1993L0022 — EN — 24.05.1993 — 000.001 — 1
This document is meant purely as a documentation tool and the institutions do not assume any liability for its contents
►B COUNCIL DIRECTIVE 93/22/EEC
of 10 May 1993
on investment services in the securities field
(OJ L 141, 11.6.1993, p. 27)
Corrected by:
►C1 Corrigendum, OJ L 170, 13.7.1993, p. 32 (93/22)
►C2 Corrigendum, OJ L 194, 3.8.1993, p. 27 (93/22)
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COUNCIL DIRECTIVE 93/22/EEC
of 10 May 1993
on investment services in the securities field
THE COUNCIL OF THE EUROPEAN COMMUNITIES,
Having regard to the Treaty establishing the European Economic
Community, and in particular Article 57 (2) thereof,
Having regard to the proposal from the Commission (1),
In cooperation with the European Parliament (2),
Having regard to the opinion of the Economic and Social Committee (3),
Whereas this Directive constitutes an instrument essential to the
achievement of the internal market, a course determined by the SingleEuropean Act and set out in timetable form in the Commission’s WhitePaper, from the point of view both of the right of establishment and ofthe freedom to provide financial services, in the field of investmentfirms;
Whereas firms that provide the investment services covered by this
Directive must be subject to authorization by their home Member Statesin order to protect investors and the stability of the financial system;
Whereas the approach adopted is to effect only the essential harmon-
ization necessary and sufficient to secure the mutual recognition ofauthorization and of prudential supervision systems, making possiblethe grant of a single authorization valid throughout the Community andthe application of the principle of home Member State supervision;whereas, by virtue of mutual recognition, investment firms authorized intheir home Member States may carry on any or all of the servicescovered by this Directive for which they have received authorizationthroughout the Community by establishing branches or under thefreedom to provide services;
Whereas the principles of mutual recognition and of home Member
State supervision require that the Member States’ competent authoritiesshould not grant or should withdraw authorization where factors such asthe content of programmes of operations, the geographical distributionor the activities actually carried on indicate clearly that an investmentfirm has opted for the legal system of one Member State for the purposeof evading the stricter standards in force in another Member Statewithin the territory of which it intends to carry on or does carry on thegreater part of its activities; whereas, for the purposes of this Directive,an investment firm which is a legal person must be authorized in theMember State in which it has its registered office; whereas an invest-ment firm which is not a legal person must be authorized in the MemberState in which it has its head office; whereas, in addition, MemberStates must require that an investment firm’s head office must alwaysbe situated in its home Member State and that it actually operates there;
Whereas it is necessary, for the protection of investors, to guarantee the
internal supervision of every firm, either by means of two-man manage-ment or, where that is not required by this Directive, by other mecha-nisms that ensure an equivalent result;
Whereas in order to guarantee fair competition, it must be ensured that
investment firms that are not credit institutions have the same freedomto create branches and provide services across frontiers as is providedfor by the Second Council Directive (89/646/EEC) of 15 December1989 on the coordination of laws, regulations and administrative provi-
(1) OJ No C 43, 22. 2. 1989, p. 7; and OJ No C 42, 22. 2. 1990, p. 7.
(2) OJ No C 304, 4. 12. 1989, p. 39; and OJ No C 115, 26. 4. 1993.
(3) OJ No C 298, 27. 11. 1989, p. 6.
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sions relating to the taking up and pursuit of the business of credit
institutions (1);
Whereas an investment firm should not be able to invoke this Directive
in order to carry out spot or forward exchange transactions other than asservices connected with the provision or investment services; whereas,therefore, the use of a branch solely for such foreign-exchange transac-tions would constitute misuse of the machinery of this Directive;
Whereas an investment firm authorized in its home Member State may
carry on business throughout the Community by whatever means itdeems appropriate; whereas, to that end it may, if it deems it necessary,retain tied agents to receive and transmit orders for its account andunder its full and unconditional responsibility; whereas, in these circum-stances, such agents’ business must be regarded as that of the firm;whereas, moreover, this Directive does not prevent a home MemberState from making the status of such agents subject to special require-ments; whereas should the investment firm carry on cross-border busi-ness, the host Member State must treat those agents as being the firmitself; whereas, moreover, the door-to-door selling of transferable secur-ities should not be covered by this Directive and the regulation thereofshould remain a matter for national provisions;
Whereas ‘transferable securities'means those classes of securities which
are normally dealt in on the capital market, such as government securi-ties, shares in companies, negotiable securities giving the right toacquire shares by subscription or exchange, depositary receipts, bondsissued as part of a series, index warrants and securities giving the rightto acquire such bonds by subscription;
Whereas ‘money-market instruments' means those classes of instru-
ments which are normally dealt in on the money market such astreasury bills, certificates of deposit and commercial paper;
Whereas the very wide definitions of transferable securities and money-
market instruments included in this Directive are valid only for thisDirective and consequently in no way affect the various definitions offinancial instruments used in national legislation for other purposes suchas taxation; whereas, furthermore, the definition of transferable securi-ties covers negotiable instruments only; whereas, consequently, sharesand other securities equivalent to shares issued by bodies such asbuilding societies and industrial and provident societies, ownership ofwhich cannot in practice be transferred except by the issuing body’sbuying them back, are not covered by this definition;
Whereas ‘instrument equivalent to a financial-futures contract' means a
contract which is settled by a payment in cash calculated by reference tofluctuations in interest or exchange rates, the value of any instrumentlisted in Section B of the Annex or an index of any such instruments;
Whereas, for the purposes of this Directive, the business of the recep-
tion and transmission of orders also includes bringing together two ormore investors thereby bringing about a transaction between thoseinvestors;
Whereas no provision in this Directive affects the Community provi-
sions or, failing such, the national provisions regulating public offers ofthe instruments covered by this Directive; whereas the same applies tothe marketing and distribution of such instruments;
Whereas Member States retain full responsibility for implementing their
own monetary-policy measures, without prejudice to the measuresnecessary to strengthen the European Monetary System;
Whereas it is necessary to exclude insurance undertakings the activities
of which are subject to appropriate monitoring by the competentprudential-supervision authorities and which are coordinated at
(1) OJ No L 386, 30. 12. 1989, p. 1. Directive as last amended by Directive
92/30/EEC (OJ No L 110, 28. 4. 1992, p. 52).
