AUSTRIA Trends and Developments Contributed by: Oliver Völkel, Jara Erhard and Bryan Hollmann, CERHA HEMPEL
policies, trading platform rules, commercial policies, execution policies, qualifications of personnel provid- ing advice or managing portfolios, and details of the crypto-assets involved. Reverse Solicitation: How the FMA Ensures a Level Playing Field by Scrutinising Third-Country Firms What is reverse solicitation? Generally, third-country firms may not solicit clients in the EU as they are not authorised to provide CASP services in the Union. There is only one exemption: if the client at its own, exclusive initiative contacted the firm and requested the service, the third-country firm may provide it (Article 61 MiCA). The rationale for this exemption is that clients shall not be excluded from using third-country firms if they choose to do so without having been solicited by such firms. In any case, it should be understood as applying in very limited and narrow circumstances. Although often referred to as the reverse solicitation exemption, it is actually a prohibition: a prohibition for third-country firms to solicit clients established or situated in the Union, unless the crypto-asset service was requested at the client’s own initiative. It also states that in order to make sure that clients of CASPs benefit from full rights and protections afforded to them under MiCA and that EU CASPs are not put at a competitive dis- advantage compared to third-country firms vis-à-vis EU clients, it is important to actively protect EU-based investors and MiCA-compliant CASPs from undue incursions by non-EU and non-MiCA compliant enti- ties. ESMA limits permissible reverse solicitation ESMA highlights that the term solicitation should be construed in the widest possible way. It includes ban- ner advertisements, sponsorship deals, and solicita- tion by any kind of affiliates such as influencers and other celebrities. This broad interpretation of the term solicitation, especially with respect to online activi- ties and the use of banner advertising and the use of influencers and other celebrities, reflects the fact that crypto-assets and crypto-asset services are essen- tially offered online.
Similarly, a broad interpretation should be given to the person soliciting. It may be the third-country firm or any entity or person on its behalf. The relationship between the third-country firm and the person solic- iting on its behalf does not necessarily need to be a contractual relationship – it may be explicit or implicit. For instance, if a third-party is undertaking a market- ing campaign or building the third-country firm profile in the Union, then the third-country firm would not be able to claim that there was no solicitation carried out and to rely on Article 61 of MiCA. Also, timing is of the essence when a third-country firm relies on the reverse solicitation exemption. If the third-country firm meets all the conditions to rely on Article 61 of MiCA, it may only do so for a very short period of time. The third-country firm relying on the exemption is not allowed to subsequently offer the client further crypto-assets or services, even if such crypto-asset or service is of the same type as the one originally requested, unless they are offered in the con- text of the original transaction. Although the guidelines do not provide any definite time window during which the exemption may be used, the lapse of a month or even a couple of weeks between the provision of the crypto-asset service based on a request made on the client’s own exclusive initiative and a subsequent offer by the third-country firm would exclude the applica- tion of Article 61. Consequences for third-country firms Where an EU client is actively solicited by a third- country firm, EU regulators may initiate proceed- ings for unauthorised provision of services. Even if a third-country firm assumes that monetary penalties are of little consequence because they are difficult to enforce, the authority’s power to issue public inves- tor warnings – also known as naming and shaming – should suffice to encourage third-country CASPs to re-evaluate their client acquisition processes.
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