MiFID II: ESMA sets out expectations on Triangular Passporting

ESMA has published a supervisory briefing setting out expectations for firms and national competent authorities (NCAs) on ‘Triangular Passporting’ under MiFID II. ESMA acknowledges that Triangular Passporting may enhance clients’ access to financial services and improve competition between firms, resulting in better quality of service. However, following recent supervisory work, ESMA has found that Triangular Passporting can also give rise to challenges and risks for firms and supervisory work. The briefing therefore aims to provide clarity by setting out ESMA’s expectations along with practical guidance for firms and NCAs.

What is triangular passporting? 

Triangular passporting is the practice of an investment firm using the regulatory permissions of one EU Member State to access markets in another Member State, often through a third intermediary Member State. This mechanism is closely tied to the EU’s single market principles and passporting rights granted under various EU directives

While the mechanism offers clear benefits, key challenges and risks include:

• Compliance complexity: Branches must comply with the conduct of business rules of their host Member State (under Article 35 MiFID II) but must also apply the conduct of business rules of their home Member State when providing investment services cross-border into Member State C (under Article 34 MiFID II), while also taking into account any applicable requirements of Member State C.

• Investor protection risks: Clients receiving financial services through Triangular Passporting in Member State C may be exposed to certain unclarities and risks, for example, it may be unclear for clients whether they should direct their complaints to the branch in Member State B or the head office in the home Member State, and which dispute resolution mechanism is competent to settle their complaints.

In providing clarity and guidance within the briefing, ESMA highlights that the briefing does not constitute new policy nor promote any particular way of supervising the rules. NCAs are expected to apply the briefing within a reasonable timeframe and in a way that is proportionate to the size and nature of firms’ Triangular Passporting practices.

Supervisory expectations for firms

• Passporting notifications: In their passporting notification to the NCA of the home Member State, firms willing to rely on Triangular Passporting are expected to specify that they intend to use a branch or tied agent established in Member State B to provide services and activities in Member State C, using the relevant templates related to the freedom to provide services (Article 34 MiFID II). ESMA expects firms to have their branch or tied agent established and fully operational in Member State B in accordance with Article 35 MiFID II before providing investment services cross-border from Member State B to C in compliance with Article 34 MiFID II.

• Risk assessment: ESMA expects firms intending to rely on Triangular Passporting to conduct, and regularly review if necessary, an internal assessment of risks arising from this specific cross-border model. Risks may relate, for example, to investor protection, AML/CTF, responsibilities in the event of outsourcing of services, and third-party risks.

• No regulatory arbitrage: Firms should not use Triangular Passporting to circumvent supervisory competences or to select regulatory practices (e.g. through so-called "forum shopping"). Establishing a branch or tied agent in Member State B solely to passport services to Member State C could be considered not in line with Article 35 MiFID II.

• Tied agents: As a tied agent has a separate legal personality from the firm, the agreement between the firm and the tied agent is expected to explicitly authorise the tied agent to provide cross-border services on behalf of the firm, since the cross-border provision of services creates regulatory and compliance implications for the firm, which must therefore retain control over the geographical scope of tied agents' activities.

• Client Disclosure: Firms are expected to clearly inform their clients in Member State C that the service is provided by the firm through a branch or tied agent established in Member State B. Moreover, ESMA expects the firm to clearly inform its clients that the NCA of the home Member State is responsible for supervising the services provided to the client through the branch or tied agent in Member State B (and not the host regulator of the Member State in which the branch or tied agent is located).

• Dispute Resolution and Compensation Schemes: Firms are expected to inform their clients in a clear and non-misleading manner about their access to complaints and redress procedures, where, as a result of Triangular Passporting, such clients are provided with investment services in Member State C outside the territory of the Member State where the licensed entity, branch or tied agent is located. Similarly, clients should be informed about any relevant and applicable investor compensation scheme.

• Complaints Handling: On the basis of a firm's general obligation to act honestly, fairly and professionally in accordance with the best interests of its clients, clients should be able to submit complaints in any language used by the firm in its marketing communications or contractual documents provided to them. Firms are expected to accept complaints from clients in Member State C submitted to the head office in Member State A or to the branch or tied agent in Member State B, and to include such complaints in their complaints handling procedure established under Article 26 of the MiFID II Delegated Regulation.

Supervisory expectations for NCAs

• Passporting notifications: Where a firm intends to rely on Triangular Passporting, the passport notification should be sent by the NCA of the home Member State to the NCA of host Member State C, specifying that services will be provided by the branch or tied agent established in Member State B. In addition, the NCA of the home Member State is expected to send a copy of the passporting notification to the NCA of Member State B, so it is aware that the branch or tied agent established in its jurisdiction will provide services on a cross-border basis in Member State C.

• Allocation of supervisory responsibilities: In accordance with Articles 34 and 35 MiFID II: the home NCA is responsible for supervising the organisational requirements of the firm, including the branch or tied agent in Member State B; the host NCA in Member State B is responsible for supervising the branch's or tied agent's conduct of business requirements where they provide services in Member State B; and the home NCA is responsible for supervising the provision of all cross-border services by the firm, including both organisational and conduct-of-business requirements for services provided in Member State C since branches and tied agents do not possess passporting rights themselves.

• NCA Cooperation: ESMA acknowledges that in some cases the allocation of supervisory responsibilities may be challenging in practice without smooth cooperation from all NCAs involved. For instance, to supervise services provided on a cross-border basis in Member State C from a branch or tied agent in Member State B, the home NCA may need to carry out an on-site inspection of the branch or tied agent in Member State B, requiring cooperation from the host NCA. According to Article 86 of MiFID II, where the interests of investors or the orderly functioning of markets in the host Member State is at risk of prejudice, precautionary measures may be taken by the host NCA if those taken by the home NCA are insufficient or inadequate

The supervisory briefing published on 7 July 2026 is available here.