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Community level and undertakings carrying out reinsurance and retro-cession activities;
Whereas undertakings which do not provide services for third parties
but the business of which consists in providing investment servicessolely for their parent undertakings, for their subsidiaries, or for othersubsidiaries of their parent undertakings should not be covered by thisDirective;
Whereas the purpose of this Directive is to cover undertakings the
normal business of which is to provide third parties with investmentservices on a professional basis; whereas its scope should not thereforecover any person with a different professional activity (e.g. a barristeror solicitor) who provides investment services only on an incidentalbasis in the course of that other professional activity, provided that thatactivity is regulated and the relevant rules do not prohibit the provision,on an incidental basis, of investment services; whereas it is also neces-sary for the same reason to exclude from the scope of this Directivepersons who provide investment services only for producers or users ofcommodities to the extent necessary for transactions in such productswhere such transactions constitute their main business;
Whereas firms which provide investment services consisting exclusively
in the administration of employee-participation schemes and whichtherefore do not provide investment services for third parties should notbe covered by this Directive;
Whereas it is necessary to exclude from the scope of this Directive
central banks and other bodies performing similar functions as well aspublic bodies charged with or intervening in the management of thepublic debt, which concept covers the investment thereof; whereas, inparticular, this exclusion does not cover bodies that are partly or whollyState-owned the role of which is commercial or linked to the acquisitionof holdings;
Whereas it is necessary to exclude from the scope of this Directive any
firms or persons whose business consists only of receiving and transmit-ting orders to certain counterparties and who do not hold funds orsecurities belonging to their clients; whereas, therefore, they will notenjoy the right of establishment and freedom to provide services underthe conditions laid down in this Directive, being subject, when theywish to operate in another Member State, to the relevant provisionsadopted by that State;
Whereas it is necessary to exclude from the scope of this Directive
collective investment undertakings whether or not coordinated atCommunity level, and the depositaries or managers of such undertak-ings, since they are subject to specific rules directly adapted to theiractivities;
Whereas, where associations created by a Member State’s pension funds
to permit the management of their assets confine themselves to suchmanagement and do not provide investment services for third parties,and where the pension funds are themselves subject to the control of theauthorities charged with monitoring insurance undertakings, it does notappear to be necessary to subject such associations to the conditions fortaking up business and for operation imposed by this Directive;
Whereas this Directive should not apply to ‘agenti di cambio' as defined
by Italian law since they belong to a category the authorization of whichis not to be renewed, their activities are confined to the national territoryand they do not give rise to a risk of the distortion of competition;
Whereas the rights conferred on investment firms by this Directive are
without prejudice to the right of Member States, central banks and othernational bodies performing similar functions to choose their counterpar-ties on the basis of objective, non-discriminatory criteria;
Whereas responsibility for supervising the financial soundness of an
investment firm will rest with the competent authorities of its homeMember State pursuant to Council Directive 93/6/EEC of 15 March
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1993 on the capital adequacy of investment firms and credit institu-
tions (1), which coordinates the rules applicable to market risk;
Whereas a home Member State may, as a general rule, establish rules
stricter than those laid down in this Directive, in particular as regardsauthorization conditions, prudential requirements and the rules ofreporting and transparency;
Whereas the carrying on of activities not covered by this Directive is
governed by the general provisions of the Treaty on the right of estab-lishment and the freedom to provide services;
Whereas in order to protect investors an investor’s ownership and other
similar rights in respect of securities and his rights in respect of fundsentrusted to a firm should in particular be protected by being keptdistinct from those of the firm; whereas this principle does not,however, prevent a firm from doing business in its name but on behalfof the investor, where that is required by the very nature of the transac-tion and the investor is in agreement, for example stock lending;
Whereas the procedures for the authorization of branches of investment
firms authorized in third countries will continue to apply to such firms;whereas those branches will not enjoy the freedom to provide servicesunder the second paragraph of Article 59 of the Treaty or the right ofestablishment in Member States other than those in which they areestablished; whereas, however, requests for the authorization of subsi-diaries or of the acquisition of holdings by undertakings governed bythe laws of third countries are subject to a procedure intended to ensurethat Community investment firms receive reciprocal treatment in thethird countries in question;
Whereas the authorizations granted to investment firms by the
competent national authorities pursuant to this Directive will haveCommunity-wide, and no longer merely nationwide application, andexisting reciprocity clauses will henceforth have no effect; whereas aflexible procedure is therefore needed to make it possible to assessreciprocity on a Community basis; whereas the aim of this procedure isnot to close the Community’s financial markets but rather, as theCommunity intends to keep its financial markets open to the rest of theworld, to improve the liberalization of the global financial markets inthird countries; whereas, to that end, this Directive provides for proced-ures for negotiating with third countries and, as a last resort, for thepossibility of taking measures involving the suspension of new applica-tions for authorization and the restriction of new authorizations;
Whereas one of the objectives of this Directive is to protect investors;
whereas it is therefore appropriate to take account of the differentrequirements for protection of various categories of investors and oftheir levels of professional expertise;
Whereas the Member States must ensure that there are no obstacles to
prevent activities that receive mutual recognition from being carried onin the same manner as in the home Member State, as long as they donot conflict with laws and regulations protecting the general good inforce in the host Member State;
Whereas a Member State may not limit the right of investors habitually
resident or established in that Member State to avail themselves of anyinvestment service provided by an investment firm covered by thisDirective situated outside that Member State and acting outwith thatMember State;
Whereas in certain Member States clearing and settlement functions
may be performed by bodies separate from the markets on whichtransactions are effected; whereas, accordingly, any reference in thisDirective to access to and membership of regulated markets should beread as including references to access to and membership of bodiesperforming clearing and settlement functions for regulated markets;
(1) See page 1 of this Official Journal.
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Whereas each Member State must ensure that within its territory, treat-
ment of all investment firms authorized in any Member State andlikewise all financial instruments listed on the Member States’ regulatedmarkets is non-discriminatory; whereas investment firms must all havethe same opportunities of joining or having access to regulated markets;whereas, regardless of the manner in which transactions are at presentorganized in the Member States, it is therefore important, subject to theconditions imposed by this Directive, to abolish the technical and legalrestrictions on access to the regulated markets within the framework ofthis Directive;
Whereas some Member States authorize credit institutions to become
members of their regulated markets only indirectly, by setting upspecialized subsidiaries; whereas the opportunity which this Directivegives credit institutions of becoming members of regulated marketsdirectly without having to set up specialized subsidiaries constitutes asignificant reform for those Member States and all its consequencesshould be reassessed in the light of the development of the financialmarkets; whereas, in view of those factors, the report which theCommission will submit to the Council on this matter no later than 31December 1998 will have to take account of all the factors necessary forthe Council to be able to reassess the consequences for those MemberStates, and in particular the danger of conflicts of interest and the levelof protection afforded to investors;
Whereas it is of the greatest importance that the harmonization of
compensation systems be brought into effect on the same date as thisDirective; whereas, moreover, until the date on which a Directiveharmonizing compensation systems is brought into effect, host MemberStates will be able to impose application of their compensation systemson investment firms including credit institutions authorized by otherMember States, where the home Member States have no compensationsystems or where their systems do not offer equivalent levels of protec-tion;
Whereas the structure of regulated markets must continue to be
governed by national law, without thereby forming an obstacle to theliberalization of access to the regulated markets of host Member Statesfor investment firms authorized to provide the services concerned intheir home Member States; whereas, pursuant to that principle, the lawof the Federal Republic of Germany and the law of the Netherlandsgovern the activities Kursmakler andhoekmannen respectively so as to
ensure that they do not exercise their functions in parallel with otherfunctions; whereas it should be noted that Kursmakler andhoekmannen
may not provide services in other Member States; whereas no one,whatever his home Member State, may claim to act as a Kursmakler or
ahoekman without being subject to the same rules on incompatibility as
result from the status of Kursmakler orhoekman ;
Whereas it should be noted that this Directive cannot affect the meas-
ures taken pursuant to Council Directive 79/279/EEC of 5 March 1979coordinating the conditions for the admission of securities to officialstock-exchange listing (
1);
Whereas the stability and sound operation of the financial system and
the protection of investors presuppose that a host Member State has theright and responsibility both to prevent and to penalize any actionwithin its territory by investment firms contrary to the rules of conductand other legal or regulatory provisions it has adopted in the interest ofthe general good and to take action in emergencies; whereas, moreover,the competent authorities of the host Member State must, in dischargingtheir responsibilities, be able to count on the closest cooperation withthe competent authorities of the home Member State, particularly asregards business carried on under the freedom to provide services;whereas the competent authorities of the home Member State are enti-tled to be informed by the competent authorities of the host MemberState of any measures involving penalties on an investment firm or
(1) OJ No L 66, 16. 3. 1979, p. 21. Directive last amended by the Act of
Accession of Spain and Portugal.
