Reverse solicitation: when is it applicable?

Can a crypto company serve clients in the EU without a license and still stay within the law? Yes, but only if the initiative comes directly from the client. This approach is known as reverse solicitation and is frequently used by companies seeking to bypass restrictions on cross-border services. However, EU regulators are increasingly narrowing the interpretation of what is permissible, particularly following the adoption of the MiCA Regulation. Where is the line between a legitimate client inquiry and a regulatory breach? This article will help you understand the boundaries and build a compliant model for working with EU-based clients, without putting your license at risk.

What is reverse solicitation?

Reverse solicitation is a legal mechanism whereby the initiative to establish a business relationship comes from the client, not from the provider of financial or crypto services. In such cases, the company may serve the client without obtaining a license in the client’s country of residence, as it has not engaged in any active promotion of its services in that jurisdiction.

In other words, if a company has not advertised or marketed its services in a particular jurisdiction, but receives a service request from a client based there, it may be permitted to provide the service without holding a local license, based on the principle of reverse solicitation.

Key features of reverse solicitation

However, this exemption is interpreted very narrowly. The burden of proof lies with the company, which must demonstrate that the client acted on their initiative. Regulators, including ESMA, emphasize that any public communications, marketing efforts, PR campaigns, or even indirect promotions may be seen as client solicitation.

Let's look at the main features of reverse solicitation:

• The service request comes from the client, without any prior contact with the company.
• The company does not engage in active promotion within the client’s jurisdiction (no ads, email campaigns, or targeted outreach).
• The client’s initiative is properly documented—ideally through a formal request, website logs, inquiry forms, or recorded communication.

This principle is often used by non-EU companies to legally work with clients in the European Union. However, incorrect application of reverse solicitation may result in regulatory sanctions, fines, or even a ban on operating within the EU.

Legal basis for reverse solicitation in the EU

The concept of reverse solicitation was first clearly defined under EU Directive 2014/65/EU (MiFID II). This exception applies only when:

• The initiative genuinely comes from the client.
• The company has not actively promoted its services in the client’s country.
• The service provider can prove the request and demonstrate that it was voluntary.

Important! Even if the client initiated contact, any subsequent marketing activity in their jurisdiction, such as offering additional services, may still qualify as a regulatory breach.

The European Securities and Markets Authority (ESMA) has issued guidelines to prevent the misuse of reverse solicitation. Regulators stress that some companies disguise active marketing as client-initiated contact. In practice, this may include:

• Geo-targeted advertising aimed at EU users.
• Landing pages in EU languages.
• Social media campaigns tailored to European audiences.

National regulators like BaFin (Germany), AMF (France), and CNMV (Spain) have already enforced penalties against crypto firms that violate reverse solicitation rules. Fines, operational restrictions, and service bans are becoming increasingly common.

When can reverse solicitation be applied?

For reverse solicitation to be legally valid, specific conditions must be met. Both the EU and national regulators closely monitor any signs that cross the line between a legitimate client request and active marketing. The key compliance criteria include:

1. The client contacts the company independently, without responding to advertisements or marketing incentives.
2. The company does not engage in targeted advertising, email campaigns, or social media promotions aimed at the EU.
3. The website is not tailored to specific EU countries—there is no geotargeting, localized content, or region-specific payment terms.
4. The client’s request must be documented: this may include a completed inquiry form, email correspondence, IP logs, time stamps, and other records.

Even if all these conditions are met, it’s essential to remember that reverse solicitation applies only to the specific service initially requested. Any follow-up communication, especially offering additional services, may be considered active solicitation and require proper licensing.

When reverse solicitation is unlikely to be accepted

In practice, the boundaries of reverse solicitation are often unclear, and companies may breach the rules unintentionally, particularly online platforms and crypto exchanges. Common mistakes:

1. The website is translated into EU languages (such as French or German) and features localized content.
2. Landing pages, subdomains, or banners contain phrases like “we ship to Europe” or “serving EU clients”.
3. Targeted advertising is set up for EU users via Google, Meta, or other ad networks.
4. The company sends emails or messages (including via messengers) inviting users to join or use the platform.
5. Blog posts, interviews, or social media content are aimed at EU residents, even without direct sales intent.

If even one of these elements is present, it becomes hard to prove the legitimacy of reverse solicitation. Regulators are likely to interpret such behavior as active commercial engagement within the EU, triggering licensing requirements.

Legal consequences for violating reverse solicitation

Companies that violate the principle of reverse solicitation may face serious legal consequences, including:

1. Administrative fines from national regulators can reach hundreds of thousands or even millions of euros.
2. Suspension or complete ban on providing services within a specific jurisdiction.
3. Public blacklisting on regulatory authority websites.
4. Obligations to refund funds obtained through unauthorized services.
5. In severe cases, criminal prosecution is warranted for the illegal provision of financial services.

For example, in 2022, the French regulator AMF fined an investment advisor and its manager for unlawfully promoting funds under the guise of reverse solicitation. The investigation revealed that investors signed pre-drafted letters allegedly confirming their initiative, But these letters were supplied by the distributor and did not reflect genuine interest in specific products. The company received a fine of €150,000, while individual managers were fined €50,000. Additionally, the company was banned from operating as an investment advisor for five years.

How to safely use reverse solicitation: recommendations from Key2Law

To apply the reverse solicitation mechanism lawfully and avoid regulatory sanctions, companies must build a legally robust operating model and implement internal compliance controls. We recommend:

1. Developing a clear “no marketing in the EU” policy with detailed guidance for marketing and sales teams.
2. Conducting regular audits of all digital channels, including websites, advertising, and email campaigns.
3. Updating Terms & Conditions to specify that the company does not offer services to individuals subject to EU licensing requirements.
4. Restricting targeting and localization to avoid promotional activities directed at EU countries.
5. Training staff on relevant regulatory standards and potential violations.

Documenting the client's initiative: what is important?

An incoming message is not enough. To demonstrate the lawful use of reverse solicitation, the company must ensure proper documentation of the client’s initiative. Key evidence includes:

• Logs showing the client's activity before submitting the request (e.g., visits from organic search).
• Screenshots of the inquiry form completed by the client.
• The date and IP address of the initial contact.
• Confirmation that no prior marketing or outreach was conducted.
• CRM records or system logs documenting the interaction timeline.

Companies are advised to retain this data for at least the duration of any potential statute of limitations or period during which regulators may raise claims.

How Key2Law helps companies comply with the law

Our team helps businesses build a strategy in which reverse solicitation is genuinely compliant. We conduct audits of marketing and client acquisition practices, draft proper disclaimers and procedures for documenting client-initiated requests, and train your team to act lawfully when working with non-resident clients.

If regulatory concerns have already arisen, we provide professional representation before authorities and develop a tailored defense strategy based on the specifics of your case.

If you plan to grow your business in the EU market without risking sanctions, contact Key2Law. We’ll offer you an effective and legally sound solution, customized for your project’s needs. Schedule your consultation today and stay one step ahead!