Cicero Policy Briefer

Issue 6, November 2006

MiFID: European Commission warns Member States to implement on time

By Michael Cooper

The European Internal Market Commissioner, Charlie McCreevy, has recently reiterated his strong desire to ensure that the Markets in Financial Instruments Directive (MiFID) remains on course to be implemented next year. MiFID, one of the last major pieces of legislation to be implemented as part of the EU’s Financial Services Action Plan, aims to reduce barriers to cross-border share trading, facilitating investment and stimulating the EU economy. However, reaction to it has raised concern, with some stakeholders bemoaning the potential costs of implementation and some Member States claiming to be doubtful of completing transposition on time.

After the implementing measures of the Directive were agreed and adopted by the European Commission in the summer, the next stage of implementation will be the transposition by Member States by January 2007 into national law before coming into force in November 2007.

The Directive will form a comprehensive regulatory regime which will impose higher standards and include commodities derivatives with an overall aim to bring about greater harmonisation and encourage capital market integration in the EU.

Under the Directive, an investment firm, once authorised by the respective authority in its home country would receive a single passport enabling it to operate throughout the Union under the supervision of its country of origin. MiFID will also open up the share market to greater competition as well as ensure higher levels of protection for investors.

MiFID will bring about massive changes to the way that market players conduct business and considerable amendments to IT systems will be necessary for banks, investment firms, regulated markets and clearing and settlement intermediaries.

In its role as guarantor of the Treaties, the Commission is responsible for ensuring that all Member States fully adhere to all EU law. Responding to rumours that some Members States were struggling to guarantee their implementation by the November deadline, Charlie McCreevy held no punches in reaffirming the Commission’s intentions to see the Directive fully respected by all Members States. He recently confirmed that “the Commission will launch immediate infringement procedures against any Member State which fails to transpose on time. There will be no exceptions.”

To facilitate the implementation process, the Commission will be launching an inter-active Q&A database to answer issues of interpretation concerning the Directive.

Mr McCreevy’s comments come in an attempt to consolidate the conclusion of what has been a very controversial piece of legislation in Brussels with the European Parliament, Commission and Council all finding an acceptable compromise hard to come by. Having threatened to block the whole issue until the European Constitution debate was resolved, the European Parliament has settled for a right to ‘call-back’ any contentious measures with which it does not feel happy until April 2008.

Michael Cooper can be contacted on +44 (0)20 7665 9530 or click here to email.

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