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restrictions on its activities which the latter have taken vis-à-vis the
investment firms which the former have authorized so as to be able toperform their function of prudential supervision efficiently; whereas tothat end cooperation between the competent authorities of home andhost Member States must be ensured;
Whereas, with the two-fold aim of protecting investors and ensuring the
smooth operation of the markets in transferable securities, it is neces-sary to ensure that transparency of transactions is achieved and that therules laid down for that purpose in this Directive for regulated marketsapply both to investment firms and to credit institutions when theyoperate on the market;
Whereas examination of the problems arising in the areas covered by
the Council Directives on investment services and securities, as regardsboth the application of existing measures and the possibility of closercoordination in the future, requires cooperation between national author-ities and the Commission within a committee; whereas the establish-ment of such a committee does not rule out other forms of cooperationbetween supervisory authorities in this field;
Whereas technical amendments to the detailed rules laid down in this
Directive may from time to time be necessary to take account of newdevelopments in the investment-services sector; whereas the Commis-sion will make such amendments as are necessary, after referring thematter to the committee to be set up in the securities-markets field,
HAS ADOPTED THIS DIRECTIVE:
TITLE I
Definitions and scope
Article 1
For the purposes of this Directive:
1.investment service shall mean any of the services listed in Section
A of the Annex relating to any of the instruments listed in SectionB of the Annex that are provided for a third party;
2.investment firm shall mean any legal person the regular occupation
or business of which is the provision of investment services forthird parties on a professional basis.
For the purposes of this Directive, Member States may include as
investment firms undertakings which are not legal persons if:
— their legal status ensures a level of protection for third parties’
interests equivalent to that afforded by legal persons, and
— they are subject to equivalent prudential supervision appropriate
to their legal form.
However, where such natural persons provide services involving
the holding of third parties’ funds or transferable securities, theymay be considered as investment firms for the purposes of thisDirective only if, without prejudice to the other requirementsimposed in this Directive and in Directive 93/6/EEC, they complywith the following conditions:
— the ownership rights of third parties in instruments and funds
belonging to them must be safeguarded, especially in the eventof the insolvency of a firm or of its proprietors, seizure, set-offor any other action by creditors of the firm or of its proprietors,
— an investment firm must be subject to rules designed to monitor
the firm’s solvency and that of its proprietors,
— an investment firm’s annual accounts must be audited by one or
more persons empowered, under national law, to audit accounts,
— where a firm has only one proprietor, he must make provision
for the protection of investors in the event of the firm’s cessa-tion of business following his death, his incapacity or any othersuch event.
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No later than 31 December 1997 the Commission shall reporton the application of the second and third subparagraphs of thispoint and, if appropriate, propose their amendment or deletion.Where a person provides one of the services referred to inSection A (1) (a) of the Annex and where that activity is carriedon solely for the account of and under the full and unconditionalresponsibility of an investment firm, that activity shall beregarded as the activity not of that person but of the investmentfirm itself;
3.credit institution shall mean a credit institution as defined in the
first indent of Article 1 of Directive 77/780/EEC (
1) with the excep-
tion of the institutions referred to in Article 2 (2) thereof;
4.transferable securities shall mean:
— shares in companies and other securities equivalent to shares in
companies,
— bonds and other forms of securitized debt
which are negotiable on the capital market and
— any other securities normally dealt in giving the right to acquire
any such transferable securities by subscription or exchange orgiving rise to a cash settlement
excluding instruments of payment;
5.money-market instruments shall mean those classes of instruments
which are normally dealt in on the money market;
6.home Member State shall mean:
(a) where the investment firm is a natural person, the Member
State in which his head office is situated;
(b) where the investment firm is a legal person, the Member State
in which its registered office is situated or, if under its nationallaw it has no registered office, the Member State in which itshead office is situated;
(c) in the case of a market, the Member State in which the regis-
tered office of the body which provides trading facilities issituated or, if under its national law it has no registered office,the Member State in which that body’s head office is situated;
7.host Member State shall mean the Member State in which an
investment firm has a branch or provides services;
8.branch shall mean a place of business which is a part of an
investment firm, which has no legal personality and which providesinvestment services for which the investment firm has been autor-ized; all the places of business set up in the same Member State byan investment firm with headquarters in another Member State shallbe regarded as a single branch;
9.competent authorities shall mean the authorities which each
Member State designates under Article 22;
10.qualifying holding shall mean any direct or indirect holding in an
investment firm which represents 10 % or more of the capital or ofthe voting rights or which makes it possible to exercise a significantinfluence over the management of the investment firm in which thatholding subsists.For the purposes of this definition, in the context of Articles 4 and9 and of the other levels of holding referred to in Article 9, thevoting rights referred to in Article 7 of Directive 88/627/EEC (
2)
shall be taken into account;
(1) OJ No L 322, 17. 12. 1977, p. 30. Directive last amended by Directive
89/646/EEC (OJ No L 386, 30. 12. 1989, p. 1).
(2) OJ No L 348, 17. 12. 1988, p. 62.
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11.parent undertaking shall mean a parent undertaking as defined in
Articles 1 and 2 of Directive 83/349/EEC (1);
12.subsidiary shall mean a subsidiary undertaking as defined in
Articles 1 and 2 of Directive 83/349/EEC; any subsidiary of asubsidiary undertaking shall also be regarded as a subsidiary of theparent undertaking which is the ultimate parent of those undertak-ings;
13.regulated market shall mean a market for the instruments listed in
Section B of the Annex which:
— appears on the list provided for in Article 16 drawn up by the
Member State which is the home Member State as defined inArticle 1 (6) (c),
— functions regularly,— is characterized by the fact that regulations issued or approved
by the competent authorities define the conditions for the opera-tion of the market, the conditions for access to the market and,where Directive 79/279/EEC is applicable, the conditionsgoverning admission to listing imposed in that Directive and,where that Directive is not applicable, the conditions that mustbe satisfied by a financial instrument before it can effectively bedealt in on the market,
— requires compliance with all the reporting and transparency
requirements laid down pursuant to Articles 20 and 21;
14.control shall mean control as defined in Article 1 of Directive
83/349/EEC.
