The Economic Affairs Committee on Tuesday voted on the first reading of the investment services directive (ISD). Following the advice of rapporteur Theresa Villiers, the committee supported the basic line of the Commission's proposal but introduced several amendments to limit red tape, distinguish between retail and professional investors and prevent the new rules increasing the cost of share dealing. Other amendments seek to ensure a non-discriminatory approach to venue choice, in particular regarding transparency requirements. All compromise amendments were adopted.
As regards 'conduct of business' obligations, the committee called for suitability tests (Art. 18) to apply only to deals where advice is provided. 'Execution only' services, should not be burdened by extra requirements that would lead to higher charges.
Article 19 on the 'best execution' principle was amended in a way, that firms will simply have to guarantee they have taken steps to obtain the best result 'reasonably achievable'.. While supporting the idea that firms should actively look for the best deal for clients, MEPs believe this point should be clarified because an absolute duty to find the lowest price or the cheapest transaction venue cannot work in practice.
On transparency requirements (Art. 20.4 and Art. 25) the committee supports enchanced transparency but it has taken account of concerns that the new rules could have a negative impact on liquidity and could discriminate against investment firms.
Under Article 25, the adopted compromise amendments limit the scope of the obligation to firms which practise 'systematic internalisation' in shares (for instance, firms that regularly and continuously execute orders on their own account or regularly match with other client orders). The committee has also introduced the concept of a 'standard size' which will trigger the obligation to make prices public, though the amount will be fixed later by regulators.
As for Art 20.4, which obliges investment firms to disclose the terms of 'limit orders' when these are not executed immediately, the committee adopted a compromise amendment saying that these orders will be forwarded to a regulated market unless the client objects.
The European Parliament will vote at first reading on this report at its plenary session on 24 September.
Final report
© European Parliament
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