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Brussels, 24th July 2001

Commission launches "Post-Lamfalussy" open consultation on Investment Services Directive

The European Commission has launched an open Internet consultation on potential adjustments to the Investment Services Directive (ISD) (93/22/EEC). The ISD is the cornerstone of the EU legislative framework to create an Internal Market for investment firms and "regulated markets". The Commission is seeking reactions from all interested parties on a detailed set of possible adjustments to the structure and content of the Directive. The closing date for receipt of submissions is 30 October 2001. An open hearing, to which all interested parties are invited, will be organised by the Commission in Brussels on 18-19 September. The preliminary orientations contained in the consultation document are without prejudice to any future decisions by the Commission in finalising its proposals. This is the second open consultation (see IP/01/999 for details of the consultation on transparency obligations of publicly-traded companies) undertaken by the Commission further to the February 2001 Lamfalussy Committee report (see The Committee recommended that all new legislation in the securities field be preceded by an early, broad, and systematic consultation of all interested parties in the securities area. This policy was endorsed by the Stockholm European Council Resolution and the European Parliament. The consultative document is available on the Europa web-site: en/finances/securities/index.htm

Internal Market Commissioner Frits Bolkestein, said: "The strategic importance of integrated and liquid financial markets as a catalyst for economic growth and job creation was recognised at the Lisbon European Council. The Lamfalussy report, and subsequently the Stockholm European Council, have singled out revision of the ISD as a central plank of the structural reforms needed to achieve this objective. The ISD must be updated as part of the general drive to establish a dynamic EU-level framework for financial markets that will stand the test of time, optimise the benefits of technological change and the introduction of the euro, and which will ensure a level playing field for market participants. In the wake of the Lamfalussy report, the Commission services are anxious to give market practitioners and interested parties an opportunity to comment on its proposed approach to revision of this important piece of Internal Market legislation".

In the light of the 42 detailed reactions to the consultation on broad orientations for upgrading the ISD launched in November 2000 (see IP/00/1315 and MEMO/00/81), the Commission services have come forward with preliminary proposals for changes to the ISD. Whilst not representing a radical departure from the principles and structure of the existing ISD, the proposed adjustments imply its reorganisation so as to achieve these objectives more effectively, and to respond fully to the developments currently underway in EU securities markets.

The most notable adjustments provide for:

    A systematic review of the coverage of ISD so as to better reflect the changing nature of investment intermediation and to allow a broader range of investment services to be organised on a pan-European basis;

    Enhanced convergence of organisational and investor protection requirements with which investment firms must comply;

    Consolidation and amplification of current obligations of investment firms to respect the integrity of the market. The proposed adjustments provide for stringent obligations in respect of transaction reporting and off-market disclosure than are presently required under the current ISD;

    Elaboration of high level principles governing the authorisation and operation of "regulated markets" which would allow 'regulated markets" to compete for order flow and liquidity without jeopardising the orderly and efficient operation of the European securities market system, or the interests of issuers and investors;

    Clarification of conditions under which market participants and regulated markets may seek access to clearing and settlement infrastructures in other Member States;

    Modernisation of provisions relating to supervisory cooperation to place mechanisms for communication and cooperation between competent authorities within and between Member States on a firmer, real-time footing.

These proposals seek to build on the provisions of the existing ISD and are driven by the need to:

  • Clarify and amplify existing provisions where these have not established an effective legislative framework which allows investment firms and securities markets to serve an EU-wide market;

  • Guarantee a homogeneous and high level of protection for investors;

  • Reinforce the existing ISD provisions where necessary in order to respond to changed business models and increased competition between trading infrastructures.

Description of consultation material:

The following material is available on the web-site of the European Commission for this consultation:

    An overview paper (document 1) providing an extensive commentary on the proposed adjustments to the existing ISD (this document will be made available in English, French, German, Italian, Spanish and Dutch)

    Three supporting annexes providing a detailed presentation of those possible adjustments to ISD, accompanied by a brief commentary:

    • Annex 1outlines the proposed scope and definitions for a revised ISD

    • Annex 2 sets out the requirements for the initial and ongoing authorisation of investment firms

    • Annex 3 introduces possible new principles that must be respected by EU "regulated markets" and their operators.

    A synthesis of 42 responses to the November 2000 consultation (Document 2).

Comments on this material are invited from all interested parties no later than 30th October 2001.

Comments could in particular address the following considerations:

  • The likely impact of proposed adjustments in overcoming public law or administrative obstacles which prevent investment firms or regulated markets from serving cross-border markets;

  • The extent to which elements of proposed adjustments should feature in high level principles to be incorporated in the revised ISD and elements which should be the object of supplementary implementing measures;

  • The cost-effectiveness of proposed EU level regulatory/supervisory arrangements in promoting investor protection and fostering orderly and efficient markets for financial instruments;

  • The suitability of the proposed obligations in respect of particular types of service, service format or organised trading system, and indications on how provisions could be applied so as to better reflect the real risks to investors and market functioning arising from those activities;

  • The clarity of rights and obligations for market participants, market operators and competent authorities.

Responses to this consultative paper should be sent to:

European Commission

Internal Market Directorate General

Securities and Organised Markets Unit F/3

Av. de Cortenbergh, 107

B-1000 Brussels

(fax: +32-2-295-40-62)

Responses may also be sent by e-mail to:

Open hearing:

On September 18-19, at the mid-point of the consultation period, the Commission will host an open hearing in the Borschette Conference Centre, Brussels. This hearing will provide an opportunity for interested parties to obtain clarification on proposed adjustments and to convey initial views on their implications. Details of this hearing (preliminary agenda, registration form) can be obtained at the above web-site or fax address.

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