Article 2
1. This Directive shall apply to all investment firms. Only paragraph
4 of this Article and Articles 8 (2), 10, 11, 12, first paragraph, 14 (3)and (4), 15, 19 and 20, however, shall apply to credit institutions theauthorization of which, under Directives 77/780/EEC and 89/646/EEC,covers one or more of the investment services listed in Section A of theAnnex to this Directive.
2. This Directive shall not apply to:
(a) insurance undertakings as defined in Article 1 of Directive 73/
239/EEC (
2) or Article 1 of Directive 79/267/EEC (3) or undertak-
ings carrying on the reinsurance and retrocession activities referredto in Directive 64/225/EEC (
4);
(b) firms which provide investment services exclusively for their parent
undertakings, for their subsidiaries or for other subsidiaries of theirparent undertakings;
(c) persons providing an investment service where that service is
provided in an incidental manner in the course of a professionalactivity and that activity is regulated by legal or regulatory provi-sions or a code of ethics governing the profession which do notexclude the provision of that service;
(d) firms that provide investment services consisting exclusively in the
administration of employee-participation schemes;
(e) firms that provide investment services that consist in providing both
the services referred to in (b) and those referred to in (d);
(f) the central banks of Member States and other national bodies
performing similar functions and other public bodies charged withor intervening in the management of the public debt;
(1) OJ No L 193, 18. 7. 1983, p. 1. Directive last amended by Directive 90/
605/EEC (OJ No L 317, 16. 11. 1990, p. 60).
(2) OJ No L 228, 16. 8. 1973, p. 3. Directive last amended by Directive 90/
619/EEC (OJ No L 330, 29. 11. 1990, p. 50).
(3) OJ No L 63, 13. 3. 1979, p. 1. Directive last amended by Directive 90/
618/EEC (OJ No L 330, 29. 11. 1990, p. 44).
(4) OJ No 56, 4. 4. 1964, p. 878/64.
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(g) firms
— which may not hold clients’ funds or securities and which for
that reason may not at any time place themselves in debit withtheir clients, and
— which may not provide any investment service except the recep-
tion and transmission of orders in transferable securities andunits in collective investment undertakings, and
— which in the course of providing that service may transmit
orders only to
(i) investment firms authorized in accordance with this
Directive;
(ii) credit institutions authorized in accordance with Directives
77/780/EEC and 89/646/EEC;
(iii) branches of investment firms or of credit institutions which
are authorized in a third country and which are subject toand comply with prudential rules considered by thecompetent authorities as at least as stringent as those laiddown in this Directive, in Directive 89/646/EEC or inDirective 93/6/EEC;
(iv) collective investment undertakings authorized under the
law of a Member State to market units to the public and tothe managers of such undertakings;
(v) investment companies with fixed capital, as defined in
Article 15 (4) of Directive 77/91/EEC (
1), the securities of
which are listed or dealt in on a regulated market in aMember State;
— the activities of which are governed at national level by rules or
by a code of ethics;
(h) collective investment undertakings whether coordinated at
Community level or not and the depositaries and managers of suchundertakings;
(i) persons whose main business is trading in commodities amongst
selves or with producers or professional users of such products andwho provide investment services only for such producers andprofessional users to the extent necessary for their main business;
(j) firms that provide investment services consisting exclusively in
dealing for their own account on financial-futures or optionsmarkets or which deal for the accounts of other members of thosemarkets or make prices for them and which are guaranteed byclearing members of the same markets. Responsibility for ensuringthe performance of contracts entered into by such firms must beassumed by clearing members of the same markets;
(k) associations set up by Danish pension funds with the sole aim of
managing the assets of pension funds that are members of thoseassociations;
(l) ‘agenti di cambio' whose activities and functions are governed by
Italian Royal Decree No 222 of 7 March 1925 and subsequentprovisions amending it, and who are authorized to carry on theiractivities under Article 19 of Italian Law No 1 of 2 January 1991.
3. No later than 31 December 1998 and at regular intervals thereafter
the Commission shall report on the application of paragraph 2 inconjunction with Section A of the Annex and shall, where appropriate,propose amendments to the definition of the exclusions and the servicescovered in the light of the operation of this Directive.
4. The rights conferred by this Directive shall not extend to the
provision of services as counterparty to the State, the central bank orother Member State national bodies performing similar functions in the
(1) OJ No L 26, 30. 1. 1977, p. 1. Directive last amended by the Act of
Accession of Spain and Portugal.
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pursuit of the monetary, exchange-rate, public-debt and reservesmanagement policies of the Member State concerned.
TITLE II
Conditions for taking up business
Article 3
1. Each Member State shall make access to the business of invest-
ment firms subject to authorization for investment firms of which it isthe home Member State. Such authorization shall be granted by thehome Member State’s competent authorities designated in accordancewith Article 22. The authorization shall specify the investment servicesreferred to in Section A of the Annex which the undertaking is author-ized to provide. The authorization may also cover one or more of thenon-core services referred to in Section C of the Annex. Authorizationwithin the meaning of this Directive may in no case be granted forservices covered only by Section C of the Annex.
2. Each Member State shall require that:
— any investment firm which is a legal person and which, under its
national law, has a registered office shall have its head office in thesame Member State as its registered office,
— any other investment firm shall have its head office in the Member
State which issued its authorization and in which it actually carrieson its business.
3. Without prejudice to other conditions of general application laid
down by national law, the competent authorities shall not grant authori-zation unless:
— an investment firm has sufficient initial capital in accordance with
the rules laid down in Directive 93/6/EEC having regard to thenature of the investment service in question,
— the persons who effectively direct the business of an investment
firm are of sufficiently good repute and are sufficiently experienced.
The direction of a firm’s business must be decided by at least two
persons meeting the above conditions. Where an appropriate arrange-ment ensures that the same result will be achieved, however, particu-larly in the cases provided for in the last indent of the third subpara-graph of Article 1 (2), the competent authorities may grant authorizationto investment firms which are natural persons or, taking account of thenature and volume of their activities, to investment firms which arelegal persons where such firms are managed by single natural persons inaccordance with their articles of association and national laws.
4. Member States shall also require that every application for author-
ization be accompanied by a programme of operations setting out inter
aliathe types of business envisaged and the organizational structure of
the investment firm concerned.
5. An applicant shall be informed within six months of the submis-
sion of a complete application whether or not authorization has beengranted. Reasons shall be given whenever an authorization is refused.
6. An investment firm may commence business as soon as authoriza-
tion has been granted.
7. The competent authorities may withdraw the authorization issued
to an investment firm subject to this Directive only where that invest-ment firm:
(a) does not make use of the authorization within 12 months, expressly
renounces the authorization or ceased to provide investmentservices more than six months previously unless the Member Stateconcerned has provided for authorization to lapse in such cases;
(b) has obtained the authorization by making false statements or by any
other irregular means;
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(c) no longer fulfils the conditions under which authorization was
granted;
(d) no longer complies with Directive 93/6/EEC;
(e) has seriously and systematically infringed the provisions adopted
pursuant to Articles 10 or 11; or
(f) falls within any of the cases where national law provides for with-
drawal.
