Extended protection of investors – Implementation of MIFID2 and MIFIR

Since 3 January 2018, the Directive of the European Parliament and of the Council No 2014/65/EU on markets in financial instruments, called the MiFID2, and the Regulation of the European Parliament and of the Council (EU) No 600/2014 on markets in financial instruments, called the MiFIR, have been in force in the European Union. Both EU legal acts revoke the existing regulations of European law in this area, including in particular the MiFID1.

The MiFID1 was amended many times. The financial crisis of 2008 revealed further organisational weaknesses of financial markets and reflected that the frameworks had to be modernised. As a result of the changes, the MiFID1 was partially converted into the MiFID2 and partially replaced with the MiFIR. Both legal acts modernised the operation of financial markets within the European Union and principles of operation of investment companies, regulated markets, suppliers of information provision services, and companies which are located in third countries and provide investment services or carry out investment activities in the European Union. The authors of the changes claim that the major purpose of the changes is to strengthen investors’ trust to the market, reduce system risks, improve the effectiveness of financial markets, and reduce necessary costs for market players at the same time.

Obviously, the Polish legislator implemented standards set out by these legal acts in order to consolidate them with applicable legal regulations on financial instrument trading in Poland. For that purpose, the Act of 1 March 2018 on Amendments to the Act on Trading in Financial Instruments and Certain Other Acts was enforced as of 21 April 2018.

From the investors’ point of view, the greatest change consists in extending the definition of financial market offering. Art. 72 of the Act on Trading in Financial Instruments was modified substantially. To eliminate interpretation doubts connected with the scope of the term “financial instruments offering”, all activities resulting in the purchase of financial instruments by other entities were considered “offering”. To date, informing customers about an offer of financial instruments by agents or other entities operating in the market was not always classified as the “offering”. At present, any form or manner of presentation of information by the issuer or seller about financial instruments and terms of sale (including indirect sale) which constitute sufficient basis for making a decision on the purchase of such instruments is deemed to meet the statutory definition of financial instruments offering. Applying the extended definition of the offering in connection with activities aimed at investor and capital acquisition for the issuer is an activity regulated by the Polish Financial Supervision Authority and is subject to a relevant permit. These solutions are to eliminate entities which operate in the market and talk investors into buying financial instruments without permit. Each entity the new regulations apply to will be subject to a relevant adjustment period because of the specific character of its operations.

Another change connected with the protection of investors consists in the modification of Art. 73 of the Act on Trading in Financial Instruments. The definition of the performance of a financial instrument purchase or sales order was supplemented with the performance of other activities which bring about effects equivalent to buying or selling financial instruments on the contracting party’s account or on own account under financial instrument purchase or sales agreements entered into with the contracting party, or accepting subscriptions for financial instruments issued or offered by the investment company. Therefore, the supervision covered rights to issuance. The scope of changes overlap with the general purpose of the new regulations, i.e. special emphasis put on investor protection and on increasing investors’ access to information about financial instruments and issuers of financial instruments.

Investment companies which perform the orders will also have to comply with regulations which oblige them to carry out all reasonable activities aimed at acquiring the best possible results for customers in connection with the order. This is to be achieved through an obligation of implementing and complying with the order performance policy, preparing yearly reports with a list of five best order performance systems for each class of financial instruments, as well as monitoring the effectiveness of the solutions. The aforementioned obligations aim at eliminating market practices applied by the investment companies to perform purchase and sales orders by gaining financial benefits for the investment companies, e.g. by charging a commission on a part of an order fee which is refunded to the asset manager.

These regulations are to ensure that the investment companies will fulfil customer orders in the best possible way. The purpose of the information obligations is to enable the customers to monitor activities taken by companies fulfilling their orders. These obligations will also allow for choosing such solutions that will turn up to be the most favourable for the customers.


Maciej Kwadrans, Lawyer