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08/02/2006 | European Union: EU Unveils Plans for Increased Investor Protection and Transparency in Financial Markets

WMRC Staff

The European Commission yesterday (for Monday, February 6)presented new proposals towards establishing a single market in financial services in the EU.

 

Global Insight Perspective

Significance

The plans presented yesterday within the framework of the Markets in Financial Instruments Directive aim to boost investor protection across the EU and make financial markets more transparent.

Implications

By updating investment rules in the EU, the Commission is inching closer towards its objective of creating one giant European capital market. By cutting red tape for investors and allowing them to shop around for securities across borders, the plans will also spur economic growth across the 25-nation bloc.

Outlook

The Commission presented its proposals to the European Parliament and the European Securities Committee yesterday. A decision on the new rules is expected in June 2006, and the new measures will then come into force in 2007.

Towards a Single EU Market in Financial Services

The European Commission yesterday presented its formal drafts to the European Parliament and the European Securities Committee (ESC) for a series of technical measures implementing the Markets in Financial Instruments Directive (MiFID). The MiFID is a key element of the Financial Services Action Plan (FSAP), which seeks to create a single market for financial services in the European Union (EU). It is also a response to structural changes in the European securities markets.

The Commission hopes that the MiFID will play an essential part in building a better-integrated, deeper and more efficient capital market in the EU in order to lower the cost of capital, generate growth, and boost the bloc's international competitiveness.

The main objectives of the plans presented yesterday are:

To enable investors to invest and procure investment services across EU borders more easily.

To remove obstacles to the use of the EU passport by investment firms.

To foster competition and ensure a level playing field between Europe's trading venues.

To ensure appropriate levels of protection for investors and consumers of investment services across Europe.

 

The plans were drafted following a series of consultations with stakeholders over a two-year period. It is therefore hoped that the measures, once implemented, will provide firms with clear and predictable rules, and offer greater security to investors and consumers who buy services from foreign firms.

Outlook and Implications

The plans presented yesterday provide for the lowering of technical and administrative barriers to securities competition between banks and brokerages. Investors will be able to shop around more easily for cross-border securities options without encountering the cumbersome red tape which currently acts as a deterrent to such practices.

Key elements of the proposals focus on laying down strict rules in order to avoid conflicts of interest, as well as to improve research and advice for investors. Furthermore, one of the more radical provisions presented to the Parliament calls for an end to the obligation in some member states for banks and brokerage houses to route client orders through exchanges.

The European Commission is eager to see obstacles to cross-border investment broken down in order to stimulate much-needed economic growth in the bloc. Speaking yesterday, the head of the Commission's internal market division, David White, was optimistic that if the planned objectives 'drive down the costs of capital both for retail consumers, small businesses and big businesses, we can do an awful lot of good for the European economy.'

The Commission's proposals are likely to be under review in both the Parliament and the ESC for the next few months; an eventual implementation of the new rules, once approved, is expected in November 2007, when they will need to be incorporated into the individual legal systems of each EU member state.

Contact: Raul Dary

24 Hartwell Ave.
Lexington, MA 02421, USA
Tel: 781.301.9314
Cel: 857.222.0556
Fax: 781.301.9416
raul.dary@globalinsight.com

www.globalinsight.com and www.wmrc.com

WMRC (Reino Unido)

 



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