Article 4
The competent authorities shall not grant authorization to take up the
business of investment firms until they have been informed of theidentities of the shareholders or members, whether direct or indirect,natural or legal persons, that have qualifying holdings and of theamounts of those holdings.
The competent authorities shall refuse authorization if, taking into
account the need to ensure the sound and prudent management of aninvestment firm, they are not satisfied as to the suitability of theaforementioned shareholders or members.
Article 5
In the case of branches of investment firms that have registered offices
outwith the Community and are commencing or carrying on business,the Member States shall not apply provisions that result in treatmentmore favourable than that accorded to branches of investment firms thathave registered offices in Member States.
Article 6
The competent authorities of the other Member State involved shall be
consulted beforehand on the authorization of any investment firm whichis:
— a subsidiary of an investment firm or credit institution authorized in
another Member State,
— a subsidiary of the parent undertaking of an investment firm or
credit institution authorized in another Member State,
or
— controlled by the same natural or legal persons as control an invest-
ment firm or credit institution authorized in another Member State.
TITLE III
Relations with third countries
Article 7
1. The competent authorities of the Member States shall inform the
Commission:
(a) of the authorization of any firm which is the direct or indirect
subsidiary of a parent undertaking governed by the law of a thirdcountry;
(b) whenever such a parent undertaking acquires a holding in a
Community investment firm such that the latter would become itssubsidiary.
In both cases the Commission shall inform the Council until such time
as a committee on transferable securities is set up by the Council actingon a proposal from the Commission.
When authorization is granted to any firm which is the direct or indirect
subsidiary of a parent undertaking governed by the law of a thirdcountry, the competent authorities shall specify the structure of thegroup in the notification which they address to the Commission.
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2. The Member States shall inform the Commission of any generaldifficulties which their investment firms encounter in establishing them-selves or providing investment services in any third country.
3. Initially no later than six months before this Directive is brought
into effect and thereafter periodically the Commission shall draw up areport examining the treatment accorded to Community investmentfirms in third countries, in the terms referred to in paragraphs 4 and 5,as regards establishment, the carrying on of investment services activi-ties and the acquisition of holdings in third-country investment firms.The Commission shall submit those reports to the Council together withany appropriate proposals.
4. Whenever it appears to the Commission, either on the basis of the
reports provided for in paragraph 3 or on the basis of other information,that a third country does not grant Community investment firms effec-tive market access comparable to that granted by the Community toinvestment firms from that third country, the Commission may submitproposals to the Council for an appropriate mandate for negotiation witha view to obtaining comparable competitive opportunities forCommunity investment firms. The Council shall act by a qualifiedmajority.
5. Whenever it appears to the Commission, either on the basis of the
reports referred to in paragraph 3 or on the basis of other information,that Community investment firms in a third country are not grantednational treatment affording the same competitive opportunities as areavailable to domestic investment firms and that the conditions of effec-tive market access are not fulfilled, the Commission may initiate nego-tiations in order to remedy the situation.
In the circumstances described in the first subparagraph it may also be
decided, at any time and in addition to the initiation of negotiations, inaccordance with the procedure to be laid down in the Directive bywhich the Council will set up the committee referred to in paragraph 1,that the competent authorities of the Member States must limit orsuspend their decisions regarding requests pending or future requests forauthorization and the acquisition of holdings by direct or indirect parentundertakings governed by the law of the third country in question. Theduration of such measures may not exceed three months.
Before the end of that three-month period and in the light of the results
of the negotiations the Council may, acting on a proposal from theCommission, decide by a qualified majority whether the measures shallbe continued.
Such limitations or suspensions may not be applied to the setting up of
subsidiaries by investment firms duly authorized in the Community orby their subsidiaries, or to the acquisition of holdings in Communityinvestment firms by such firms or subsidiaries.
6. Whenever it appears to the Commission that one of the situations
described in paragraphs 4 and 5 obtains, the Member States shall informit at its request:
(a) of any application for the authorization of any firm which is the
direct or indirect subsidiary of a parent undertaking governed by thelaw of the third country in question;
(b) whenever they are informed in accordance with Article 10 that such
a parent undertaking proposes to acquire a holding in a Communityinvestment firm such that the latter would become its subsidiary.
This obligation to provide information shall lapse whenever agreement
is reached with the third country referred to in paragraph 4 or 5 or whenthe measures referred to in the second and third subparagraphs ofparagraph 5 cease to apply.
7. Measures taken under this Article shall comply with the Commu-
nity’s obligations under any international agreements, bilateral or multi-lateral, governing the taking up or pursuit of the business of investmentfirms.
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TITLE IV
Operating conditions
Article 8
1. The competent authorities of the home Member States shall
require that an investment firm which they have authorized comply atall times with the conditions imposed in Article 3 (3).
2. The competent authorities of the home Member State shall require
that an investment firm which they have authorized comply with therules laid down in Directive 93/6/EEC.
3. The prudential supervision of an investment firm shall be the
responsibility of the competent authorities of the home Member Statewhether the investment firm establishes a branch or provides services inanother Member State or not, without prejudice to those provisions ofthis Directive which give responsibility to the authorities of the hostMember State.
Article 9
1. Member States shall require any person who proposes to acquire,
directly or indirectly, a qualifying holding in an investment firm first toinform the competent authorities, telling them of the size of his intendedholding. Such a person shall likewise inform the competent authoritiesif he proposes to increase his qualifying holding so that the proportionof the voting rights or of the capital that he holds would reach or exceed20, 33, or 50 % or so that the investment firm would become hissubsidiary.
Without prejudice to paragraph 2, the competent authorities shall have
up to three months from the date of the notification provided for in thefirst subparagraph to oppose such a plan if, in view of the need toensure sound and prudent management of the investment firm, they arenot satisfied as to the suitability of the person referred to in the firstsubparagraph. If they do not oppose the plan, they may fix a deadlinefor its implementation.
2. If the acquirer of the holding referred to in paragraph 1 is an
investment firm authorized in another Member State or the parentundertaking of an investment firm authorized in another Member Stateor a person controlling an investment firm authorized in anotherMember State and if, as a result of that acquisition, the firm in whichthe acquirer proposes to acquire a holding would become the acquirer’ssubsidiary or come under his control, the assessment of the acquisitionmust be the subject of the prior consultation provided for in Article 6.
3. Member States shall require any person who proposes to dispose,
directly or indirectly, of a qualifying holding in an investment firm firstto inform the competent authorities, telling them of the size of hisholding. Such a person shall likewise inform the competent authoritiesif he proposes to reduce his qualifying holding so that the proportion ofthe voting rights or of the capital held by him would fall below 20, 33or 50 % or so that the investment firm would cease to be his subsidiary.
4. On becoming aware of them, investment firms shall inform the
competent authorities of any acquisitions or disposals of holdings intheir capital that cause holdings to exceed or fall below any of thethresholds referred to in paragraphs 1 and 3.
At least once a year they shall also inform the competent authorities of
the names of shareholders and members possessing qualifying holdingsand the sizes of such holdings as shown, for example, by the informa-tion received at annual general meetings of shareholders and membersor as a result of compliance with the regulations applicable to compa-nies listed on stock exchanges.
