The EU single market lets an investment firm authorised in one member state provide services in all the others. This "passport" is why so many brokers serving Germans, Italians or Poles are licensed in Cyprus, Ireland, Malta or Luxembourg – and why the country of the licence matters for your protection.
Two ways to passport
Under MiFID II, a firm authorised in its home state can operate in a host state in two ways:
- Freedom to provide services (Article 34): the firm serves clients across the border from its home country, typically online. It must notify its home regulator, which informs the host regulator.
- Branch (Article 35): the firm opens a physical branch in the host country. The host regulator then has a bigger role, especially on conduct rules for business done through the branch.
Some firms go further and set up a separately licensed subsidiary in a country, which is then a local firm in its own right.
Who supervises what
| Home regulator (e.g. CySEC) | Host regulator (e.g. BaFin) | |
|---|---|---|
| Authorisation and capital | ✔ | |
| Client-money safeguarding | ✔ | |
| Investor compensation scheme | ✔ (home scheme applies) | |
| Conduct of cross-border services | Mainly ✔ | Can intervene, issue warnings |
| Conduct at a local branch | Shared | ✔ |
| Product-intervention measures (e.g. CFD rules) | ✔ | ✔ – host rules can apply to its residents |
So a French client of a Cyprus-licensed broker is covered by the Cyprus compensation scheme, while French rules – such as France's ban on electronic advertising of most CFDs to retail clients – still limit how the broker can market to them.
How to check a passport
- Search the firm on its home regulator's register (for example CySEC).
- Look for the list of countries where it has notified cross-border services or branches, or search your national regulator's register for incoming firms.
- ESMA's registers consolidate MiFID II investment firms across the EU.
Brexit and the end of the UK passport
UK firms lost passporting rights when the Brexit transition ended on 31 December 2020. That is why IG, CMC Markets and many others set up EU entities – often in Germany, Cyprus, Ireland or Luxembourg – before that date. An FCA licence today covers UK clients only. The same applies in reverse: EU firms need UK authorisation to serve UK clients.
Switzerland and the EEA
Switzerland is outside the EU and the EEA, so Swiss banks do not have a passport either. Liechtenstein, Norway and Iceland are in the EEA and apply MiFID II, so their firms can passport like EU firms.
Reverse solicitation
A non-EU firm may serve an EU client who approaches it entirely on their own initiative. ESMA has repeatedly warned that this is a narrow exception – marketing, adverts and "introducing" affiliates remove it. Offshore brokers that rely on it are not authorised in Europe. See unregulated and offshore brokers.
This guide is general information, not personal financial, tax or legal advice. Rules change; we review this page regularly and show the date of the last update above. Found an error? Tell us. See our editorial policy.
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