longer apply under the following circumstances: 1. Any material changes (e.g. change to business model, investment services/financial instruments applied for etc.) made to the applicant s Business Plan at any time during the review process; 2. Any changes to the applicant s shareholder structure during the review process; and / or 3. Where the applicant fails to respond to comments from the Central Bank for a period exceeding 20 or 10 working days, as the case may be. Page 11 of 63

12 The Central Bank will at its discretion commence a new determination timeframe, as described on Page 9, No. 5 of this Guidance Note and apply it in accordance with Regulation 15 (1) of the MiFID Regulations, at the point which caused the previous timeframe to be stopped, once it is satisfied that the application can proceed. Page 12 of 63

13 2.2 Level 2 Applicant Firms The following applies to Level 2 Applicant Firms: Process 1. Key Facts Document ( KFD ) (a) Applicant firms will complete a KFD (see Appendix 3 attached) (b) The Central Bank will review the KFD and i. Revert to the applicant firm in writing with any comments on the KFD as soon as possible but expected to be no later than within 20 working days;; and ii. Arrange a preliminary meeting with the applicant as soon as possible but expected to be no later than 20 working days of receiving an acceptable KFD. The meeting will be scheduled for the earliest possible date. If the KFD does not contain, or is deficient in relation to, the information required it will not be considered and the applicant firm will be asked to revise and resubmit it with the appropriate level of detail. 2. Preliminary Meeting A preliminary meeting will be held with all applicant firms in advance of an application being made. (a) The KFD will form the basis for the preliminary meeting. (b) The Central Bank will confirm to the applicant the level, at which the application will fall under. (c) The applicant firm will be informed of the Central Bank s authorisation process and timeframes. (d) The Central Bank will advise the applicant of significant issues that are apparent at this juncture that would negatively impact the Central Bank s determination of the application if the firm wishes to proceed to make an application for authorisation Page 13 of 63

14 3. Receipt and Acceptance of a complete Application (a) Acknowledgement of complete applications will issue by the Central Bank within 10 working days with any comments to follow subsequently within the specified timeframe (see below). (b) Incomplete applications will be returned (see below). The Central Bank will set out why the application is incomplete in this correspondence within 10 working days. 4. Review of the Application (a) The Central Bank will issue comments to the applicant firm within 40 working days of receipt of the application; (b) The applicant firm must respond within 20 working days of receiving first comments; (c) Second comments will be issued to the applicant firm within 20 working days; (d) The applicant firm must respond within 10 working days of receiving second comments; (e) Final comments will be issued to the applicant firm within 10 working days; and (f) The applicant firm must respond within 10 working days of receiving final comments. It is expected that all issues / comments will be addressed in the applicant firm s third submission and therefore the Central Bank will not review more than four submissions before reaching a decision on the application. In order to be in a position to meet its targets on an application for authorisation, the Central Bank does not intend to engage in an exhaustive analysis of the information provided and therefore the onus is on the applicant firm to ensure all information meets with the relevant requirements in the application form and where applicable this should be verified by the applicant prior to making its filing. 5. Decision on the Application A determination will be made on the application within 120 working days of receipt of a complete application. Page 14 of 63

15 Complete Application An application will not be accepted by the Central unless it is complete, i.e., includes the following: 1. Fully completed (all tick boxes and page references must be filled in where applicable) and signed Application Form; 2. A detailed Business Plan which must include details of each of the following: (a) Business strategy along with a business model that illustrates the regulated investment service(s) to be provided to clients (See Sub-Section 2.5 of the Application Form); (b) High level overview of non-iia / non-mifid activity to be carried out (if applicable) [See Sub-Section 2.7 of the Application Form]; (c) Organisational structure chart along with staff numbers, their roles, responsibilities and reporting lines, Pre-Approval Controlled Functions ( PCF ) and details of their experience (See Sub-Section and Sub-Section of the Application Form); (d) Corporate Governance Arrangements, e.g., board of directors, committees (if any) [See Sub-Section 5.1.3, Sub-Section and Sub-Section of the Application Form]; (e) Outsourcing of critical or important functions (See Sub-Section 8.6 of the Application Form); (f) Compliance Policy (See Sub-Section 8.1 of the Application Form); (g) Risk Management Policy (See Sub-Section 8.2 of the Application Form); (h) Internal Audit Policy (See Sub-Section 8.3 of the Application Form); (i) Conflict of Interest Policy (See Sub-Section 8.4 of the Application Form); (j) Business Continuity Overview (See Sub-Section 8.5 of the Application Form); 3. Fully completed on-line Individual Questionnaires ( IQs ) 7 for all PCFs including directors and hard-copy IQs for individual qualifying shareholders; 7 Regulatory Transactions ( RTD ) is a division within the Central Bank whose responsibilities include managing and improving current processes as well as the fitness and probity process for new Pre- Approval Controlled Function ( PCF ) holders. As part of the MiFID application process but after the preliminary meeting, once the applicant firm communicates to the Central Bank that it wishes to proceed with submitting a MiFID Application Form, the applicant firm must the following information to the Central Bank pertaining to its nominated Systems Administrator: - Name of proposed person; - Telephone Number of proposed person; and - Address of proposed person. Page 15 of 63

16 (Note: IQs for individual Qualifying Shareholders must be submitted in paper based hard copy format) 4. Shareholder information including group structure chart and required supporting documentation (see Sub-Section 6 of the Application Form). This should also include the impact of close links and applicability of consolidated supervision; 5. Financial Projections for the first three years of operation (with detailed notes explaining each line item). This must include: (a) P&L and Balance Sheet for the first three years (year 1 of the P&L account to be in monthly format); (b) Audited Accounts and latest management accounts (where applicable); (c) Regulatory Capital calculations for Year 1; (d) Details of any charges, guarantees, indemnities or other security to third parties; 6. Draft Internal Capital Adequacy Assessment Process ( ICAAP ); 7. National Discretion / Derogation requests under the Capital Requirements Regulations and S.I. (S.I. No. to be inserted after transposition); 8. Required Client Asset Documentation specified at Appendix 1 (if applicable); 9. For applicants who intend to provide services to retail investors, the applicant firm s policy in relation to compliance with conduct of business rules; and 10. Arrangements for the orderly and forced winding down of the firm which ensures the protection of client assets and fair treatment of clients. The nominated System Administrator will then have the capability to file IQs on-line that pertain to the applicant firm s PCFs. RTD will contact the applicant firm to notify it that the Systems Administrator has received the requisite capability in order for the filing to commence. Page 16 of 63

17 Return of Application The Central Bank will return the application to the firm if it is incomplete on receipt. The timeframe undertaken by the Central Bank to make a determination on the application will not commence until a complete application is submitted. Stopping / Starting the Central Bank s determination timeframe Without prejudice to regulation 15 of the MiFID Regulations, upon receiving a complete application, the Central Bank s determination timeframe as set out on Page 9, No. 5 of this Guidance Note will be stopped and no longer apply under the following circumstances: 1. Any material changes (e.g. change to business model, investment services/financial instruments applied for etc.) made to the applicant s Business Plan at any time during the review process; 2. Any changes to the applicant s shareholder structure during the review process; and / or 3. Where the applicant fails to respond to comments from the Central Bank for a period exceeding 20 or 10 working days, as the case may be. The Central Bank will at its discretion commence a new determination timeframe, as described on Page 14, No. 5 of this Guidance Note and apply it in accordance with Regulation 15 (1) of the MiFID Regulations, at the point which caused the previous timeframe to be stopped, once it is satisfied that the application can proceed. Page 17 of 63

