Brussels, 06/02/2006 (Agence Europe) - On 6 February, the European Commission presented two legislative execution measures- a directive and a regulation- designed to implement the fundamental principles of directive 2004/39/EC on the financial instruments market (also known as the "MiFID" three directive). These measures relate solely to certain provisions (1871) of the "MiFID" framework directive, for which the Commission holds a competency delegated under the "Lamfalussy" procedure. "Uniform measures are desirable", says David Wright, Financial Services Director of the European Commission, presenting these measures to the press, although "we would like to avoid excessive red tape". When it was possible to have uniform rules, we opted for a "regulation"; on the other hand, when it was not "legally or technically" possible, our approach was based on "principles" enshrined within "a directive", he added.
According to David Wright, the directive of execution establishes a "high level of harmonisation" which is unlikely to motivate the Member States to adopt additional measures, even though this possibility is permitted in certain circumstances. It gives a specific and detailed list of the provisions under the "MiFID" directive as they relate to relations between an investment company and its clients. Such issues are concerned as the organizational requirements of the investment companies (and also the externalisation of certain services in third countries), conflicts of interest, the rules of conduct for the provision of investment services, the obligation to execute clients' orders under the most favourable conditions to them, rules governing the handling of clients' orders, transactions carried out with eligible parties.
The directive of execution specifies, for example, the exact kind of information which an investment company must make available to its retail clients so that these, which are less well-informed than professional clients, are able to make an enlightened choice. The necessary information will focus on such things as the investment company, the financial instruments and costs related to the investment services. Obligations in terms of clear, correct and non-misleading information do not, however, concern advertising material containing small amounts of information.
The regulation defines execution measures with a direct effect. These measures concern transparency obligations and the functioning of the markets, to wit: transaction declarations, cooperation between regulation authorities, the transparency of investment companies before and after negotiations and the definition of systematic internalisers.
We hope that the "procedures will be concluded" around "June or July 2006", announced David Wright. These two legislative measures have been forwarded to the European Parliament and the Committee of European Securities Regulators (CESR), which will examine them over the next three months. Once the CESR has returned its opinion, the European Parliament will have one month to decide whether the Commission has overstepped the powers delegated to it. The directive and the regulation will then enter into force in "November 2007", said David Wright. This date corresponds to the presumed entry into force of the "MiFID" framework directive (see EUROPE 9096 and 8975).
These execution measures are the result of an "open and broad consultation process" with all interested parties, said David Wright, adding that "15 consultations" have been carried out, "11 of which in the last two years". These consultations involved the Member States meeting in the European Securities Committee (ESC), the CESR, which the Commission has officially mandated to provide advice, and the financial markets. Germany and the United Kingdom had very active roles in ensuring that the Commission proposed a directive which would allow the Member States to have leeway in the transposition of execution provisions into national law.
The "MiFID" directive, which is a cornerstone of the Financial Services Action Plan (FSAP), aims to promote the integration of financial markets in Europe, by bringing in more competition between investment companies whilst improving protection for investors. It removes the rule of concentration, to make places on the stock exchange open to competition from investment companies, such as banks or Multilateral Trading Facilities (MTF). It also brings in a single passport issued by the national regulators of the country of establishment, allowing an investment company to be active throughout the European Union. Lastly, it covers new investment services (e.g. investment advice) and financial instruments (e.g. derivative products).