Tied agent | Definitions and registration requirements

 


 

 

What is a Tied Agent?

A Tied Agent is a person (natural or legal) established in a Member State, who, acting under the full and unconditional responsibility of only one Investment Firm (the “IF”) of a Member State, on whose behalf it acts, promotes investment or/and ancillary services, attracts Clients or prospective Clients, receives and transmits Client orders in respect of investment services or financial instruments, places financial instruments or/and provides advice to Clients or prospective Clients in respect of those financial instruments or services.

 

To avoid confusion we are copying below Article 29 of MiFID2, directly from the ESMA website (link provided below):
  1. Member States shall allow an investment firm to appoint tied agents for the purposes of promoting the services of the investment firm, soliciting business or receiving orders from clients or potential clients and transmitting them, placing financial instruments and providing advice in respect of such financial instruments and services offered by that investment firm.

 

  1. Member States shall require that where an investment firm decides to appoint a tied agent it remains fully and unconditionally responsible for any action or omission on the part of the tied agent when acting on behalf of the investment firm. Member States shall require the investment firm to ensure that a tied agent discloses the capacity in which he is acting and the investment firm which he is representing when contacting or before dealing with any client or potential client.

 

Member States may allow, in accordance with Article 16(6), (8) and (9), tied agents registered in their territory to hold money and/or financial instruments of clients on behalf and under the full responsibility of the investment firm for which they are acting within their territory or, in the case of a cross border operation, in the territory of a Member State which allows a tied agent to hold client money.

 

Member States shall require the investment firms to monitor the activities of their tied agents so as to ensure that they continue to comply with this Directive when acting through tied agents.

 

  1. Tied agents shall be registered in the public register in the Member State where they are established. ESMA shall publish on its website references or hyperlinks to the public registers established under this Article by the Member States that decide to allow investment firms to appoint tied agents.

 

Member States shall ensure that tied agents are only admitted to the public register if it has been established that they are of sufficiently good repute and that they possess the appropriate general, commercial and professional knowledge and competence so as to be able to deliver the investment service or ancillary service and to communicate accurately all relevant information regarding the proposed service to the client or potential client.

 

Member States may decide that, subject to appropriate control, investment firms can verify whether the tied agents which they have appointed are of sufficiently good repute and possess the knowledge and competence referred to in the second subparagraph.

The register shall be updated on a regular basis. It shall be publicly available for consultation.

 

  1. Member States shall require that investment firms appointing tied agents take adequate measures in order to avoid any negative impact that the activities of the tied agent not covered by the scope of this Directive could have on the activities carried out by the tied agent on behalf of the investment firm.

 

Member States may allow competent authorities to collaborate with investment firms and credit institutions, their associations and other entities in registering tied agents and in monitoring compliance of tied agents with the requirements of paragraph 3. In particular, tied agents may be registered by an investment firm, credit institution or their associations and other entities under the supervision of the competent authority.

 

  1. Member States shall require that investment firms appoint only tied agents entered in the public registers referred to in paragraph 3.

 

  1. Member States may adopt or retain provisions that are more stringent than those set out in this Article or add further requirements for tied agents registered within their jurisdiction.

 

See the complete article directly on the ESMA website.

 

Should you become a tied agent?

To answer this question, like with any evaluation on what to do next or how to get bigger, you need to evaluate your current standing. What drove you into thinking that tied agent is indeed an option? Maybe you are a White Label or large forex IB that wants to expand. Or maybe you tried to get regulated and found difficulties to be approved or even worse, got rejected and you need to identify plausible and feasible next steps.

 

We’re mentioning the above scenarios because allFX-Consult dealt with them in the past. But no matter what the reasoning, becoming a tied agent requires minimal cost, hassle free registration process and it’s a great stepping stone, in order to evaluate if it’s worth it to go for a full EU license on your own. You probably know better than we do, that targeting a European client base is not an easy task today.

 

Tied Agent under MiFID2 means you are obliged to offer trading conditions like the rest of European regulated brokers and therefore, you should have a solid plan and a European client base before looking into such a concept. No regulated broker will accept to connect if it doesn’t make sense, not only compliance wise (to have a clear standing with your operations) but relative to the income you will produce with them.

 

 

What is the process to become a Tied Agent?

Firstly you will seek registration with the national regulator to be appointed as a Tied Agent of a specific Investment Firm and be registered in the Register of Tied Agents.

 

Some of the details you will provide in this regard will include the following:

 

  • – Name of the Tied Agent and/or Trading name(s)
  • – Notarised company documents and contact information
  • – Your agreement with the Investment Firm with estimated revenues
  • – Personal questionnaires and documentation for shareholders, directors and employees of the Tied Agent who will provide Investment Services

 

The complete list of needed documents will be provided on a case by case basis and depending on the status of the company applying to become a Tied Agent.

 

It’s then in the discretion of the national regulator to ask further questions, documents and clarifications. It’s usually a fast procedure, taking just a few months to finalise but if your operations fit in this scenario, it’s definitely worth considering moving ahead. As a Tied Agent, you will learn a lot about the target audience, the regulatory framework and if it makes sense to invest and do this on your own (get your own license).

 

What does it cost to apply for a Tied Agent registration?

Firstly you need to find the Investment Firm willing to tie itself with your operations. Not all licensed brokers will want to do this, especially if they don’t have enough information regarding who they are tying with and that of course that this new partnership, will not jeopardise/burn their license.

 

So it is typical that exchange of information will take place, several calls and meetings before any actual costs are brought forward and reviewed.

 

When it’s all said and done, the cost for the application to the regulator is quite small. From experience, what matters the most is the final arrangement on P&L sharing agreement that depending on the size of the licensed broker, can vary significantly. It would be irresponsible to throw here actual percentages of P&L sharing, because really each case is different.

 

Lastly, the Tied agent will need to employ a Head of Reception and Transmission that needs to be a certified professional (in the case of Cyprus, the employee needs to be registered in CySEC’s Public Register of Certified Persons (the “Public Register”) which has a salary cost as well as a small application cost, for the regulator to approve the person.

 

How allFX-Consult can step into this picture:

We have done extensive research on the topic and brokered quite a few deals concerning Tied Agents. In many cases we recommended alternative solutions because as mentioned above, not all cases fit the scenario of a Tied Agent. But almost all deals brokered by allFX-Consult, eventually resulted in obtaining a full license (either in Cyprus or abroad) or remained successful partnerships (Tied Agent partnerships or other) that still benefit everyone involved.

 

About allFX-Consult

allFX-Consult is a boutique forex consulting agency, catering to quality rather than quantity. For over a decade, our Directors have been connecting with some of the best individuals/professionals, service providers and brokers the industry has to offer so that we can meet any corporate forex challenge that comes our way.

Because of this, allFX-Consult always has a counterpart/partner for any corporate structure. But before we connect anyone, we thoroughly examine all possibilities.

We’re chosen for being discreet, detail oriented and deadline driven.

Contact us for a private conversation to discuss your case through the contact form or one of our emails at info@allfx–consult.com, partners@allfx-consult.com.

 

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