18 3.0 Obligations of an Investment Firm An applicant firm must familiarise itself with the obligations and requirements of an investment firm authorised under the MiFID Regulations and such obligations and requirements will include but are not limited to the following: MiFID Regulations; Books and Records Requirements as published by the Central Bank; Capital Requirements Regulation (EU) No. 575/2013 and S.I No.; (S.I. No. to be inserted after transposition) Section 32D of the Central Bank Act 1942 (as inserted by the Central Bank Reform Act, 2010) Supplementary Supervisory Requirements 8 The Investor Compensation Act, 1998 (as amended); The Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 (as amended); Client Asset Regulations 2015 for Investment Firms; Consumer Protection Code 2012; and Minimum Competency Code Successful applicant firms are issued with a letter of authorisation by the Central Bank that sets out their authorisation requirements and any conditions of authorisation. 4.0 Post Authorisation The Central Bank authorises investment firms on the basis of the information provided as part of the application process and in this regard all investment firms will be required to operate in accordance with the information provided in support of its application for authorisation and in accordance with applicable legislation and requirements. The Central Bank will expect that a proven track record in accordance with the original application (including the business plan) be displayed before a newly authorised investment firm can amend/expand its investment services. The application must therefore cover activities that are proposed to be undertaken in the first twelve months post authorisation. 8 Available on the Central Bank website. Page 18 of 63

19 Investment firms must monitor and, on a regular basis, evaluate the adequacy and effectiveness of the policies and procedures, systems, internal control mechanisms and arrangements in place (ensuring that they are kept up to date) and promptly take appropriate measures to address any deficiencies. Policies and procedures must be kept up to date and be made available to the Central Bank, for review, upon request. Once authorised the firm will be subject to prudential supervision under the Central Bank s PRISM TM framework. PRISM TM is a risk based framework for the supervision of all entities regulated by the Central Bank. Detailed guidance can be found on the Central Bank s website. Page 19 of 63

20 5.0 Application Form Please take time to read these notes carefully. Application Form correctly. They will help you complete the The application form is comprised of two Sections: Section A Core Details Form (applicable to all applicant firms); and Section B Level 2 specific details Form (applicable only to level 2 firms). Thus Level 1 firms complete Section A; and Level 2 firms complete Sections A and B. (Depending on the nature of the applicant s proposed services, Appendix 1 and / or Appendix 2 may also be required to be completed) It is important when completing the form that you provide accurate and complete information and disclose all the relevant information. Page 20 of 63

21 5.1 Section A Core Details Form (Applicable to all applicant firms) Sub-Section 1: Structure and Head Office App. Form Ref. 1.1 This name must mirror the constitutional document and the name registered with the Companies Registration Office at date of filing this application form. 1.2 No additional notes. 1.3 The registered trading name that the applicant firm will use for the branding of its services, promotions, advertising etc. 1.4 No additional notes No additional notes No additional notes. 1.6 This address must mirror the registered address lodged with the Companies Registration Office. 1.7 What constitutes a head office / principal place of business is a matter to be determined, given the particular circumstances of each case. In general, the Central Bank interprets head office / principal place of business to mean the location of the mind and management of the applicant firm and the place where the day-to-day decisions about the direction of the applicant firm s business are taken. While the onus of meeting the statutory requirements and satisfying the Central Bank that adequate and effective control of an entity rests in Ireland (not abroad) lies with the applicant firm, some guidance on what the Central Bank would expect to see is set out below. This is not intended to be a formula for meeting the head office / principal place of business requirement. However, it does provide an indication of what the Central Bank will expect to see in this respect. The Central Bank will expect decision making at board and committee level to take place within the State. In addition, to ensure the central management is located within the head office / principal place of business, its functions must include: Financial control; Legal and compliance; and Page 21 of 63

22 Risk management. It follows that there should be a significant senior management presence (within the applicant) in Ireland to ensure that full authority and effective control of the applicant rests within the head office / principal place of business. 1.8 This must be someone who possesses knowledge of the applicant firm s business model and its requirements under the MiFID Regulations and must be someone who works for / will work for the applicant firm if and when authorised, and not a professional advisor No additional notes If completed by a tick by the applicant firm, the Central Bank with this permission from the applicant firm will copy the professional advisor in on correspondence pertaining to this application No additional notes No additional notes If the applicant firm has, or is in the course of developing a website or presence on other social media, please provide the name and its approximate launch date No additional notes No additional notes Depending on the legal structure of the partnership, these may be PCFs and where this is the case an on-line filing must be made as part of this application. Where the role is not a PCF, please submit the IQ in hard-copy format as part of the application. Please refer to Schedule 2 of S.I. No. 437 of 2011 / The Central Bank Reform Act 2010 (Section 20 and 22) Regulations 2011 (as amended) for list of PCFs No additional notes No additional notes. Page 22 of 63

23 5.1.2 Sub-Section 2: General Business Information App. Form Ref This relates to the places of business in the State other than the address listed in Section 1.7 where the applicant firm will be operating from and identification of the head (of management) of those places of business No additional notes No additional notes In addition to providing the address and head (of management) of offices identified, the applicant firm must also provide a concise description of the activities currently carried out or proposed to be carried out outside the State. The description must be sufficiently clear to ascertain the precise objective and nature of activity and whether it falls to be a regulated / non-regulated activity. 2.2 This must cover the period from date of incorporation. If yes, a description of each activity must be provided and be sufficiently clear to ascertain the precise nature and objective of each activity carried out. 2.3 These must mirror the investment services and financial instruments that were disclosed in the Key Facts Document received by the Central Bank and discussed at the subsequent meeting. 2.4 These must mirror the investment business services and/or investment instruments that were disclosed in the Key Facts Document received by the Central Bank and discussed at the subsequent meeting The applicant firm in its Business Plan must outline its business strategy and provide clear details of its business model for each investment (business) service and ancillary service that is ticked The business model for each investment (business) service and ancillary service that is ticked must also contain the following information in the Business Plan: The details of each service must be clearly outlined including details of the transaction flow from start to finish of the business process (e.g. from initial interaction with the client to carrying out the transaction on the trading venue or with another service provider vendor). The transaction flow may include a diagrammed transaction flow and a detailed narrative in relation to each leg of the transaction must also be provided. Page 23 of 63

24 The transaction flow must outline each leg of the transaction and the function 9 within the applicant firm responsible for performing that leg No additional notes No additional notes See definition of Systematic Internaliser in Regulation 3 (1) of the MiFID Regulations. Where the applicant firm proposes to act as a Systematic Internaliser the Central Bank will seek other disclosures / requirements but these will be notified to the applicant at the preliminary meeting stage and the various requirements will be on a case-by-case basis No additional notes. 2.8 A detailed overview of the nature and objective of all Other Regulated (for example insurance mediation business) and non-regulated services / activities (to be) carried out must be disclosed in the Business Plan along with details of the function 10 within the applicant firm that is / will be responsible for carrying out the activity or activities. 2.9 The MiFID and IIA service(s) must specify the particular investment (business) service as set out in the legislation. The category Other Regulated must specify the applicable piece of legislation that the activity falls under. Non-regulated relates to lines of business carried out by the applicant firm not requiring regulation by the Central Bank and a heading describing each line of activity must also be inserted. For each line item the applicant firm must estimate the number of clients to be serviced in Year 1 in respect of each specific activity and also the percentage of total income projected in Year 1 that will be attributed to that activity This relates to the provision of regulated activities only This relates to the provision of non-regulated activities only This includes regulated or a combination of both regulated and non-regulated activity (as the case may be) % indicates that the applicant firm will not at any time be providing investment services to that category of client If the applicant firm proposes to hold client assets, please also complete Appendix 1 in the Application Form Where the applicant firm proposes to appoint a tied agent in another EEA Member State, Section 2.13 of the Application Form relating to the establishment of a branch 9 Cross-refer to the firm s staff organisational chart. 10 Cross-refer to the firm s staff organisational chart. Page 24 of 63

25 must also be completed. Regulation 127(2) states that where an investment firm uses a tied agent established in a member state outside the state, the tied agent shall be assimilated to the branch, and is subject to the provisions of the MiFID Regulations relating to branches i.e. the appointment of tied agents in another member state requires a de facto branch notification No additional notes No additional notes No additional notes No additional notes No additional notes The applicant firm must include in its Business Plan the role and responsibilities of the branch and how these are linked to the operation carried out in the principal business address of the applicant. This section of the Business Plan must also set out the category and profile of clients the branch will be servicing as well as how such clients will be sourced and the services to be provided. Where the applicant firm proposes to establish a branch, the group and staff organisational charts must incorporate the branch and the branch staff in the charts along with the reporting lines of the branch staff (ensure that the staff organisational chart makes the distinction of where all the applicant firm s staff are employed, i.e. the principal office or the branch). It must also be described how the Managing Director / Chief Executive of the applicant maintain oversight of the branch as well as how the Head of the Branch oversees the operations of the branch. The Business Plan must also disclose summary details of arrangements it has in place in order to comply with client asset rules (if applicable), local conduct of business rules, anti-money laundering along with monitoring and controlling critical outsourcing (if applicable). The financial projections of the applicant firm must also incorporate the running of the branch as well as its costs of establishment The board is required to provide separate detailed plans for an orderly and forced wind-down. Each plan must include specific action and trigger points and must be constructed on a phased basis, with each phase clearly setting out the projected timelines for that phase and the resources (in terms of costs and manpower) needed Page 25 of 63

