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Brussels, 13th September 2001

Commission to host open hearing on Investment Services Directive

On September 18th and 19th the European Commission will host an open hearing in Brussels that will bring together a wide range of financial market practitioners and experts to consider the recently-published orientations (see IP/01/1055) on possible modifications of the Investment Services Directive (93/22/EEC). The hearing will allow the Commission services to clarify their preliminary suggestions. It offers participants, including representatives from the European Parliament and securities commissions, an opportunity to air their views which will guide the Commission before it finalises a proposal to be submitted to the European Council and Parliament. This process of open consultation has been launched by the Commission further to the final report of the Lamfalussy Committee (published in February: see, which 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.

The Investment Services Directive (ISD) is the cornerstone of the EU legislative framework 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. These preliminary suggestions for changes to the ISD were published by the Commission in July 2001 and are available on the Europa web-site: see below for details). The preliminary orientations contained in the consultation document are without prejudice to any future decisions by the Commission in finalising its proposals. The closing date for receipt of submissions is 30 October 2001. The open hearing has a double objective:

  • to allow the Commission services to present and clarify their analysis and the key regulatory and legal objectives motivating its suggested approach

  • to allow interested parties to convey views or concerns regarding the substance or form of the proposals to Commission services at the mid-point in the consultation period.

The hearing will commence with a series of statements on the strategic, systemic and institutional issues arising from the proposals by high level representatives from the European Parliament (Ms Christa Randzio-Plath, chair of the Economic and Monetary Affairs Committee), the financial community (Mr. Alan Yarrow, Vice-Chairman Dresdner, Kleinwort & Wasserstein), regulators and a noted academic commentator on EU financial markets legislation (Karel Lannoo, Centre for European Policy Studies).

Thereafter, the hearing will be structured in 4 workshops dealing with preliminary proposals in respect of:

    The core regulatory concepts and building-blocks for a revised ISD

    ISD provisions relating to investment firms

    High-level principles for "regulated markets"

    Access to and choice of clearing and settlement systems for recognised firms and markets.

It is hoped that exchanges will provide for constructive input and comment on:

  • 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.

Overview of preliminary orientations for modification of the ISD

The adjustments suggested by the Commission in its consultation document imply a revision and extension of the ISD so as to better achieve the original objectives of an effective single passport for investment firms and open trading infrastructures, 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 suggested 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:

  • An overview paper (document 1) providing an extensive commentary on the suggested adjustments to the existing ISD. (This document is available in English, French, German, Italian and Spanish)

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

  • Annex 1 outlines the suggested 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 would have to be respected by EU "regulated markets" and their operators

  • A synthesis of 42 responses to a Communication on Upgrading the Investment Services Directive issued by the Commission on 16 November 2000 (see IP/00/1315).

Comments on this material are invited from all interested parties no later than 30th October 2001 and 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) or by e-mail to:

The hearing will be held at the Centre Borschette, Place Jourdan, Brussels. Journalists accredited with the Commission will be able to attend the hearing on production of their press card.

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