xv-follow-up1987-11-18-xv-73-87-redacted
Dieses Dokument ist Teil der Anfrage „Ergebnisse von Konsultationen“
Ref. Ares(2023)3725176 - 30/05/2023
COMMISSION Brussels, 18.11.1987
OF THE EUROPEAN CC/mk/zp
COMMUNITIES
Directorate-General
Financial Institutions
and Company law
XV/A/3
Note to
Di rector-General
Re : Investment service
Further . to my note of 11 November I attach hereto a draft ”discussion
document" designed to accompany and explain the draft articles·.
Provisional address Rue de la Loi 200 · B-1049 Brussels - Belgium - Telephone direct line 23 telephone exchange 235 11 1t · 236 1111
Telex COMEU B 21877 - Telegraphic address COMEUR Brussels
Draft / Discussion document
Provision of jnye st ment se rv i c es to t he pub l i c
Introduc t i on
Annexed to this discussion document is a re-drafted version of the proposal
for a Directive.
The annexed text is based on Working Document № 3 (Doc. XV/73/87), which was
discussed by the expert working party at its meeting on 7 and 8 May 1986.
This text has been revised in the light of the results of that meeting, and
also takes account of comment received since from professional associations
at European level and of further reflection by Commission staff.
Thé main changes to Working Document '№ 3 can be summarized as follows:
1. The services to be covered have been re formulated. On the one hand,
"pure" investment advice is proposed to be left out, and also collective
investment in "a-typical" assets. On the other hand, the services
proposed to be included have been defined in more detail.
2. The observance of conduct of business rules is suggested to be assigned to
the regulatory competence of the home Member State, leaving rules only in
the field of advertising and canvassing to be supervised in the host
Member State;
3. A differentiation is made in the conduct of business rules according to
the nature of the service to be provided.
2 -
4- Branches are to be given the same treatment in host Member States as is
laid down for investment services provided across frontiers on a
”services” basis (this is the approach adopted in the proposal for a
second banking coordination Directive).
Comment in detail
Article 1
It is now proposed to exclude:
(1) ”pure” investment advice and
(2) collective investment in assets such as forests, containers and the like.
The reason for excluding investment advice as a separate activity is that
there appears to .be little evidence in Europe of . a. separate professidn . of
investment advisers i.e. persons -whose income . depends . on/ the giving of
investment advice rather than dealing commission.
This is probably why only one Member State (the United Kingdom) has rules
which relate speci ficai Ly· to this activity. . A further consideration is that
any proposed rules at Community level relating to advice given in neusletters
and periodicals and the like could fall foul of press freedom.
Advice given in connection with dealing and portfolio management would be
covered indirectly by the rule that persons providing these services must act
”in the interest of investors”.
As regards collective investment, it appears that the present Directive is not
the appropriate place to deal with this topic. If work was needed on it could
more conveniently be dealt with in a separate directive following on from the
1985 UCITS Directive, as the problems are much the same.
3
As regards the services proposed to be retained, these are now limited to
four, which, however, seem the most important ones as regards secondary market
1
operations in the securities field:
- brokerage ;
- dealing as principal ;
- market making ;
- portfolio management.
Brokerage. As defined, this covers not only the activity of execution, but
also the collection of orders from the public (the "remisier" function in
France). This latter activity consists in the collection of orders from
investors and their transmission to brokers for execution, in exchange for
sorne part of the broker’s commission.
Dealing as principal needs no'special comment.
Market making. . The definition is'· based on the text of · Arti c Įe 7' of the ’
proposal for a Directive on notification of the' purchase and sale of major
shareholdings. Such a person has much the same role as a dealer except that he
is normally obli ged to purchase and sell .in order to ensure a two way market.
Portfolio management. No special comment is needed.
Article 2
It would appear that the definition of "home Member State" needs to take
account of the possibility that the provider of the services is one of three
different types of person i.e. either a company, a collective body of persons
other than a company (e.g. a partnership) or an individual natural person.
