The idea is old and reasonable. A country regulates who may sell financial services to its residents. It does not follow that a resident is forbidden from seeking out a provider abroad on their own. So the law leaves a narrow door: where a client approaches a foreign firm at their own exclusive initiative, the firm is not treated as having marketed into that country.
In EU law the door appears in MiFID II for investment services and again in MiCA for crypto-asset services. Both are drafted the same way, and both have been read narrowly by supervisors ever since firms started treating the exception as a distribution channel.
The exemption belongs to the client, not the firm
Two features of the drafting do most of the work. First, the initiative has to be exclusively the client's. Any approach by the firm, or by anyone acting for it, that reaches that client beforehand defeats it. Second, the exemption is bounded by what the client asked for. Once a relationship exists on this basis, marketing a different category of product or service to the same client is a fresh act of solicitation requiring authorisation.
That second point is what makes reverse solicitation useless as a growth strategy. A business built on cross selling, retention campaigns and upgrade offers cannot rely on an exemption that stops at the first product the client requested. It suits an occasional institutional counterparty who telephones once a year, and it does not suit a retail funnel.
What counts as solicitation
ESMA addressed this directly after Brexit, when a number of firms outside the EU began describing their European client books as inbound. Its position was blunt: promotional activity by any means, whether or not it names the client, weighs against a claim of client initiative. Since then the same reasoning has been applied under the crypto regime, where the regulation itself states that the exemption cannot be used to circumvent it.
The list of activities that undermine a reverse solicitation claim is longer than most operators expect:
- Paid advertising visible to residents of the country, including social campaigns with no geographic exclusions applied.
- A website in the local language, or a local currency price list, or a local telephone number.
- Affiliates and introducing brokers promoting the firm there, since their activity is attributed to the firm.
- Sponsorships, expo stands, webinars and influencer content aimed at that audience.
- Cold outreach of any kind, including messages that begin as a discussion of something else.
The practical effect is that an offshore firm running any marketing at all in a European country has almost certainly forfeited the argument for every client it acquires there, whatever the onboarding form says. That is the same conclusion reached from the other direction in the piece on marketing to EU clients from offshore.
The burden of proof sits with the firm. A supervisor does not have to show that the client was solicited. The firm has to show that they were not, years after the fact, from records it kept at the time.
The tick box does not save you
Every offshore onboarding flow contains a declaration: I confirm I approached this firm on my own initiative. Supervisors have said as clearly as they can that such a statement, on its own, establishes nothing. It is drafted by the firm, presented at the moment of sale, and signed by someone who wants an account.
Evidence that carries weight looks different. The traffic source for the registration, retained rather than discarded. Documented geographic exclusions on every campaign, with the platform settings kept as proof. Geo blocking that actually prevents registration from the country in question, tested rather than assumed. Records of inbound enquiries, with the original message. And a written record of who was refused, because a firm that has never turned anyone away has not been applying a restriction.
The whole file has to be reconstructible later, which means it belongs in the client record from the first touch rather than being assembled during an investigation.
Where the door has narrowed further
Three developments have tightened the position. The EU's crypto framework wrote the anti circumvention principle into the regulation itself, so the argument no longer depends on regulator commentary alone, a change that runs alongside the wider move from registration to authorisation described in MiCA versus national VASP regimes. National regulators have published warning lists naming firms accepting local clients without permission, which converts a legal question into a reputational and banking one. And payment providers have begun asking about client geography as part of their own risk assessment, so the exemption gets tested by a commercial partner long before a regulator arrives.
The UK operates a different mechanism with a similar effect. Its financial promotions regime restricts who may communicate an invitation to engage in investment activity to UK persons, and the overseas persons arrangements are equally narrow in practice.
What to do instead
Decide which markets you actually want, and get permission for them. Inside the EU that means authorisation in one member state and passporting onward, or a partnership with a firm that already holds it. The obligations that come with it are set out in the guide to MiFID II, and they are heavier than an offshore permission by a wide margin.
For the markets you do not want, block them properly: geographic exclusions on every campaign, registration blocked by residence rather than by IP alone, affiliates contractually bound to the same exclusions and audited on it, and support scripts that decline rather than improvise. A firm that does this can defend the handful of genuine inbound clients it accepts. A firm that advertises everywhere and hopes the declaration holds is running an unlicensed business with extra paperwork.
"Reverse solicitation is a defence you raise once, for one client, with a file to back it. The moment it becomes your acquisition channel, it has stopped being a defence."
— Roman Onta, Executive Director, SINGUARD
Key Takeaways
- The exemption requires the client's exclusive initiative and covers only what the client asked for.
- Advertising, affiliates, local language pages and events all count as solicitation into that market.
- An onboarding declaration proves nothing on its own, and the burden of proof sits with the firm.
- Cross selling to an inbound client is a new solicitation, which is why the exemption cannot carry a retail book.
Frequently Asked Questions
What is reverse solicitation?
It is the principle that a firm outside a jurisdiction does not need that jurisdiction's authorisation when a client there approaches it at the client's own exclusive initiative. In EU law it appears in MiFID II for investment services and in MiCA for crypto-asset services, and in both cases the exemption is read narrowly.
Does a tick box saying the client approached us work?
Not on its own. Supervisors have said repeatedly that a disclaimer or a declaration signed at onboarding does not establish client initiative when the firm's own marketing reached that client. The declaration is one piece of evidence among several, and the weakest one.
Can a client who approached us be sold other products later?
Generally no. The exemption covers the service or product the client sought. Marketing a new category of investment or service to that same client is treated as solicitation in its own right and requires authorisation, which is why the exemption does not support an ongoing sales relationship.