Firms talk about holding a MiFID licence as though it were a single thing. It is not. It is a menu of investment services, and the ones you are authorised for decide your capital requirement, your conduct obligations, and how closely you are supervised.
Two firms in the same member state, both correctly described as licensed investment firms, can operate under obligations that differ by an order of magnitude. The difference is entirely in which permissions they hold.
The services you can be authorised for
The core investment services are separately defined and separately granted. Reception and transmission of orders, execution of orders on behalf of clients, dealing on own account, portfolio management, investment advice, underwriting or placing, and operating a trading facility each sit on their own.
Alongside them are ancillary services, most importantly safekeeping and administration of financial instruments, and granting credit to a client to carry out a transaction.
You apply for the specific combination your business needs. Regulators authorise what you evidence you can run, so asking for permissions you have no immediate plan to use tends to slow the file rather than future-proof it.
The two questions that set your weight
Almost everything downstream turns on two facts about your permission set.
Do you deal on own account? Taking principal risk, including internalising client flow rather than passing it to the market, moves you into the highest capital category and brings market risk requirements with it. This is the line between an agency business and a risk-taking one, and regulators treat the two very differently.
Do you hold client money or assets? Holding client funds triggers a materially higher capital floor and a set of client asset obligations that are, in practice, the most operationally demanding part of running an investment firm. A firm that never touches client money and only receives and transmits orders, advises, or manages portfolios sits at the lightest capital tier.
That is why the same licence can feel entirely different from the inside. An advisory firm holding no client assets and a market-making firm dealing on own account are both MiFID investment firms.
Capital under the prudential regime
Investment firms are no longer capitalised as though they were small banks. The prudential regime for investment firms sets an initial capital requirement by permission set, then an ongoing requirement based on the higher of a fixed overheads floor, the permanent minimum, and a set of activity-based factors covering assets under management, client money held, order flow handled, and positions taken.
The practical implication is that your capital requirement scales with what you actually do, not with what your licence theoretically permits. It also means cost forecasts built from the initial capital number alone are wrong, because a growing firm's requirement grows with it.
Where investment management sits
Discretionary portfolio management is a MiFID service, so a manager can be authorised as an investment firm. Managing collective investment schemes is a different regime again, with its own authorisation. Which one you need follows from whether you are managing mandates or funds, and firms occasionally apply for the wrong one because both are described as asset management in ordinary speech.
Passporting, and why the base matters
An authorised investment firm can passport across the EEA, on a services basis or by establishing a branch. The permissions travel with you, which is why the scope you are granted at home determines what you can offer everywhere else.
That makes the choice of home state a decision about the permission set as much as about the regulator. A member state that is reluctant to grant a particular permission constrains your entire European business, not just your domestic one.
Conduct is the part that is underestimated
Capital is a number you can plan for. The conduct regime is continuous work: client categorisation, appropriateness and suitability assessment, best execution with the evidence to support it, product governance, inducement rules, transaction reporting, and record keeping of client communications.
Firms consistently under-resource this at authorisation and discover the cost at their first thematic review. If you are choosing between permission sets, the conduct load is a legitimate reason to take fewer.
Getting the scope right first time
Varying a permission later is possible, and it is a regulatory process with its own timetable. The efficient path is to map the business you will run in the next two to three years, take the permissions that cover it, and leave out the ones that merely sound useful.
BrokLicense licenses investment firms across the jurisdictions we cover, by new application or by acquisition of an authorised entity, and the scoping conversation is the one that saves the most time later. Start with what you intend to do.