MiFIR: ESMA publishes opinion on product intervention powers

Under MiFIR, ESMA and national competent authorities (NCAs) may temporarily prohibit or restrict the marketing, distribution or sale of certain financial instruments in the EU, including units or shares in UCITS and alternative investment funds (AIFs), whether internally or externally managed, or financial instruments with certain specified features, a type of financial activity or practice. The MiFIR intervention powers will only apply to MiFID investment firms marketing products which pose risks to retail investors, market integrity, and financial stability in the EU, but do not cover UCITS management companies and Alternative Investment Fund Managers (AIFMs).

In its opinion, ESMA intends to draw the attention of the EU institutions to the consequences of the possible lack of clarity it has identified around the exclusions to UCITS management companies and AIFMs from the scope of the powers. In particular, ESMA highlights the risk of arbitrage where a type of fund that is restricted or banned under MiFIR could be distributed through fund management companies if they decided to market or distribute the funds themselves.