26 to conclude each and every stage. Each plan must also clearly demonstrate how client assets are protected (if applicable) and how fair treatment of clients is ensured until the firm is successfully wound down. In addition, each plan must also demonstrate how the firm would be financially prepared if a wind-down situation arose. The applicant firm s Internal Capital Adequacy Assessment Process ( ICAAP ) must provide for the costs of a wind-down scenario. Page 26 of 63

27 5.1.3 Sub-Section 3: Financial Information App. Form Ref The financial projections must be submitted in hard-copy and in the following format: (a) The projected period must commence at Day 1 of the proposed authorisation period and each period must be titled Year 1, Year 2 and Year 3. (b) The Profit and Loss Account must be in the following format: Income Less Expenses = Gross Profit Less Taxation = Net Profit Less Dividends (if any) = Retained Profit. (c) Only Year 1 of the Profit and Loss Account must be broken up into monthly periods. Year 2 and Year 3 need not be broken up into monthly periods and therefore yearly totals provided for each. (d) The Income section of the Profit and Loss Account must be broken up into separate line items that distinguish between the different investment (business) services, other regulated / non-regulated activities carried out. Each line item must account for the income projected for each activity as highlighted in Section 2.8 of the Application Form. (e) The applicant firm must provide workings / detailed calculations for each month / year in order for the Central Bank to reconcile the projected income to be derived from that line of activity against its assumptions for that activity (for example in the case of an investment management fee: projected assets under management X rate of fee). (f) The Expenses Section of the Profit and Loss Account must break down each individual expense item to the extent that distinguishes between the different categories of expenses. For example, categories of expense will include salaries, rent, utilities, subscriptions etc. and therefore need not be broken down any further. Furthermore where an applicant firm is not currently trading it must be clear how the applicant s set up costs are borne and where borne by the applicant, the Central Bank expects to see management accounts providing for them. (g) The Regulatory Levy and fee to the Investor Compensation Company Page 27 of 63

28 Limited must be included as separate line items in the Expenses section of the Profit and Loss Account. (h) The Retained Profit/Loss must also incorporate the latest financial position of the applicant firm, i.e. where an applicant is currently trading it must carry forward its latest 11 (available) retained profit/loss. (i) The Balance Sheet must be in the following format: Fixed Assets + Current Assets Less Current Liabilities = Net Assets = Shareholders Funds. (j) It is critical that the applicant firm ensures that the Retained Profit / Loss figure in the Balance Sheet reconciles with the Profit and Loss Account while ensuring in cases where an applicant is currently trading, its retained profit / loss figures to date (based on audited accounts and/or latest management accounts) are accurately being carried forward into the projections. (k) The applicant firm must provide a note describing all line items accounted for in the Profit and Loss Account and Balance Sheet. The description can be appropriately brief as long as it is sufficiently clear what the entry is providing for. Furthermore, where an amount in a line item is fluctuating by greater than 10% per year [or month in the case of Year 1 of the Profit and Loss Account (only)] an explanation must be provided in the note to explain the rationale behind the movement The Management Accounts must be the latest available at the time. The Central Bank reserves the right to request more updated management accounts as the application progresses in order to assess the updated capital position of the applicant firm No additional notes. 3.3 No additional notes. 11 Including latest unaudited period. Page 28 of 63

29 5.1.4 Sub-Section 4: Capital Requirements App. Form Ref. 4.1 See investment firm definition under Article 4(1) (2) of Capital Requirements Regulation (EU) No. 575/2013 ( CRR ). 4.2 The legislative reference must be to S.I. No. (S.I. No. to be inserted after transposition) 4.3 (1) Article 92 of the CRR; (2) Article 95(1) and Article 92 of the CRR; (3) Third sub-paragraph of Article 95(2) of the CRR (i.e. for firms referred to in point 2(c) of Article 4(1) of the CRR that provide the investment services and activities listed in points (2) and (4) of Section A of Annex 1 to Directive 2004/39/EC the applied competent authority discretion to apply the own funds requirements that would be binding on those firms according to national transposition measures in force on 31 December 2013 for Directives 2006/48/EC and 2006/49/EC); and (4) Article 96(1) and Article 92 of the CRR. 4.4 Where applicable, the Business Plan must provide detailed calculations as to how the applicant firm is calculating risk weighted exposure amounts / capital requirements for all of its risks. The applicant firm must use its Profit and Loss Account and Balance Sheet as at the end of its projected Year 1 period as the reference period for its regulatory capital requirement. Section The calculations for each risk must include the CRR reference and approach taken in attaining the final risk requirement figure (for example, in respect of Credit Risk the Central Bank will require the relevant CRR reference and approach taken for assigning to an asset item the particular risk weighting). Figures shown should be after applying Article 92(4) of the CRR. Section This section applies to those applicant firms referred to in the third sub-paragraph of Article 95(2) of the CRR i.e. firms referred to in point 2(c) of Article 4(1) of the Page 29 of 63

30 CRR that provide the investment services and activities listed in points (2) and (4) of Section A of Annex 1 to Directive 2004/39/EC to which the competent authority discretion to apply the own funds requirements that would be binding on those firms according to national transposition measures in force on 31 December 2013 for Directives 2006/48/EC and 2006/49/EC applies. The calculations for each risk must include the CRD reference and approach taken in attaining the final capital requirement figure (for example, in respect of Credit Risk the Central Bank will require the relevant CRD reference and approach taken for assigning to an asset item the particular risk weighting). A detailed calculation must also be provided in respect of the Fixed Overhead Requirement Common Equity Tier 1 items (CET1) must comply with Article 26 of the CRR, Additional Tier 1 items must comply with Article 51 of the CRR and Tier 2 items must comply with Article 62 of the CRR and deductions made from regulatory capital must be in accordance with Part Two of the CRR. Under the Category of Capital column the applicant should insert the relevant tier of capital CET1, Additional Tier 1 or Tier No additional notes No additional notes. 4.6 No additional notes Where the applicant firm is part of a group, a submission must accompany the application explaining why consolidated supervision will (including identification of the level) / will not apply to the applicant firm. Additionally the rationale for the answer must be justified by reference to the CRR / CRD IV. This information must also be accompanied by the full group structure chart including an explanation of what activity each company in the group carries out and the regulatory status of each group company (if regulated, the name of the regulatory body must be provided) See Note Where consolidated supervision will apply the applicant firm must provide projected consolidated Profit and Loss Account and Balance Sheet at the level where consolidated supervision will apply, for the first three years post authorisation of the applicant, along with a note explaining each line item (see Note (b) and (i) for details on the format of the accounts). Page 30 of 63

31 4.7.3 Where consolidated supervision will apply, the applicant firm must also provide a projected consolidated capital requirement at the level where consolidated supervision will apply. The firm must provide a detailed note with the calculation explaining how the capital requirement is calculated with reference to the consolidated Profit and Loss and Balance Sheet. The Central Bank reserves the right to comment on the calculation and notes provided. 4.8 Where a National Discretion is to be applied for, ensure the specific legislative reference is provided. (Section to be updated in order to refer to Implementation of the CRR document when it becomes available) Where a derogation is requested, ensure a detailed submission containing all the legislative references are contained in the submission that accompanies the main application. Where applicable, the submission must also demonstrate how the applicant firm meets any criteria / requirements specified in the relevant legislation. Page 31 of 63

