16 November 2000

Commission Communications on Investment Services Directive

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The commission set out two communications on the revision of the Investment Service Directive. The first communication provides a survey of the way in which Article 11 has been implemented in member states and provides guidelines on how conduct of business rules could be applied to facilitate cross-border provisions of service. It suggests how conduct of business protection can be tailored to prevailing market reality and impending changes in the legal environment. The communication also considers the application of conduct of business rules to branches of investment firms. For a number of reasons, cross-border provision of investment services is unnecessarily complicated and made more costly than necessary by legal uncertainty and overlapping regulatory requirements. The key elements of this proposal are:

with regard to article 11(1), the obligation of member states to take account of the professional nature of the investor should not be seen as conditional on the prior harmonisation of the content of business protection;

with regard to article 11(2), the general good requires that national supervisory bodies take account of the nature of the investor and their 'need for protection' before deciding whether to impose local conduct of business rules.
Account must also be taken of the fact that conduct of business regimes in all member states already offers sufficient and comparable protection to professional investors. Therefore, investment services provided to professional investors could be governed exclusively by the conduct of business rules in force in the country of the service provider ('home country') without prior harmonisation. With respect to retail investors, differences persist between national conduct of business protection. Host country authorities may thus impose local business rules for such investors in accordance with principles in the treaties and secondary legislation.
See press release for a short summary

The second communication sets out guidelines and seeks public comments for a substantive overhaul of the Investment Services Directive (ISD:93/22/EEC).
The ISD is the cornerstone of the EU legislative framework for investment firms and securities markets. In the five years since it came into force, it has eliminated the first set of legal obstacles to the single market for securities. The single passport conferred on authorised investment firms is widely used. Access to 'regulated markets' and exchanges has been liberalised. Pan-European dealing in nationally listed securities has been made easier.
The four key priorities for the ISD upgrading include:

an effective passport for investment firms;

new forms of service provision;

effective competition between exchanges and trading platforms;

the growing cross-border dimension of clearing and settlement.
See press release for a short summary

© European Commission