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The markets in financial instruments directive, or Mifid, is widely seen as the EU’s most ambitious piece of financial legislation to date. It will allow investment companies to operate across the 25 member states under their home country regulations, and will force stock exchanges to compete with banks for parts of their business.
Mifid’s complex and far-reaching provisions must be on member states’ law books by January 2007 and companies must have implemented the rules by November 2007. However, there have long been concerns that governments, regulators and companies may not be ready by that date. There are also worries that Mifid may be implemented differently in the various member states, a situation that would almost certainly undermine the expected benefits of the legislation.
In a sign that the European Commission shared these doubts, Charlie Mc-Creevy, the EU internal market commissioner, warned member states not to drag their feet. In London on Tuesday night, he said: “I am very concerned that some member states have stated publicly that they will not be able to transpose Mifid on time. This is very disappointing – particularly since we have repeatedly ad-vised them to begin the transposition process early.”
The commissioner added: “Let me be perfectly clear about this. The Commission will launch immediate infringement procedures against any member state which fails to transpose on time. There will be no exceptions.” Under EU law, the Commission is required to launch a legal challenge against any government that fails to comply with EU law, for example by failing to enact a piece of legislation agreed at the European level. After a case is launched, member states receive one final warning before the Commission launches a formal case against the country in front of the European Court of Justice.
The infringement procedure aside, Mr McCreevy warned that governments could face lawsuits from market participants in national courts. He said: “By not transposing on time, member states are also harming the competitiveness of their own firms who will not have the passport and so will be deprived of those all-important first mover advantages. Equally, it is wholly unacceptable that member states should refuse to accept incoming firms from member states that are fast out of the block.”
Germany is among the countries that have warned they may miss the November 2007 target date for implementing Mifid. However, officials in Brussels said yesterday Mr McCreevy’s intervention was intended as a general warning to all member states rather than a threat to individual governments.