32 5.1.5 Sub-Section 5: Organisational Structure App. Form Ref The Business Plan must include the applicant firm s organisational chart that captures all staff (to be) employed 12 at commencement of authorisation with a clear indication if any individual who will be employed on a part-time basis. Where no such indication made, it will be assumed that the staff member will be employed on a full-time basis. The chart must clearly highlight: (i) the function each staff member is responsible for and their reporting line within the applicant firm and in addition, the relevant reporting line to the board; and (ii) whether an individual has more than one function within the applicant firm (e.g. carries out both the compliance and risk functions) and also clearly identity whether a staff member holds a PCF. The Business Plan must also disclose the main (4-5) responsibilities of the applicant firm s senior management. The Central Bank expects the organisational chart to mirror that set out in the KFD received by the Central Bank or subsequently agreed with the Central Bank prior to the applicant being told it may file its application The Business Plan also needs to contain a brief biography of each person carrying out a PCF in the applicant firm in order to highlight their qualifications, expertise and experience The Business Plan must also disclose the minimum reporting frequency by senior managers to the Managing Director / Chief Executive as well as the minimum reporting frequency by the Managing Director / Chief Executive to the board Identification of board members along with the minimum frequency of board meetings and location (which are required to be in the State) of the board meetings 12 Includes direct employment through a contract of employment, a secondment arrangement or an outsourcing arrangement. Page 32 of 63

33 must be disclosed in the Business Plan along with the main (4-5) responsibilities of the board of directors. The chairman of the board must be an independent nonexecutive director or a non-executive director in cases where the appointment of an independent non-executive director is optional Where the applicant firm has a committee / sub-committee in place, the objective of and the modus operandi of the committee must be disclosed in the Business Plan, e.g. the purpose of having a committee in place and whether decisions are to be unanimously, majority reached etc. Also disclose the composition of the committee and frequency of meetings See Schedule 2 of S.I. No. 437 of 2011 / The Central Bank Reform Act 2010 (Section 20 and 22) Regulations 2011 (as amended) for list of PCFs. The IQs relating to each PCF role must be submitted on-line to the Central Bank s Regulatory Transactions Division (See Section 2.1 or Section 2.2 of the Guidance Note for details on the filing process). The range of PCFs including their allocation between individuals will have already been agreed between the applicant firm and Central Bank during the preliminary meeting stage but prior to inviting the firm to submit an application for authorisation and therefore this information should not have changed This record must be made available to the Central Bank upon request The Central Bank requires the board to have a balance of executive and nonexecutive directors. The Central Bank requires the following minimum number of Independent Non- Executive Directors on the board: Level 1 One Level 2 Two Independent Directors (criteria) The following criteria must be considered and given reasonable weight in order to assess whether a director is independent: (a) Any financial or other obligation the individual may have to the applicant firm or its directors; (b) Whether the individual is or has been employed by the applicant firm or a group company in the past and the post(s) so held; Page 33 of 63

34 (c) Whether the individual is or has been a provider of professional services to the applicant firm in the recent past; (e) Whether the individual represents a significant shareholder in the applicant firm; (f) Circumstances where the individual has acted as an independent nonexecutive director of the applicant firm for extended periods; (g) Any additional remuneration received in addition to the director s fee, related directorships or shareholdings in the applicant firm; and (h) Any close business or personal relationship with any of the applicant firm s directors or senior employees No additional notes. Page 34 of 63

35 5.1.6 Sub-Section 6: Shareholders/Partners/Members and Qualifying Shareholders App Form Ref. 6.1 The applicant firm must provide a chart outlining its full ownership structure (i.e. include all direct and indirect qualifying shareholders). Where the applicant firm is part of a group the chart must include all entities (including their branches) in the group and the nationality / country of incorporation of the natural person / legal person as the case may be. In the case of a legal entity the country where the entity s head office / principal place of business must also be disclosed. The main activities of each entity in the group must be supplemented with the group chart. The chart must disclose the percentage ownership held by the respective party in each group entity with all qualifying shareholders identified. Disclose in the chart whether each natural / legal person is regulated / nonregulated. Where a natural / legal person falls to be regulated also disclose the identity of the regulatory body. 6.2 This sub-section requests the identity of all persons (whether natural or legal) with a direct qualifying holding 13 in the applicant firm. The applicant firm must also consider whether the legal owner of the direct qualifying holding is also the beneficial owner of that holding and where they are not the same, consideration must also be given to whether the beneficial owner(s) of that direct qualifying holding is also a qualifying shareholder in the applicant firm. Where the beneficial owner referred to above falls to be a qualifying shareholder in 13 See definition of qualifying holding in Regulation 3 (1) of the MiFID Regulations and particular attention must be drawn to the determinants of a qualifying holding, i.e. capital and control. Page 35 of 63

36 the applicant firm, this must be highlighted and their details provided for in the table contained in this section of the Application Form with the requisite shareholder information for that person filed. 6.3 This sub-section requests the identity of all persons (whether natural or legal) with an indirect qualifying holding 14 in the applicant firm. The applicant firm must also consider whether the legal owner of the indirect qualifying holding is also the beneficial owner of that holding and where they are not the same, consideration must also be given to whether the beneficial owner(s) of the indirect qualifying holding is also a qualifying shareholder in the applicant firm. Where the beneficial owner referred to above falls to be a qualifying shareholder in the applicant firm, this must be highlighted by providing their details in the table contained in this section of the Application Form along with providing the requisite shareholder information for that person. 6.4 Natural or legal persons, who are not covered in either 6.2 or 6.3 and where that natural person does not sit on the board of the applicant firm, who have input into the decision making of the applicant firm will be considered to fall to be qualifying shareholders of the applicant firm, and then Section 6.5 and Section 6.6 will also apply to them. See definition of qualifying holding in Regulation 3 (1) of the MiFID Regulations. 6.5 The direct / indirect qualifying shareholders or those in a position to exercise a significant influence over the management of the applicant may be acting in concert with other parties in respect of the management of the applicant firm. Where this arises, details (i.e. identity of those parties and a description of how acting in concert arises) must be disclosed in the Business Plan. 6.6 The following requirements are required for each category of qualifying shareholder: Individual (a) Individual Questionnaire (the IQ must be filed in hard copy enclosed with the main Application Form). (b) Regulatory Status of the individual (including name of their regulated position and identity of the regulatory body). (c) Document that evidences the individual as a qualifying shareholder of the applicant firm, i.e. shareholder register of the applicant firm with the 14 See definition of qualifying holding in Regulation 3 (1) of the MiFID Regulations and particular attention must be drawn to the determinants of a qualifying holding, i.e. capital and control. Page 36 of 63

37 (d) (e) (f) individual s name appearing on it. Written confirmation from the individual confirming the identity of the beneficial owner of those shares registered in his/her name. An up-to-date net asset statement from the individual, that discloses each asset and liability category and the monetary amount held in that category along with details of sources/amounts of income and any personal guarantees made by the individual. Details regarding any financial or non-financial interests or relationships that the individual may have with any other party / parties related to the applicant firm. Company (a) Description of the company s main activities; (b) Regulatory status of the company including by which regulatory body. (c) Audited financial statements for the last three years and if no audits are available, management accounts for the last three years. (d) Details of proposed interaction with the applicant firm (whether the interaction is limited to group reporting or otherwise). (e) Document that evidences the company as a qualifying shareholder of the applicant firm, i.e. shareholder register with the company s name appearing on it. (f) Written confirmation from a director of the company confirming the identity of the beneficial owner of those shares registered in its name. (g) Address of registered office of the company. (h) Address of principal place of business (i.e. where the operations of the company are carried out). (i) Company Registration Number. (j) Country of Formation. (k) Certificate of Solvency (the wording is as follows) from a director of the Company: I certify that at this time, to the best of my knowledge and belief, and having made reasonable enquiry, the total of [Name of Company] assets exceeds the total of [Name of Company] liabilities, and that [Name of Company] is able to meet those liabilities as they fall due. I am not currently aware of any circumstances that would cause this position to change within the next twelve months. I acknowledge that if this statement is found to be false, inaccurate or misleading in any respect, I may be guilty of an offence under Regulation 19 of the European Communities (Markets in Financial Instruments) Regulations 2007 (as amended). I also undertake to notify the Central Bank of Ireland immediately if at any time [Name of Company] financial circumstances change to an extent, which would render my unable to complete this certification. Partnership (i.e. Limited Liability Partnership) (a) Description of the partnership including names of all partners (whether general or limited) and their role(s) in the partnership. (b) Description of the activities of the partnership. (c) Regulatory status of the partnership including the regulatory body. (d) Audited financial statements for the last three years and if audits are not available, management accounts for the last three years. (e) Details of proposed interaction with the applicant firm (whether the interaction is limited to group reporting or otherwise). Page 37 of 63