5. Member States shall require that, where the influence exercised by
the persons referred to in paragraph 1 is likely to be prejudicial to thesound and prudent management of an investment firm, the competentauthorities take appropriate measures to put an end to that situation.Such measures may consist, for example, in injunctions, sanctions
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against directors and those responsible for management or suspension of
the exercise of the voting rights attaching to the shares held by theshareholders or members in question.
Similar measures shall apply to persons failing to comply with the
obligation to provide prior information imposed in paragraph 1. If aholding is acquired despite the opposition of the competent authorities,the Member States shall, regardless of any other sanctions to beadopted, provide either for exercise of the corresponding voting rightsto be suspended, for the nullity of the votes cast or for the possibility oftheir annulment.
Article 10
1. Each home Member State shall draw up prudential rules which
investment firms shall observe at all times. In particular, such rules shallrequire that each investment firm:
— have sound administrative and accounting procedures, control and
safeguard arrangements for electronic data processing, and adequateinternal control mechanisms including, in particular, rules forpersonal transactions by its employees,
— make adequate arrangements for instruments belonging to investors
with a view to safeguarding the latter’s ownership rights, especiallyin the event of the ►
C1investment firm’s insolvency, and to
preventing the investment firm’s using investors’ instruments for itsown account ◄except with the investors’ express consent,
— make adequate arrangements for funds belonging to investors with a
view to safeguarding the latter’s rights and, except in the case ofcredit institutions, preventing the investment firm’s using investors’funds for its own account,
— arrange for records to be kept of transactions executed which shall
at least be sufficient to enable the home Member State’s authoritiesto monitor compliance with the prudential rules which they areresponsible for applying; such records shall be retained for periodsto be laid down by the competent authorities,
— be structured and organized in such a way as to minimize the risk of
clients’ interests being prejudiced by conflicts of interest betweenthe firm and its clients or between one of its clients and another.Nevertheless, where a branch is set up the organizational arrange-ments may not conflict with the rules of conduct laid down by thehost Member State to cover conflicts of interest.
Article 11
1. Member States shall draw up rules of conduct which investment
firms shall observe at all times. Such rules must implement at least theprinciples set out in the following indents and must be applied in such away as to take account of the professional nature of the person forwhom the service is provided. The Member States shall also apply theserules where appropriate to the non-core services listed in Section C ofthe Annex. These principles shall ensure that an investment firm:
— acts honestly and fairly in conducting its business activities in the
best interests of its clients and the integrity of the market,
— acts with due skill, care and diligence, in the best interests of its
clients and the integrity of the market,
— has and employs effectively the resources and procedures that are
necessary for the proper performance of its business activities,
— seeks from its clients information regarding their financial situa-
tions, investment experience and objectives as regards the servicesrequested,
— makes adequate disclosure of relevant material information in its
dealings with its clients,
— tries to avoid conflicts of interests and, when they cannot be
avoided, ensures that its clients are fairly treated, and
— complies with all regulatory requirements applicable to the conduct
of its business activities so as to promote the best interests of itsclients and the integrity of the market.
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2. Without prejudice to any decisions to be taken in the context of
the harmonization of the rules of conduct, their implementation and thesupervision of compliance with them shall remain the responsibility ofthe Member State in which a service is provided.
3. Where an investment firm executes an order, for the purposes of
applying the rules referred to in paragraph 1 the professional nature ofthe investor shall be assessed with respect to the investor from whomthe order originates, regardless of whether the order was placed directlyby the investor himself or indirectly through an investment firmproviding the service referred to in Section A (1) (a) of the Annex.
Article 12
Before doing business with them, a firm shall inform investors which
compensation fund or equivalent protection will apply in respect of thetransactions envisaged, what cover is offered by whichever systemapplies, or if there is no fund or compensation.
The Council notes the Commission’s statement to the effect that it will
submit proposals on the harmonization of compensation systemscovering transactions by investment firms by 31 July 1993 at the latest.The Council will act on those proposals within the shortest possibletime with the aim of bringing the systems proposed into effect on thesame date as this Directive.
Article 13
This Directive shall not prevent investment firms authorized in other
Member States from advertising their services through all availablemeans of communication in their host Member States, subject to anyrules governing the form and the content of such advertising adopted inthe interest of the general good.
TITLE V
The right of establishment and the freedom to provide services
Article 14
1. Member States shall ensure that investment services and the other
services listed in Section C of the Annex may be provided within theirterritories in accordance with Articles 17, 18 and 19 either by theestablishment of a branch or under the freedom to provide services byany investment firm authorized and supervised by the competent author-ities of another Member State in accordance with this Directive,provided that such services are covered by the authorization.
This Directive shall not affect the powers of host Member States in
respect of the units of collective investment undertakings to whichDirective 85/611/EEC (
1) does not apply.
2. Member States may not make the establishment of a branch or the
provision of services referred to in paragraph 1 subject to any authoriza-tion requirement, to any requirement to provide endowment capital or toany other measure having equivalent effect.
3. A Member State may require that transactions relating to the
services referred to in paragraph 1 must, where they satisfy all thefollowing criteria, be carried out on a regulated market:
— the investor must be habitually resident or established in that
Member State,
— the investment firm must carry out such transactions through a main
establishment, through a branch situated in that Member State orunder the freedom to provide services in that Member State,
(1) OJ No L 375, 31. 12. 1985, p. 3. Directive last amended by Directive
88/220/EEC (OJ No L 100, 19. 4. 1988, p. 31).
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— the transaction must involve a instrument dealt in on a regulated
market in that Member State.
4. Where a Member State applies paragraph 3 it shall give investors
habitually resident or established in that Member State the right not tocomply with the obligation imposed in paragraph 3 and have the trans-actions referred to in paragraph 3 carried out away from a regulatedmarket. Member States may make the exercise of this right subject toexpress authorization, taking into account investors’ differing needs forprotection and in particular the ability of professional and institutionalinvestors to act in their own best interests. It must in any case bepossible for such authorization to be given in conditions that do notjeopardize the prompt execution of investors’ orders.
5. The Commission shall report on the operation of paragraphs 3 and
4 not later than 31 December 1998 and shall, if appropriate, proposeamendments thereto.
Article 15
1. Without prejudice to the exercise of the right of establishment or
the freedom to provide services referred to in Article 14, host MemberStates shall ensure that investment firms which are authorized by thecompetent authorities of their home Member States to provide theservices referred to in Section A (1) (b) and (2) of the Annex can, eitherdirectly or indirectly, become members of or have access to the regu-lated markets in their host Member States where similar services areprovided and also become members of or have access to the clearingand settlement systems which are provided for the members of suchregulated markets there.
Member States shall abolish any national rules or laws or rules of
regulated markets which limit the number of persons allowed accessthereto. If, by virtue of its legal structure or its technical capacity,access to a regulated market is limited, the Member State concernedshall ensure that its structure and capacity are regularly adjusted.
2. Membership of or access to a regulated market shall be condi-
tional on investment firms’ complying with capital adequacy require-ments and home Member States’ supervising such compliance inaccordance with Directive 93/6/EEC.
Host Member States shall be entitled to impose additional capital
requirements only in respect of matters not covered by that Directive.
