In July 2017 the Government Legislative Centre published a proposal to amend the Trading in Financial Instruments Act and certain other acts, to bring the Polish legal system into compliance with the EU laws governing the capital market, in particular MiFID II (Directive 2014/65/EU) and MiFIR (Regulation 600/2014). The amendment would significantly change the wording of a number of existing acts and require capital market entities to comply with the new regulations. One notable feature is the introduction of the notion of reverse solicitation, not previously regulated in Polish law.
Reverse solicitation is not a concept defined in the Trading in Financial Instruments Act of 29 July 2005. The term refers to the practice where a firm from a third country (outside the EU) provides brokerage services to a client from an EU member state at the exclusive initiative of the client. A condition for reverse solicitation is that the client solely at its own initiative has brought about contact with the investment firm and was not previously encouraged to make contact, and that the investment firm does not offer the client any unrequested products or services. In that case, the service by the investment firm is not deemed to be performed in the member state where the client resides or has its registered office.
The Trading in Financial Instruments Act implemented into the Polish legal system MiFID I (Directive 2004/39/EC), establishing common rules for functioning of capital market entities, including the “single passport” rule, requiring mutual recognition of licences issued by the supervisory authorities in other EU member states. Based on the single passport rule, an entity from another EU member state can perform brokerage services in Poland in cross-border form, without opening a branch in Poland, or in the form of a branch. These rules are maintained in MiFID II and the July 2017 draft amendment of the Trading in Financial Instruments Act.
As MiFID II enters into force on 3 January 2018, the permissibility of reverse solicitation will also be recognised in the regulations in force in Poland.
Reverse solicitation in MiFID II
Art. 42 of MiFID II obligates the member states to ensure that where a client in the member state “initiates at its own exclusive initiative the provision of an investment service or activity by a third-country firm,” the requirement to obtain a licence in the member state does not apply. But the scope of this freedom is limited. The sale of new categories of products or services will be possible only if the client expressly requests them or the investment firm opens a branch in that country.
Amendment of the Trading in Financial Instruments Act
Under the draft from July 2017, an article would be added to the Trading in Financial Instruments Act enabling brokerage services to be provided to clients in Poland on the basis of reverse solicitation. It would apply to the provision of services by the third-country firm (from outside the EU) to a client registered, domiciled or staying in Poland, where the client brought about provision of the service at its own exclusive initiative. However, it will not be permissible to provide other services on this basis which the client did not request.
The drafters of this provision, following the wording in MiFID II, define the boundaries of the client’s own exclusive initiative. Promotion or advertising by a third-country firm in relation to potential clients in Poland will be deemed to exclude the client’s sole initiative.
The term “promotion or advertising” may generate difficulties in interpretation. If a broad interpretation is adopted, the scope of application of the reverse solicitation rule could be greatly limited. There are no guidelines for determining for example whether the common practice of providing a Polish-language website would be regarded as promotion aimed at clients in Poland.
The proposed amendment to the Trading in Financial Instruments Act is in the consultation stage and may undergo revisions before being passed into law. The deadline for implementing MiFID II in the Polish legal system is 3 January 2018.
Mariusz Kociszewski, Marcin Pietkiewicz, M&A and Corporate practice, Wardyński & Partners