38 (f) (g) (h) (i) (j) (k) (l) Document that evidences the partnership as a qualifying shareholder of the applicant firm, i.e. shareholder register with the partnership s name appearing on it. Written confirmation from a partner of the partnership confirming the beneficial owner of those shares registered in its name. Address of registered office of the partnership. Address of principal place of business (i.e. where the operations of the partnership are carried out) of the partnership. Country of formation / incorporation. Certificate of Solvency (wording is as follows) from a partner: I certify that at this time, to the best of my knowledge and belief, and having made reasonable enquiry, the total of [Name of Partnership] assets exceeds the total of [Name of Partnership] liabilities, and that [Name of Partnership] is able to meet those liabilities as they fall due. I am not currently aware of any circumstances that would cause this position to change within the next twelve months. I acknowledge that if this statement is found to be false, inaccurate or misleading in any respect, I may be guilty of an offence under Regulation 19 of the European Communities (Markets in Financial Instruments) Regulations 2007 (as amended). I also undertake to notify the Central Bank of Ireland immediately if at any time [Name of Partnership] financial circumstances change to an extent, which would render my unable to complete this certification. Trust (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) Document that evidences the trust as a qualifying shareholder of the applicant firm, i.e. shareholder register with the trust s name appearing on it. Completed IQ for the settlor(s) of the Trust (the IQ must be filed in hard copy and must accompany the main application form). Completed IQ for the trustee(s) of the Trust (the IQ must be filed in hard copy and must accompany the main application form). Completed IQ for the beneficiaries of the trust (the IQ must be filed in hard copy and must accompany the main application form). If the beneficiary is a minor, then their name along with independent certification 15 or documentary verification 16 of their age and the rationale for their role as beneficiary of the trust are only required (as opposed to an IQ for the minor). Audited financial statements for the last three years and if audits are not available, management accounts for the last three years. Reasons for a trust structure in the applicant s ownership. Address of the registered office of the trust. Address of principal place of business (i.e. where the operations of the trust are carried out). Country of formation / incorporation. Certificate of Solvency (wording is as follows) from the trustee of the trust I certify that at this time, to the best of my knowledge and belief, and having made reasonable enquiry, the total of [Name of Trust] assets exceeds the total of [Name of Trust] liabilities, and that [Name of Trust] is able to meet those liabilities as they fall due. I am not currently aware of any circumstances that would cause this position to change within the next twelve months. I acknowledge that if this statement is found to be false, inaccurate or misleading in any respect, I may be guilty of an offence under Regulation 15 Independent certification from a legal advisor. 16 Passport or birth certificate. Page 38 of 63

39 19 of the European Communities (Markets in Financial Instruments) Regulations 2007 (as amended). I also undertake to notify the Central Bank of Ireland immediately if at any time [Name of Trust] financial circumstances change to an extent, which would render my unable to complete this certification. Nominee Company This relates to a company that holds a qualifying shareholding in an applicant firm on behalf of third parties as a nominee. The nominee company must submit the following shareholder information pertaining to itself (the beneficiary of that qualifying shareholding must also provide the requisite shareholder information pertaining to itself providing the beneficiary is a qualifying shareholder): (a) Document that evidences the nominee company as a qualifying shareholder, i.e. shareholder register with the nominee company s name appearing on it. (b) Where the shareholder of the Nominee Company is a qualifying shareholder of the applicant firm, the relevant shareholder requirements must also be submitted for that shareholder. (c) Audited financial statements for the last three years and if audits are not available, management accounts for the last three years. (d) Letter from a director of Nominee Company confirming the beneficial owner of those shares registered in its name. (e) Shareholder requirements of the beneficial owner(s) of those shares where the beneficial owner(s) fall to be a qualifying shareholder in the applicant firm. (f) Details explaining the objective that is intended to be served by using such a nominee company, rather than the legal / natural person holding the shares directly. (g) Address of the registered office of the Nominee Company. (h) Address of principal place of business (i.e. where the operations of the Nominee Company are carried out). (i) Company registration number. (j) (l) Country of formation / incorporation. Certificate of Solvency (the wording is as follows) from a director of the Nominee Company: I certify that at this time, to the best of my knowledge and belief, and having made reasonable enquiry, the total of [Name of Company] assets exceeds the total of [Name of Company] liabilities, and that [Name of Company] is able to meet those liabilities as they fall due. I am not currently aware of any circumstances that would cause this position to change within the next twelve months. I acknowledge that if this statement is found to be false, inaccurate or misleading in any respect, I may be guilty of an offence under Regulation 19 of the European Communities (Markets in Financial Instruments) Regulations 2007 (as amended). I also undertake to notify the Central Bank of Ireland immediately if at any time [Name of Company] financial circumstances change to an extent, which would render my unable to complete this certification. Note: All share registers must be certified by a party independent of the applicant firm such as an accountant or professional advisor. Page 39 of 63

40 6.7.1 The Business Plan must disclose the reason(s) why close links 17 exist or do not exist between the applicant firm and other natural person and therefore the definition in the Regulations will need to be reviewed The Business Plan must disclose the persons (whether natural or legal) that close links exist between. The existence of close links must not prevent the Central Bank from effectively supervising the applicant firm. Possible examples of the kind of issues that might prevent the Central Bank s effective supervision of an investment firm include anything that might: affect an investment firm s ability to provide adequate information to the Central Bank at any time; hinder the flow of information from an investment firm or an investment firm s close link to the Central Bank at any time; prevent the Central Bank from being able to assess the overall financial position of an investment firm or its close link at any time. The applicant firm must therefore set out what action, structures, mechanisms it has in place to prevent the existence of such close links from allowing the Central Bank from effectively supervising the applicant firm. 17 See definition of close link in Regulation 3 (1) of the MiFID Regulations. Page 40 of 63

41 5.1.7 Sub-Section 7: Regulatory Background App. Form Ref. 7. The applicant firm must state, to the best of its knowledge and belief, whether it has ever been subject to those actions listed. In any case where the answer is yes, full details must be given on a separate sheet with the reference to the appropriate question. Page 41 of 63

42 6.0 Section B (Level 2 only) 6.1 Sub-Section 8: Key Policies App. Form Ref The applicant firm must provide an overview of the principles that underlie its Compliance Policy. The Application Form sets out a list of principles that must be included or addressed in the applicant firm s compliance policy and these must be disclosed in the Business Plan. The applicant firm must review the MiFID Regulations when addressing this aspect of its application and particular attention must be paid to Regulations of the MiFID Regulations. While the Central Bank does not require the actual Compliance Manual as part of the application process, this document must be made available to the Central Bank upon request if and when authorised The applicant firm must provide an overview of the principles that underlie the firm s Risk Policy. The Application Form sets out a list of principles that must be included or addressed in the applicant firm s risk policy and these must be disclosed in the Business Plan. The applicant firm must review the MiFID Regulations when addressing this aspect of its application and particular attention must be paid to Regulation 36 of the MiFID Regulations. While the Central Bank does not require the actual Risk Management Manual as part of the application process, this document must be made available to the Central Bank upon request if and when authorised If the applicant firm has an internal audit function in place, the applicant must provide an overview of the principles that underlie its Internal Audit Policy. The Application Form sets out a list of principles that must be included or addressed in the applicant firm s internal audit policy and these must be disclosed in the Business Page 42 of 63