Access to a regulated market, admission to membership thereof and
continued access or membership shall be subject to compliance with therules of the regulated market in relation to the constitution and adminis-tration of the regulated market and to compliance with the rules relatingto transactions on the market, with the professional standards imposedon staff operating on and in conjunction with the market, and with therules and procedures for clearing and settlement. The detailed arrange-ments for implementing these rules and procedures may be adapted asappropriate, inter alia to ensure fulfilment of the ensuing obligations,
provided, however, that Article 28 is complied with.
3. In order to meet the obligation imposed in paragraph 1, host
Member States shall offer the investment firms referred to in thatparagraph the choice of becoming members of or of having access totheir regulated markets either:
— directly, by setting up branches in the host Member States, or
— indirectly, by setting up subsidiaries in the host Member States or by
acquiring firms in the host Member States that are already membersof their regulated markets or already have access thereto.
However, those Member States which, when this Directive is adopted,
apply laws which do not permit credit institutions to become membersof or have access to regulated markets unless they have specializedsubsidiaries may continue until 31 December 1996 to apply the sameobligation in a non-discriminatory way to credit institutions from otherMember States for purposes of access to those regulated markets.
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The Kingdom of Spain, the Hellenic Republic and the PortugueseRepublic may extend that period until 31 December 1999. One yearbefore that date the Commission shall draw up a report, taking intoaccount the experience acquired in applying this Article and shall ifappropriate, submit a proposal. The Council may, acting by qualifiedmajority on the basis of that proposal, decide to review those arrange-ments.
4. Subject to paragraphs 1, 2 and 3, where the regulated market of
the host Member State operates without any requirement for a physicalpresence the investment firms referred to in paragraph 1 may becomemembers of or have access to it on the same basis without having to beestablished in the host Member State. In order to enable their invest-ment firms to become members of or have access to host MemberStates’ regulated markets in accordance with this paragraph homeMember States shall allow those host Member States’ regulated marketsto provide appropriate facilities within the home Member States’ terri-tories.
5. This Article shall not affect the Member States’ right to authorize
or prohibit the creation of new markets within their territories.
6. This Article shall have no effect:
— in the Federal Republic of Germany, on the regulation of the activi-
ties ofKursmakler ,o r
— in the Netherlands, on the regulation of the activities of hoek-
mannen .
Article 16
For the purposes of mutual recognition and the application of this
Directive, it shall be for each Member State to draw up a list of theregulated markets for which it is the home Member State and whichcomply with its regulations, and to forward that list for information,together with the relevant rules of procedures and operation of thoseregulated markets, to the other Member States and the Commission. Asimilar communication shall be effected in respect of each change to theaforementioned list or rules. The Commission shall publish the lists ofregulated markets and updates thereto in the Official Journal of the
European Communities at least once a year.
No later than 31 December 1996 the Commission shall report on the
information thus received and, where appropriate, propose amendmentsto the definition of regulated market for the purposes of this Directive.
Article 17
1. In addition to meeting the conditions imposed in Article 3, any
investment firm wishing to establish a branch within the territory ofanother Member State shall notify the competent authorities of its homeMember State.
2. Member States shall require every investment firm wishing to
establish a branch within the territory of another Member State toprovide the following information when effecting the notificationprovided for in paragraph 1:
(a) the Member State within the territory of which it plans to establish
a branch;
(b) a programme of operations setting out inter alia the types of busi-
ness envisaged and the organizational structure of the branch;
(c) the address in the host Member State from which documents may
be obtained;
(d) the names of those responsible for the management of the branch.
3. Unless the competent authorities of the home Member State have
reason to doubt the adequacy of the administrative structure or thefinancial situation of an investment firm, taking into account the activi-ties envisaged, they shall, within three months of receiving all theinformation referred to in paragraph 2, communicate that information to
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the competent authorities of the host Member State and shall inform theinvestment firm concerned accordingly.
They shall also communicate details of any compensation scheme
intended to protect the branch’s investors.
Where the competent authorities of the home Member State refuse to
communicate the information referred to in paragraph 2 to thecompetent authorities of the host Member State, they shall give reasonsfor their refusal to the investment firm concerned within three monthsof receiving all the information. That refusal or failure to reply shall besubject to the right to apply to the courts in the home Member States.
4. Before the branch of an investment firm commences business the
competent authorities of the host Member State shall, within twomonths of receiving the information referred to in paragraph 3, preparefor the supervision of the investment firm in accordance with Article 19and, if necessary, indicate the conditions, including the rules of conduct,under which, in the interest of the general good, that business must becarried on in the host Member State.
5. On receipt of a communication from the competent authorities of
the host Member State or on the expiry of the period provided for inparagraph 4 without receipt of any communication from those authori-ties, the branch may be established and commence business.
6. In the event of a change in any of the particulars communicated in
accordance with paragraph 2 (b), (c) or (d), an investment firm shallgive written notice of that change to the competent authorities of thehome and host Member States at least one month before implementingthe change so that the competent authorities of the home Member Statemay take a decision on the change under paragraph 3 and the competentauthorities of the host Member State may do so under paragraph 4.
7. In the event of a change in the particulars communicated in
accordance with the second subparagraph of paragraph 3, the authoritiesof the home Member State shall inform the authorities of the hostMember State accordingly.
Article 18
1. Any investment firm wishing to carry on business within the
territory of another Member State for the first time under the freedom toprovide services shall communicate the following information to thecompetent authorities of its home Member State:
— the Member State in which it intends to operate,
— a programme of operations stating in particular the investment
service or services which it intends to provide.
2. The competent authorities of the home Member State shall, within
one month of receiving the information referred to in paragraph 1,forward it to the competent authorities of the host Member State. Theinvestment firm may then start to provide the investment service orservices in question in the host Member State.
Where appropriate, the competent authorities of the host Member State
shall, on receipt of the information referred to in paragraph 1, indicateto the investment firm the conditions, including the rules of conduct,with which, in the interest of the general good, the providers of theinvestment services in question must comply in the host Member State.
3. Should the content of the information communicated in accord-
ance with the second indent of paragraph 1 be amended, the investmentfirm shall give notice of the amendment in writing to the competentauthorities of the home Member State and of the host Member Statebefore implementing the change, so that the competent authorities of thehost Member State may, if necessary, inform the firm of any change oraddition to be made to the information communicated under paragraph2.
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Article 19
1. Host Member States may, for statistical purposes, require all
investment firms with branches within their territories to report periodi-cally on their activities in those host Member States to the competentauthorities of those host Member States.
In discharging their responsibilities in the conduct of monetary policy,
without prejudice to the measures necessary for the strengthening of theEuropean Monetary System, host Member States may within their terri-tories require all branches of investment firms originating in otherMember States to provide the same particulars as national investmentfirms for that purpose.
2. In discharging their responsibilities under this Directive, host
Member States may require branches of investment firms to provide thesame particulars as national firms for that purpose.
Host Member States may require investment firms carrying on business
within their territories under the freedom to provide services to providethe information necessary for the monitoring of their compliance withthe standards set by the host Member State that apply to them, althoughthose requirements may not be more stringent than those which thesame Member State imposes on established firms for the monitoring oftheir compliance with the same standards.
