MiFID, MiFID II and MiFIR: what the EU rules require

MiFID is a directive, not a regulation: MiFID II binds the member states, and each writes its rules into national law, as each did with MiFID I.

Its companion regulation, MiFIR (Regulation (EU) No 600/2014), applies directly in every member state and carries trade transparency, transaction reporting and product intervention. Together they are the EU rulebook for investment firms and trading venues.

What does MiFID stand for, and is it a directive or a regulation?

The meaning is in the name: MiFID stands for Markets in Financial Instruments Directive. The first version, of 21 April 2004, applied from 1 November 2007. MiFID II, a recast adopted on 15 May 2014, was due earlier, but Directive (EU) 2016/1034 moved its application to 3 January 2018. It governs three kinds of trading venue: regulated markets, multilateral trading facilities (MTF) and organized trading facilities (OTF).

Every later change amends MiFID II or MiFIR. No law called MiFID III exists as of October 2026.

Table 2. MiFID instruments and dates. Sources: the instruments' Official Journal texts; Legislative Observatory, 2023/0167(COD), read 29 October 2026.

Who is affected by MiFID II?

Consider a bank (illustrative) that takes deposits and also executes share orders for its clients. Its banking license covers the deposits, and MiFID II follows the share business: Article 1(3) applies the organizational and conduct rules to banks when they provide investment services.

The directive applies to investment firms, market operators, data reporting services providers and the EU branches of non EU firms (Article 1(1)). An investment firm is "any legal person whose regular occupation or business is the provision of one or more investment services to third parties and/or the performance of one or more investment activities on a professional basis" (Article 4(1)(1)). Annex I lists nine services, from order execution and portfolio management to investment advice and running an MTF or OTF, and its Section C sets out the classification of financial instruments in 11 classes. A firm authorized in one member state may serve clients in the others under the passport of Article 34.

Crypto assets that qualify as financial instruments stay under MiFID: MiCA, Regulation (EU) 2023/1114, excludes them in Article 2(4)(a).

A firm offering services in such tokens needs a MiFID authorization, while a crypto asset service provider works under MiCA.

What does MiFID II require of an investment firm?

On 29 July 2025 the FCA fined Sigma Broking Limited £1,087,300, after a 30 percent settlement discount on £1,553,300. From 1 December 2018 to 1 December 2023, its reports on 924,584 transactions, "close to 100%" of those its desks had to report, were incomplete or inaccurate, a breach of Article 26 of MiFIR in its UK version (Final Notice). The FCA needs those reports "to monitor and detect market abuse effectively".

Reporting is one of the duties every firm carries:

• Authorization. No investment service as a regular business without it (Article 5).
• Organization. Policies and procedures that secure compliance with the directive (Article 16).
• Conduct. Act "honestly, fairly and professionally in accordance with the best interests of its clients" (Article 24).
• Suitability and appropriateness. Check that advice or a product fits the client (Article 25).
• Best execution. Take all sufficient steps to get the best possible result on client orders (Article 27).
• Transaction reporting. Report each transaction "no later than the close of the following working day" (MiFIR Article 26).
• Product intervention. ESMA and the EBA may temporarily prohibit or restrict products across the EU, and national authorities in their own state (MiFIR Articles 40 to 42).

How much of this protection a client gets depends on its category.

Which client classifications does MiFID II use?

Table 3. MiFID II client categories. Source: Directive 2014/65/EU, Articles 4(1)(10) and (11), 30 and Annex II.

A company is a professional client per se if it meets two of three sizes: a EUR 20 million balance sheet, EUR 40 million net turnover or EUR 2 million own funds. A private investor can opt up only after two of three tests: an average of 10 significant trades a quarter over the last four quarters, a portfolio above EUR 500,000, or a year of relevant work in finance.

How does MiFID relate to AML?

MiFID is not an AML law, yet it decides who the AML law covers. Directive (EU) 2015/849 defines an investment firm by pointing at MiFID's Article 4(1)(1) (Article 3(2)(c)), and the AML Regulation repeats that from 10 July 2027 (Article 2(1)(6)(d)). A firm's MiFID authorization therefore also brings it inside the AML rules.

The same client then needs a suitability file and a due diligence file, and neither can stand in for the other:

• Suitability or appropriateness (Article 25). Whether a product fits the client's knowledge, experience, finances and objectives.
• Customer due diligence. Who the client and its owners are, why the relationship exists and where the money comes from.
• Ongoing monitoring. Whether trades fit what the firm knows; mirror trades move money across a border while every product stays suitable.
• The rules in force. Until July 2027, the 2015 directive as the fifth AML directive amended it.

complead, formerly Sanction Scanner, works on the second file. For investment and wealth firms, screening results, ownership, geography, products and behavior go into the same model for every client, and transactions are monitored from the first unit; the suitability file stays in the firm's MiFID process.

How does MiFID apply in the EU and the UK?

Table 1. MiFID in the EU and the UK, October 2026. Sources: Directive 2014/65/EU; Regulation (EU) No 600/2014; UK MiFIR Article 26 on legislation.gov.uk and the Bank of England's PRA page, read 29 October 2026.

A UK firm reports under UK MiFIR, the EU text kept in UK law by the European Union (Withdrawal) Act 2018 at the end of the implementation period and amended by UK law since; the Sigma fine was imposed under it. EU amendments made after 2020, such as the 2024 review, do not change it.

What moved in 2026?

• 5 June 2026. Deadline to transpose Directive (EU) 2024/2811's changes to MiFID II into national law, applied from 6 June.
• 23 June 2026. Parliament's Economic and Monetary Affairs Committee approved the agreed text of the retail investment strategy; the Legislative Observatory) still shows it awaiting Parliament's first reading position, with plenary indicated for 11 November 2026.
• 6 July 2026. UK MiFIR Article 26 was amended again; the deadline is still the close of the following working day.

Three checks for a MiFID firm's compliance team:

• Check that the AML risk assessment names the MiFID authorization as the reason the firm is in scope.
• Keep the suitability file and the due diligence file apart, each with its own owner.
• Diary the 11 November plenary for whoever owns retail client rules.

Related terms

• Regulation. A binding rule made under powers a law gives; in the EU it applies directly in every member state.
• Customer due diligence. The checks on who a customer is, who owns it and why the relationship exists.
• Mirror trading. Matching buy and sell trades in two currencies that move money with no payment between the parties.
• Market manipulation. Trading or information that gives false signals about a financial instrument's price or supply.
• MiCA. The EU regulation on crypto assets that are not financial instruments.
• 5AMLD. The fifth EU anti money laundering directive, which amended Directive (EU) 2015/849.

How this entry was checked. Sources opened by Onur Taner (Customer Success Manager, complead): Directive 2014/65/EU, Regulation (EU) No 600/2014, Directives 2004/39/EC, 2006/31/EC, (EU) 2016/1034, (EU) 2024/790 and (EU) 2024/2811, Regulation (EU) 2024/791, the Legislative Observatory file 2023/0167(COD), Directive (EU) 2015/849, Regulation (EU) 2024/1624, Regulation (EU) 2023/1114, the FCA Final Notice to Sigma Broking Limited of 29 July 2025 and UK MiFIR Article 26 on legislation.gov.uk. Duties and client categories follow the articles named beside them; the bank in the scope section is illustrative, and the status of the retail investment strategy is the Observatory's as of 29 October 2026. Ufuk Gürdaş, Compliance Specialist, confirms every article number and date before publication. Last reviewed: 30 October 2026.