43 Plan. The applicant firm must review the MiFID Regulations when addressing this aspect of its application and particular attention must be paid to Regulation 37 of the MiFID Regulations Please review the MiFID Regulations when addressing this aspect of its application and particular attention must be paid to Regulations 39 and of the MiFID Regulations No additional notes The applicant firm must provide an overview of its Business Continuity Plan with the required information set out in the Application Form included. The applicant firm must also make arrangements for the use of an off-site disaster recovery area that is not a private residence to which the Central Bank will have unrestricted access if required No additional notes The employee of the applicant firm assigned with the responsibility of overseeing the services carried out by the Service Provider must have sufficient seniority and expertise to ensure the work is carried out to the minimum standard agreed The Central Bank has no objection to a Side Letter to the main Service Level Agreement being entered into in order to comply with the provisions of Regulation 105 of the MiFID Regulations No additional notes No additional notes. Page 43 of 63

44 6.2 Sub-Section 9: Conduct of Business App, Form Ref. 9.1 No additional notes. 9.2 The conduct of business requirements applicable to MiFID firms are contained in the MiFID Regulations as follows: (a) Part 5 - Regulations 38 and 39 (b) Part 7 Regulations 74 to 78 Regulations 80 to 87 Regulations 92 to 103 Regulations 106 to 108 Regulation 111 (c) Part 11 - Regulations 151 to 155 Where the applicant firm intends on providing non-mifid services / products, the Consumer Protection Code 2012 ( the Code ) may apply. As part of the authorisation process, the Central Bank does not intend to engage in an exhaustive analysis of the Conduct of Business related policies and procedures of the applicant firm. It is a matter for the persons concerned with the direction and management of each individual applicant firm to ensure that they are satisfied, on the basis of professional advice or otherwise, that the applicant firm complies with the MIFID Regulations and any other relevant legislation. However, there are a number of sources of additional guidance in relation to compliance with the relevant Conduct of Business Requirements set out above including the following: Page 44 of 63

45 The European Securities Markets Association (ESMA) contributes to the supervision of financial services firms with a pan-european reach, either through direct supervision or through the active co-ordination of national supervisory activity. ESMA has issued a number of guidance documents in relation MiFID Conduct of Business. These are available on ESMA s website. The Central Bank issued the MiFID - Feedback on Discussions of Conduct of Business Industry Working Group document as a guide to the conduct of business provisions of the MiFID Regulations. This document can be found on the Central Bank s website. Central Bank letters to industry regarding compliance with the MiFID Regulations and the Code can also be found on the Central Bank s website. Content of Policy The Conduct of Business Policy Document provided by the applicant firm as part of the authorisation process should summarise concisely the systems and controls in place at the applicant firm to ensure compliance by the applicant firm in relation to each of the eleven 18 Conduct of Business topics below. The applicant firm should not include copies of the firm s full policies and procedures in respect of individual topics. Where any of the eleven Conduct of Business topics below are not applicable to the applicant firm, the policy should set out the basis upon which it has been so determined. The Conduct of Business Policy Document should be no longer than 10 standard A4 typed pages. A. Client Categorisation 19 : The applicant firm must provide details of any systems and controls that the applicant firm has in place regarding the categorisation of clients as retail clients, professional clients or eligible counterparties. This should include, in 18 The eleven topics identified are based on the Conduct of Business obligations applicable under the MIFID Regulations. The rules applicable to services subject to the Consumer Protection Code are similar but not identical to the Conduct of Business obligations under MIFID. Applicant firms may need to take this into account when devising their systems and controls. 19 MiFID Regulations: Part 2 - Regulation 3, Part 7 - Regulation 81 and 111, and Schedule 2. Page 45 of 63

46 particular, how the applicant firm decides how to classify clients, how this classification and the possibility of changing classification are communicated to clients. B. Suitability & Appropriateness 20 : (i) Suitability: Where the applicant firm intends to provide the investment services of investment advice and / or portfolio management, the applicant firm must provide details of any systems and controls it has in place to ensure that sufficient information is obtained from the client so the applicant firm is able to recommend investment services or financial instruments that are suitable for the client. This should include details of: what information the applicant firm obtains from the client; how it obtains, records and retains this information; and how it assesses whether an investment service or financial instrument is suitable. (ii) Appropriateness: Where the applicant firm intends to provide investment services other than portfolio management and investment advice, the applicant firm must provide details of any systems and controls the applicant firm has in place to ensure that sufficient information is obtained from the client so the applicant firm is able to assess whether the investment service or product envisaged is appropriate for the client and provide warnings where relevant. This should include details of: what information the applicant firm obtains from the client; how it obtains, records and retains this information; how it assesses whether an investment service or product is appropriate; and any warnings provided to clients in this regard. C. Provision of Information to Client 21 Certain information is required to be provided to retail clients prior to the provision of investment services or ancillary services. This information should include, where relevant: 20 MiFID Regulations: Part 7, Regulations 76, 94, 95 and MiFID Regulations: Part 7- Regulations 74-78, 80-87, 92-94, 98, 100 and 106 Page 46 of 63

47 - Written agreement; - Disclosures regarding inducements; - Client categorisation information; - Information about the applicant firm and the services to be provided; - Information about financial instruments; - Details of the conflicts of interest policy; - Information on costs and charges; and - Details of the applicant firm s best execution policy. The applicant firm must provide details of how it intends to provide the above information to clients, addressing all points listed above where relevant to the business of the applicant firm. It must also provide details of how it intends to notify clients of any material changes to information provided. D. Reporting to clients 22 Where the applicant firm intends to carry out orders for clients, other than portfolio management, the applicant firm must confirm that it has systems and controls in place to ensure that the applicant firm meets its primary reporting obligation to provide contract notes in respect of each transaction. The applicant firm should be aware that if the service is being provided to retail clients the contract note must contain all the information outlined in Regulation 96(6). Where the applicant firm intends to provide the service of portfolio management, it must confirm it has systems and controls in place to ensure that they meet their primary reporting obligation to provide the client with a periodic statement in a durable form. E. Investment Research 23 Where the applicant firm intends to provide the ancillary service of investment research and financial analysis or other forms of general recommendation relating to transactions in financial instruments, the applicant firm must confirm that it has systems and controls in place to comply with the MiFID 22 MiFID Regulations: Part 7 - Regulation 96 and MiFID Regulations: Part 7 - Regulations and 80, Part 11 - Regulations 151 and Page 47 of 63

48 Regulations regarding investment research and provide details of these. F. Best Execution 24 Where the applicant firm intends to provide the services of: execution of orders on behalf of clients ; reception and transmission of orders in relation to one or more financial instruments ; and/or portfolio management, when placing with other entities for execution that result from decisions to deal in financial instruments on behalf of client portfolios, the applicant firm must confirm that: 1) It has in place a best execution policy which provides that the applicant firm takes all reasonable steps to obtain the best possible result for the applicant firm s clients, and 2) It intends to monitor the effectiveness of the policy on a regular basis. G. Client Order Handling 25 Where the applicant firm intends to provide the services of execution of orders on behalf of clients, it must confirm that: 1) It has in place procedures and arrangements which: (i) Provide for the prompt, fair and expeditious execution of client orders by the investment firm, relative to other client orders, or the trading interests of that investment firm, and (ii) Provide for the execution of comparable client orders in accordance with the time of their receipt by the investment firm. 2) It has established and will effectively implement an order allocation policy, which provides in sufficiently precise terms for the fair allocation of aggregated orders and transactions, and in particular in terms of how the volume and price of orders relates to how they will be allocated in each case. 24 MiFID Regulations: Part 7 - Regulations 97, 98 and MiFID Regulations: Part 7 - Regulation Page 48 of 63