Primary market operations, which are not proposed to be included in the
scope, would concern underwriting, syndication and marketing of new
securities issues through public offering or private placement.
The definition of "transferable securities” is the same as in the proposal for a Directive on the public offer prospectus. Old Article 3 (in Working Paper № 3) This contained a certain number of exclusions, but it appears that with the more precise definition of the services proposed to be covered this is no longer strictly necessary. The only doubt concerns the old exclusion in respect of services offered to persons in connection with their trade or profession, but this concept has now been taken account of in a different way by the addition of the word "public” in Article 1. .New Art i e le 3 Ąswith the approach in the 1985 UCITS Directive, the competent authorities of the’hómé Member State are responsible for· authorizing -the person proposing to provide the relevant investment service, with that authorization being accorded mutual recognition in the other Member States where the service is to be provided^ Paragraph 7 is based on wording in the Eighth Company Law Directive on auditors, and corresponds to a request made at the last meeting by the UK de legat i on. Article 4 Each Member State is to ensure that conduct of business rules are drawn up for each of the four types of service coming within the Directive's scope. Such conduct of business rules can go further than those mentioned in the Directive, but such additional rules can only be imposed on persons authorized in that same Member State and not on persons providing services on a freedom of service basis from another Member State (such persons will be subject to the conduct of business rules drawn up in their home Member State).
5 Responsibility for compliance with such rules, wherever the service is to be provided in the Community, and even if it is not to be provided in the home Member State, rests with the supervisory authorities of the home Member State, This is an analagous approach to that of the 1985 UCITS Directive. As suggested at the last meeting by the Dutch, Italian and Belgian delegations a differentiation in the conduct of business rules has been made according to the nature of each service. Whereas the rules retained seem the most important ones for each of the services in question, comment is welcomed from the group as to whether any of these rules should be deleted o> fresh ones added- Commission staff considered for example a proposed rule for the setting up of ( "Chinese walls" where multi-service financial establishments advise companies ) at the same time as dealing for investors, in the securities of the same) companies. Such a· rule was not retained, however, as it would be mainly aimed)/ at combatting "insider trading", which is the subject matter of a- separate/^ proposal at Community leve.l. It may be appropriate to spell out in more detail the "capital adequacy" rules depending on the extent to which the provider of the service is exposed to risk. The risk position may change as compared to the moment of initial authorization if for example the provider of the service undertakes business in a different Member State to his own where the scale of business is greater. Commission staff are carrying out a separate study in this connection. Article 6 The conduct of business rules which would fall within the ambit of host Member States would be Limited to "advertising" and "canvassing", which is a similar approach to the 1985 UCITS Directive, where "marketing" rules relating to the sale of UCITS units alone fall within the competence of host Member States. Branches are to be given similar treatment to persons providing services across borders i.e. no new authorization can be required for the setting up of a branch in the host country. Tn other words, the home Member State competent authorities will be responsible for supervising the organization as a whole.
6 - The setting up of a subsidiary in another Member State would however result in establishment and would give rise to an authorization requirement. The subsidiary would of course be considered to be a national of the Member State of incorporation. In view of the new treatment to be given to branches the old Article 9 (establishment) has lost much of its significance and Commission staff have proposed in the new text to delete it. A procedure for cooperation between host Member State/home Member State competent authorities is laid down, which reflects the approach adopted in the proposal for a Directive in the field of freedom of services in the provision mortgage credit. This wording will of course have to be adjusted in the light of discussions on that text in the relevant Council Working Party. Notification of the competent authorities in the host Member State is necessary prior to providing, a service, but only if the service is to be promoted in an active· way within its·territory. Notification would not of coursé be necessary if the investor himself took the initiative and- contacted the provider of a servi.ce in another Member State. . ; Article XXX Commission staff consider that it would be appropriate to· up-grade the usual contact committee into a "comité de réglementation" so as to be able speedily to adapt the Directive's requirements to changes in market practice, parti c'ular ly as regards the conduct of business rules. The comments of the group would be welcome.on this suggestion.
