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SUP 13A.9 The precautionary measure rule for incoming EEA firms

Application

SUP 13A.9.1R
  1. (1)

    1The precautionary measure rule (SUP 13A.9.2 R) applies to an incoming EEA firm which:

    1. (a)

      is authorised by a home state regulator with respect to its MiFID business; or

    2. (b)

      has a top-up permission which covers MiFID business;

    but which is not subject to provisions adopted by the Home State which transpose, in full, MiFID or the MiFID implementing Directive.

  2. (2)

    The precautionary measure rule applies:

    1. (a)

      with respect to the regulated activities carried on by the firm in the United Kingdom; and

    2. (b)

      to the extent that the firm is not subject to provisions which are comparable to provisions transposing MiFID or the MiFID implementing Directive.

  3. (3)

    This section (SUP 13A.9) is effective from 1 November 2007 until 31 October 2008.

The precautionary measure rule

SUP 13A.9.2R
  1. (1)

    A firm must comply with standards which are comparable to those required by the provisions of MiFID and the MiFID implementing Directive specified in rows (1) and (4) of the table in SUP 13A.9.3 R.

  2. (2)

    An MTF must also comply with standards in row (2).

  3. (3)

    The following firms must also comply with standards in row (3):

    1. (a)

      a systematic internaliser;

    2. (b)

      a firm, which, either on its own account or on behalf of clients, concludes transactions in shares admitted to trading on a regulated market outside a regulated market or MTF (see MAR 7.1.2 R).

SUP 13A.9.3R

Table: MiFID provisions for incoming EEA firms

Articles of MiFID or the MiFID implementing directive

1

Articles 13(3) and (6), 18 to 22 and 24 and Annex II of MiFID

2

Articles 12, 14, 26, 29 and 30 of MiFID

3

Articles 27 and 28 of MiFID

4

All related Articles of MiFID and the MiFID implementing Directive

SUP 13A.9.4E
  1. (1)

    A firm should comply with the provisions of the Handbook which transpose the provisions of MiFID and the MiFID implementing Directive referred to in SUP 13A.9.3 R (even if they are expressed not to apply to an incoming EEA firm).

  2. (2)

    Compliance with (1) may be relied upon as tending to establish compliance with the precautionary measure rule.

SUP 13A.9.5GRP
  1. (1)

    The purpose of the precautionary measure rule is to ensure that an incoming EEA firm is subject to the standards of MiFID and the MiFID implementing Directive to the extent that the Home State has not transposed MiFID or the MiFID implementing Directive by 1 November 2007. It is to 'fill a gap'.

  2. (2)

    The rule is made in the light of the duty of the United Kingdom under Article 62 of MiFID to adopt precautionary measures to protect investors.

  3. (3)

    The rule will be effective for 12 months only; it reflects the scope of the Regulated Activities Order (including, for example, the overseas persons exclusion); and it allows for the possibility of a partial transposition by the Home State.

  4. (4)

    An indication of the Handbook provisions which transpose MiFID and the MiFID implementing Directive can be found in the websites http://www.hm-treasury.gov.uk/media/C/7/transfinal1b120707.pdf and http://www.hm-treasury.gov.uk/media/C/E/transfinal2b120707.pdf. For the purposes of the precautionary measure rule, the principal provisions are the rules in COBS (including in particular those relating to inducements in COBS 2.3) and the conflicts and record keeping provisions in SYSC.

  5. (5)

    The provisions applying to an incoming EEA firm are set out in SUP 13A Annex 1. The effect of SUP 13A.9.4E (1) is that some of the provisions which are expressed as not applying may need to be applied by a firm in order to meet a MiFID standard.