49 H. Conflicts of Interest 26 The applicant firm must confirm that it has established a Conflicts of Interest policy which should identify circumstances which give rise to a conflict of interest and specify procedures to be followed and measures to be adopted in order to manage such conflicts. The applicant firm should also provide brief details on the conflicts identified in its specific business and activities. The applicant firm must also confirm that it has established adequate arrangements regarding personal transaction procedures. I. Inducements 27 The MiFID Regulations use the term inducements to include all fees, commissions and other non-monetary benefits. The applicant firm must provide details of any arrangements and procedures that the applicant firm has set up to ensure that payments it makes or receives in relation to the provision of investment or ancillary services - including intragroup payments - comply with the MiFID inducements rules. The applicant firm should include details of if and how it discloses the existence, nature and amount of any third-party payments to clients. J. Complaints Handling 28 The applicant firm must confirm that it maintains effective and transparent procedures for the reasonable and prompt handling of complaints received from retail clients. The applicant firm must provide a brief account of how it maintains a record of complaints and the processes in place for the resolution of complaints. K. Advertising and marketing communications 29 The applicant firm must confirm that it has in place adequate systems and 26 MiFID Regulations: Part 5 - Regulation 39, Part 7 - Regulations and 80 and Part 11 - Regulation MiFID Regulations: Part 7 - Regulations 74, 75 and MiFID Regulations: Part 5 - Regulation MiFID Regulations: Part 7 - Regulation 76, 80 and 81 and Part 11 - Regulations Page 49 of 63

50 controls to ensure that any marketing materials produced comply with the requirements of the MiFID regulations and it must provide a brief account of these systems and controls. The Provision of information to clients requirements in respect of marketing communications are outlined in Part 7 - Regulation 76, 80 and 81 of the MiFID Regulations. However, further miscellaneous requirements in respect of advertising are outlined in Part 11, Regulations of the MiFID Regulations. The above description of each of the eleven Conduct of Business topics identified is essentially a summary of the relevant requirements applying and should not be relied upon as detailing in full the requirements of the MIFID Regulations in respect of Conduct of Business matters. For full details of the applicable requirements, the applicant firm should refer to the MIFID Regulations and guidance documents referenced to under the Introduction above. Page 50 of 63

51 Appendix 1 Client Assets Sub-Section 10: Client Asset Arrangements An objective of the Central Bank, as mandated by the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) Client Asset Regulations 2015 for Investment Firms 30 (the Client Asset Regulations ), is to ensure investment firms authorised to hold client assets have adequate arrangements for the administration and safekeeping of client assets. The Central Bank considers the safeguarding and administration of client assets to be of paramount importance, it expects applicants applying for authorisation to hold client assets have superior operational frameworks. In August 2011 the Central Bank commissioned a taskforce to conduct a review of the regulatory regime for the safeguarding of client assets. The taskforce published a report titled Review of the Regulatory Regime for the Safeguarding of Client Assets making a number of recommendations with regards to the Central Bank s approach for supervising firms holding client assets. The Central Bank has implemented these recommendations including the establishment of specialist supervisory team, the introduction of revised Client Asset Regulations and the introduction of pre-approval controlled function with regard to client assets. On foot of this review, the Central Bank is seeking to enhance the standards of firms applying for authorisation to hold client assets, particularly in relation to their control environment and the level of oversight of their client asset arrangements. In this regard, the Central Bank will need to be satisfied the applicant s rationale for applying for authorisation to hold client assets is central to the applicant firm s business model and that such a significant authorisation is required. Furthermore, the Central Bank will need to be satisfied that the organisational structure and control environment is sufficient to mitigate client asset risks. In this regard, the Central Bank may require additional arrangements including Independent Non-Executive Directors INEDs, an internal audit function and robust compliance monitoring arrangements. 30 S.I. No. 104 of 2015 Page 51 of 63

52 Should the applicant successfully obtain authorisation to hold client assets the firm should expect a significantly higher level of engagement and scrutiny from the Central Bank. As a consequence the applicant is requested to carefully consider the rationale for its submission seeking authorisation to hold client assets and in particular the associated costs which are directly attributed to the increased regulatory burden imposed on investment firms holding client assets. Where a firm is permitted under its authorisation to hold Client Assets, it will be subject to the Client Asset Regulations. In preparing this submission, the applicant should be mindful of the revised Client Asset Regulations. In particular, the applicant should pay attention to: the seven Core Principles of the revised Client Asset Regime; the requirement for firms to have in place a Client Asset Management Plan ( CAMP ) which will detail the business model of the firm and the resulting risks of holding client assets; and the requirement for a Head of Client Asset Oversight ( HCAO ), a pre-approved control function with responsibility and ownership for the firm s compliance with client asset obligations including the production of the CAMP Client Asset Policy Document In addition to a submission on the matters outlined in 10.2, the applicant is requested to submit a Client Asset Policy Document which should outline the applicant s proposed approach to the seven Core Principles under the Client Asset Regulations. The seven Core Principles are as follows: 1. Segregation 2. Designation and Registration 3. Reconciliation 4. Daily Calculation 5. Client Disclosure and Client Consent 6. Risk Management 7. Client Asset Examination. Page 52 of 63

53 10.2 Client Asset Submission Document App Form Ref a) Provide a formal description of the applicant firm s proposed business model. This section should specify the activities of the applicant, including details of regulated and unregulated activities, types of clients and products provided. b) Outline the rationale for the firm s application for Client Asset Authorisation. This section should include: an overview of the circumstances in which the applicant proposes to hold client assets; an overview of alternative arrangements considered including engaging an independent custodian This section should detail the investment cycle of transactions which would come under the remit of the client assets regime. In particular, consideration should be given to mechanism and control processes in place: - from the initial receipt of client funds and client financial instruments, - any subsequent investment and re-investment (both regulated and unregulated) where applicable, and - the final disbursement to the client. The investment cycle should include but is not limited to flowcharts or illustrative diagrams showing control points and critical interventions particularly in cases where an applicant intends to carry out any manual processing of client assets a) Projected Level of Client Assets ( 000 s) 6 Months 12 Months 18 Months 24 Months b) Projected Level of Client Funds ( 000 s) 6 Months 12 Months 18 Months 24 Months c) Projected Level of Client Financial Instruments ( 000 s) 6 Months 12 Months 18 Months 24 Months d) Projected Number of Clients (for whom the applicant would hold clients assets) Page 53 of 63

54 Client Type 6 Months 12 Months 18 Months 24 Months MiFID Retail MiFID Professional MiFID Other Total e) Projected number of transactions across client asset accounts broken down by category and frequency Provide a breakdown of the proposed range and type of Client Assets to be held by the applicant. This should include details of: a) Types of client mandates (e.g. discretionary, advisory) which will result in the applicant holding client assets, including a description of the types of investment instruments and services associated with each mandate; b) Proposed client assets accounts for holding both client funds and financial instruments, specifying the number of accounts, types of account(s), if account(s) are pooled/segregated, currency denomination of the account(s) and proposed credit institution/eligible custodian(s) with whom the accounts would be held; c) Proposed types of client financial instruments, where these would be held and how they would be monitored; d) The process for the addition of new products or removal of existing products offered by the applicant firm, including a process for assessing whether products will be regulated; e) Details of any proposals to operate collateral/margin arrangements or any proposals to provide securities lending/borrowing services Provide a detailed overview of the applicant s proposed client asset arrangements including how the applicant proposes to organise itself to meet its obligations under the Client Asset Regulations. This overview should reference at a minimum: a) Details of projected staff with direct involvement in client assets (i) Overview of proposed functional units to administer and oversee client assets; (ii) Levels of proposed staff; (iii) Roles and relevant responsibilities e.g. account opening & designation, daily reconciliation, daily calculation, Central Bank reporting, oversight Page 54 of 63

55 of client asset arrangements; (iv) Experience and expertise of key staff; and (v) Proposal with regard to HCAO including key responsibilities. The Central Bank expects a firm to have appropriate segregation of duties and preparers and reviewers should be independent and appropriately qualified and knowledgeable staff. b) An overview of any proposed Outsourcing Arrangements for the safeguarding of client assets. This section should provide an overview of the arrangements making reference to the rational for this proposal and how it would fit into the overall control process. In addition the applicant should document how and by whom the effectiveness of the outsourced arrangement would be overseen and monitored. c) Proposed Governance Arrangements. This should specify the reporting lines in relation to the different functions involved in client assets and to include reporting to the board and to senior management in relation to client asset administration and oversight. d) Proposed Compliance Arrangements. This should detail the proposed level of compliance oversight with reference to compliance monitoring and testing, provision of client asset training, complaints procedures, escalation policies, and reporting obligations. e) IT systems. Provide an overview of the current and proposed IT systems which will support client asset activities, outlining if these systems are bespoke or standardised third party supplied. Consideration should be given to the level of automation necessary based on the nature, scale and complexity of the applicant firm s client asset arrangements. f) Proposed external auditor to be appointed to conduct annual Client Asset Examination. g) Proposed arrangements with regard to client disclosures including the process for making amendments to relevant client disclosures Details of how an applicant firm would able to differentiate, monitor and control the client assets subject to Client Asset Regulations from those assets which are not within the scope of the Client Asset Regulations. Page 55 of 63

