Reverse solicitation is one of those technical-sounding terms that has become increasingly important in EU financial regulation. It’s relevant in several areas, from investment services under MiFID II, to banking under CRD V/VI, and now in the crypto sector under MiCA. For third-country firms (non-EU banks, investment firms, or crypto providers) looking to access the EU market, reverse solicitation can seem like a useful gateway. But it’s also one of the most closely scrutinised exemptions, and misuse can create significant regulatory and legal risks.
What is reverse solicitation?
In simple terms, reverse solicitation occurs when a client in the EU initiates contact with a third-country firm entirely on their own initiative. In this scenario, the firm may provide services to that client without needing to establish a regulted presence in the EU (e.g., a regulated branch, licensed subsidiary etc.). The key condition is that the request must come solely from the client, with no marketing, advertising, or solicitation from the third-country firm.
For example, if an EU investor directly approaches a US broker for services, without any promotion targeted at EU clients, the broker may rely on reverse solicitation to provide the relevant services. But if that broker runs a website specifically targeting EU customers, sends promotional emails, or otherwise encourages EU clients to approach them, the exemption does not apply.
Why it matters under MiFID II, CRD, and MiCA
The reverse solicitation exemption is relevant in various EU frameworks, and therefore important for a wide array of financal institutions. More specifically:
- Investment firms (MiFID II): reverse solicitation is a strictly defined exemption for both retail and professional clients, pursuant to Article 42 MiFID II. ESMA has repeatedly warned against abuse, stressing that firms must not use this route as a substitute for obtaining proper authorisation (e.g., ESMA reminder in the context of Brexit and ESMA Q&A).
- Credit institutions (CRD V/VI): Similar rules apply for cross-border banking services. The newly introduced (via Directive (EU) 2024/1619) Article 21c of CRD VI narrows the scope of services that may be offered under reverse solicitation, reflecting concerns that some banks were relying too heavily on the exemption to avoid licensing. EBA’s recent report on the provision of services from third countries (EBA/REP/2025/21) is relevant in this context.
- Crypto firms (MiCA): The new EU crypto framework takes the same cautious stance. ESMA’s Final Report on the Guidelines on reverse solicitation under MiCA make clear that “the exemption should be understood as very narrowly framed“. Therefore, crypto-asset service providers (CASPs) cannot use the exemption to conduct broad business in the EU. Any form of targeted marketing or solicitation disqualifies the exemption, and of course runs the risk of regulatory scrutiny.
In all three regimes, the policy goal is in principle the same: to allow for one-off, client-initiated relationships, while preventing regulatory arbitrage that undermines EU financial stability and investor protection.
The practical benefits
When applied correctly, reverse solicitation offers some useful flexibility:
- EU clients can still access services from third-country providers if they actively seek them out.
- Firms can maintain relationships with long-standing clients who approach them after moving to the EU.
- Unnecessary licensing burden is avoided for isolated, one-off transactions.
When used properly, the exemption ensures EU markets remain open to global financial players, without creating loopholes that weaken supervisory oversight.
Risks of misusing reverse solicitation
Despite its narrow scope, some firms have tried to stretch the exemption to cover wider business models. This creates several risks:
- ESMA and national competent authorities (NCAs) have warned that they are monitoring closely for misuse. Firms found to be circumventing licensing obligations may face sanctions, fines, or bans.
- Relying on reverse solicitation without clear documentation of client initiative exposes firms to disputes if challenged by regulators or clients.
- Abuse of the exemption undermines trust and can harm a firm’s standing with EU supervisors and potential partners.
- With different NCAs interpreting the rules, what looks acceptable in one Member State may be treated as a violation in another.
In practice, regulators will look at substance over form. If a firm appears to be systematically serving EU clients under the “disguise” of reverse solicitation, it risks being deemed to be providing regulated services without authorisation.
Best practices
To minimize risk, third-country firms should, inter alia:
- Document client initiative carefully (e.g., clear records of how the first contact was made). This is very crucial, considering EU clients should enter into the business relationship at their own exclusive initiative.
- Avoid targeted marketing to EU clients, including online advertising, localized content, or promotional events.
- Apply geoblocking or disclaimers on websites to show they are not actively targeting EU investors.
- Train staff so they understand the narrow limits of the exemption.
- Seek legal advice before relying on reverse solicitation for anything more than isolated transactions.
Conclusion
Reverse solicitation remains an important but tightly constrained concept in EU financial regulation. Whether under MiFID II for investment firms, CRD V/VI for banks, or MiCA for crypto providers, the exemption exists to protect client choice, and it should not be treated as a “backdoor” into the EU market.
For firms, the benefits are real but limited. Used appropriately, reverse solicitation can facilitate occasional cross-border activity without the licensing burden. Misused, it risks drawing regulatory scrutiny and significant penalties.
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