56 a) The applicant should address how the client assets would be segregated from unregulated assets and firm assets both physically and administratively. b) The applicant should document its rationale and judgement when there is ambiguity on concluding where a service or activity considered regulated a) Please provide the applicant s assessment of the perceived risks to the safeguarding of client assets. Factors to consider, in doing so, include items such as: - counterparty risk including jurisdiction and associated legal risks; - concentration risk; - fraud; - operational risk; - complexity of assets; - compliance with client mandates; - outsourcing; - group arrangements; and - Any other relevant issues. b) The applicant should carry out a thorough review of the Client Asset Regulations to ensure all relevant obligations and the resulting risks are adequately captured What are the applicant s proposed processes and controls to mitigate those risks? These must include but not be limited to: a) The application should make reference to the material risks identified in Section and map each of these risks to the relevant controls and processes proposed to mitigate them. b) Notwithstanding (a) above, the applicant should specify the proposed controls and processes in place in relation to the following: (i) A description of how client assets would be received, held and disbursed; (ii) A description of how the ownership or registration of client financial instruments would be safeguarded; (iii) Proposed procedures relating to the removal of funds due to the firm from a client asset account; Where a firm would receive mix remittances into a client asset bank account, the control and processes surrounding the removal of funds due to it from the client asset bank account should be documented including the nature, frequency and timing of the removal process. Page 56 of 63

57 (iv) A description of how client financial instruments including physical financial instruments would be held and monitored; Where an investment firm physically holds client financial instruments, the process for so doing should be documented, including the business rationale, the extent of the service provided, the controls in place (for example, the location and access rights to a fire-proof safe) and the monitoring of such controls. (v) A description of the proposed arrangements, including senior management approval, for maintaining and updating a list of approved credit institutions and counterparties; and (vi) A description of the systems and controls in relation to the production and submission of information in relation to client assets to a third party Details of the applicant s proposed Materiality Threshold Levels. a) The applicant should outline the rationale for these thresholds and related triggers should be set for dealing with breaches of its controls, processes and procedures. These should take into account both quantitative and qualitative factors, for example, the level of client assets, the complexity of client assets, the type of clients and prior history of breaches relating to client assets. b) The applicant should outline the proposed materiality level for reporting and escalating matters to the board in respect of any errors or breaches in its controls to safeguard client assets. In areas of judgement, a firm should document its approach and any triggers set Please provide a detailed plan for the how the applicant would manage its client assets in the event of the firm s insolvency. The Client Asset Regulations require firms to have a CAMP sufficiently detailed to enable the insolvency practitioner to understand the business model and controls for safeguarding client assets. An insolvency practitioner needs to know where the assets are and the type and value of client assets. A firm should ensure there is sufficient information available to enable the distribution of client assets to take place as quickly as possible with minimum cost to clients. This information could also be required in the event that a firm is required to facilitate an orderly transfer of assets to another firm. Please outline in the submission how the applicant firm would ensure the provision of the required information is readily available to facilitate the prompt distribution of clients Page 57 of 63

58 assets in these circumstances. Page 58 of 63

59 Appendix 2 Operation of a Multilateral Trading Facility Sub-Section 11: MTF Submission App. Form Ref The detailed description of the proposed trading platform should include at a minimum the following elements: (a) (b) (c) (d) (e) (f) (g) (h) the proposed instruments to be traded on the platform (including a detailed instrument specification (e.g. base currency, minimum trading increment, minimum contract size, how contracts are liquidated or rolled forward, tick size etc.) the proposed location and trading hours of the trading platform; general description of the proposed order book (how market participants can access the order book, how orders are received and matched, price formation, how trade / transaction reporting by participants is effected, how executed transactions are transmitted to a settlement system / clearing house and the technology behind all of the forgoing); the proposed systems and controls in place for monitoring and reviewing the operation of the trading platform and trading on its platform; the proposed pre and post trade transparency information available and dissemination arrangements; the proposed market participants (including market makers etc.) and overview of requirements for membership; An overview of proposed rule book(s) and market parameters; the proposed fee structures and other income streams generated; and (transaction flow charts should also be included where applicable with a detailed narrative) The detailed description of the proposed settlement arrangements should at a minimum include the following elements: (a) clearing and / or CCP arrangements; (b) overview of rules and practices relating to clearing and settlement; (c) arrangements for matching executed trades for settlement and ensuring that the parties are in agreement about trade details for settlement; Page 59 of 63

60 (d) (e) (f) (g) (h) Where relevant, the following information should be included: an overview of arrangements for making deliveries and payments and, for collecting margin and holding collateral, in all relevant jurisdictions; overview of procedures to detect and deal with the failure of a member to settle in accordance with its rules; overview of arrangements for taking action to settle a trade if a member does not settle in accordance with its rules; overview of arrangements for monitoring its members' settlement performance; and overview of default rules and default procedures to (settlement flow charts should also be included with a detailed narrative) The Central Bank does not want the underlying procedures of the MTF to be filed with the application. However the Central Bank does require the Rules of the MTF to be filed as a separate document with the application. In responding to sections to , applicants must be able to demonstrate where the particular question is addressed either by referring to the particular rule in the Rules document or inserting the relevant rationale / answer into the Business Plan and referencing the page and paragraph. The applicant, when responding to sections to of the Application Form, must also ensure compliance with relevant ESMA Guidelines which can be found on the ESMA website. Please contact the Central Bank for any specific guidance on this matter that is relevant to the application being made. Page 60 of 63

61 Appendix 3 Key Facts Document ( KFD ) Template The KFD must include the following: 1. Brief background of the applicant firm. 2. State the reason(s) why the applicant firm has selected Ireland as a location to carry out investment services and therefore apply for MiFID Authorisation. 3. Business Model (a) An overview of the business model/strategy of the applicant firm; (b) Details of the products and services to be provided; (c) Anticipated assets under management for the first 3 years; (d) Anticipated turnover (total revenue / income generated) for the first 3 years; (e) A clear and unambiguous analysis / assessment 31 on how the business proposal 32 falls to be regulated (basis and identification of regulation to be provided where relevant); and (f) Mapping of services/products to be offered to relevant MiFID / IIA investment (business) services and instruments. 4. Client Assets (a) Whether the applicant firm proposed holding client assets and anticipated level of assets. 5. Clients (a) Who the client is (i.e. institutional, CIS, individuals); (b) Type (retail, professional, eligible counterparty); and (c) Number of clients in each of the first three Years. 6. Applicant s Structure (a) Shareholders; (b) Ownership structure chart; (c) PCFs including whether these individuals are previously approved by the Central Bank; (d) Number of employees; and (e) Staff Organisational Chart. 31 The applicant will be asked to provide a professional analysis / assessment if the information pertaining to this point is unclear in the KFD. 32 This should be provided for each MiFID investment service / IIA investment business service selected. Page 61 of 63

62 7. High-Level Capital Projections for the first 3 years including (a) Capital levels; (b) Turnover (total income / revenue generated); (c) Profitability; and (d) Sources of Regulatory Capital / Funding. The content of the KFD must be limited to the points specified above and the information provided must clearly address each point in a precise manner. The KFD must be no longer than 10 A4 pages of standard type. Failure to provide the KFD in this fashion will result in it being returned. The Central Bank does not intend to go into an exhaustive analysis of the KFD prior to its acceptance. Page 62 of 63

63 Guidance Note on completing and submitting an Application for Authorisation under the European Communities (Markets in Financial Instruments) Regulations 2007 and Commission Regulation (EC) No 1287/2006 of 10 August 2006 T Page 63 of 63 Cúirt Uíbh Eachach, Bloc D, Bóthar Fhearchair, Baile Átha Cliath 2, Éire Iveagh Court, Block D, Harcourt Road, Dublin 2, Ireland