3. Where the competent authorities of a host Member State ascertain
that an investment firm that has a branch or provides services within itsterritory is in breach of the legal or regulatory provisions adopted in thatState pursuant to those provisions of this Directive which confer powerson the host Member State’s competent authorities, those authoritiesshall require the investment firm concerned to put an end to its irregularsituation.
4. If the investment firm concerned fails to take the necessary steps,
the competent authorities of the host Member State shall inform thecompetent authorities of the home Member State accordingly. The lattershall, at the earliest opportunity, take all appropriate measures to ensurethat the investment firm concerned puts an end to its irregular situation.The nature of those measures shall be communicated to the competentauthorities of the host Member State.
5. If, despite the measures taken by the home Member State or
because such measures prove inadequate or are not available in theState in question, the investment firm persists in violating the legal orregulatory provisions referred to in paragraph 2 in force in the hostMember State, the latter may, after informing the competent authoritiesof the home Member State, take appropriate measures to prevent or topenalize further irregularities and, in so far as necessary, to prevent thatinvestment firm from initiating any further transactions within its terri-tory. The Member States shall ensure that within their territories it ispossible to serve the legal documents necessary for those measures oninvestment firms.
6. The foregoing provisions shall not affect the powers of host
Member States to take appropriate measures to prevent or to penalizeirregularities committed within their territories which are contrary to therules of conduct introduced pursuant to Article 11 as well as to otherlegal or regulatory provisions adopted in the interest of the generalgood. This shall include the possibility of preventing offending invest-ment firms from initiating any further transactions within their terri-tories.
7. Any measure adopted pursuant to paragraphs 4, 5 or 6 involving
penalties or restrictions on the activities of an investment firm must beproperly justified and communicated to the investment firm concerned.Every such measure shall be subject to the right to apply to the courts inthe Member State which adopted it.
8. Before following the procedure laid down in paragraphs 3, 4 or
5 the competent authorities of the host Member State may, in emergen-cies, take any precautionary measures necessary to protect the interestsof investors and others for whom services are provided. The Commis-sion and the competent authorities of the other Member States
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concerned must be informed of such measures at the earliest oppor-tunity.
After consulting the competent authorities of the Member States
concerned, the Commission may decide that the Member State in ques-tion must amend or abolish those measures.
9. In the event of the withdrawal of authorization, the competent
authorities of the host Member State shall be informed and shall takeappropriate measures to prevent the investment firm concerned frominitiating any further transactions within its territory and to safeguardinvestors’ interests. Every two years the Commission shall submit areport on such cases to the committee set up at a later stage in thesecurities field.
10. The Member States shall inform the Commission of the number
and type of cases in which there have been refusals pursuant to Article17 or measures have been taken in accordance with paragraph 5. Everytwo years the Commission shall submit a report on such cases to thecommittee set up at a later date in the securities field.
Article 20
1. In order to ensure that the authorities responsible for the markets
and for supervision have access to the information necessary for theperformance of their duties, home Member States shall at least require:
(a) without prejudice to steps taken in implementation of Article 10,
that investment firms keep at the disposal of the authorities for atleast five years the relevant data on transactions relating to theservices referred to in Article 14 (1) which they have carried out ininstruments dealt in on a regulated market, whether such transac-tions were carried out on a regulated market or not;
(b) that investment firms report to competent authorities in their home
Member States all the transactions referred to in (a) where thosetransactions cover:
— shares or other instruments giving access to capital,
— bonds and other forms of securitized debt,— standardized forward contracts relating to shares or— standardized options on shares.
Such reports must be made available to the relevant authority at the
earliest opportunity. The time limit shall be fixed by that authority. Itmay be extended to the end of the following working day whereoperational or practical reasons so dictate but in no circumstances mayit exceed that limit.
Such reports must, in particular, include details of the names and
numbers of the instruments bought or sold, the dates and times of thetransactions, the transaction prices and means of identifying the invest-ment firms concerned.
Home Member States may provide that the obligation imposed in (b)
shall, in the case of bonds and other forms of securitized debt, applyonly to aggregated transactions in the same instrument.
2. Where an investment firm carries out a transaction on a regulated
market in its host Member State, the home Member State may waive itsown requirements as regards reporting if the investment firm is subjectto equivalent requirements to report the transaction in question to theauthorities in charge of that market.
3. Member States shall provide that the report referred to in para-
graph 1 (b) shall be made either by the investment firm itself or by atrade-matching system, or through stock-exchange authorities or thoseof another regulated market.
4. Member States shall ensure that the information available in
accordance with this Article is also available for the proper applicationof Article 23.
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5. Each Member State may, in a non-discriminatory manner, adopt or
maintain provisions more stringent in the field governed by this Articlewith regard to substance and form in respect of the conservation andreporting of data relating to transactions:
— carried out on a regulated market of which it is the home Member
State or
— carried out by investment firms of which it is the home Member
State.
Article 21
1. In order to enable investors to assess at any time the terms of a
transaction they are considering and to verify afterwards the conditionsin which it has been carried out, each competent authority shall, foreach of the regulated markets which it has entered on the list providedfor in Article 16, take measures to provide investors with the informa-tion referred to in paragraph 2. In accordance with the requirementsimposed in paragraph 2, the competent authorities shall determine theform in which and the precise time within which the information is tobe provided, as well as the means by which it is to be made available,having regard to the nature, size and needs of the market concerned andof the investors operating on that market.
2. The competent authorities shall require for each instrument at
least:
(a) publication at the start of each day’s trading on the market of the
weighted average price, the highest and the lowest prices and thevolume dealt in on the regulated market in question for the whole ofthe preceding day’s trading;
(b) in addition, for continuous order-driven and quote-driven markets,
publication:
— at the end of each hour’s trading on the market, of the weighted
average price and the volume dealt in on the regulated market inquestion for a six-hour trading period ending so as to leave twohours’ trading on the market before publication, and
— every 20 minutes, of the weighted average price and the highest
and lowest prices on the regulated market in question for atwo-hour trading period ending so as to leave one hour’s tradingon the market before publication.
Where investors have prior access to information on the prices and
quantities for which transactions may be undertaken:
(i) such information shall be available at all times during market
trading hours;
(ii) the terms announced for a given price and quantity shall be terms
on which it is possible for an investor to carry out such a transac-tion.
The competent authorities may delay or suspend publication where that
proves to be justified by exceptional market conditions or, in the case ofsmall markets, to preserve the anonymity of firms and investors. Thecompetent authorities may apply special provisions in the case of excep-tional transactions that are very large in scale compared with averagetransactions in the security in question on that market and in the case ofhighly illiquid securities defined by means of objective criteria andmade public. The competent authorities may also apply more flexibleprovisions, particularly as regards publication deadlines, for transactionsconcerning bonds and other forms of securitized debt.
3. In the field governed by this Article each Member State may adopt
or maintain more stringent provisions or additional provisions withregard the substance and form in which information must be madeavailable to investors concerning transactions carried out on regulatedmarkets of which it is the home Member State, provided that thoseprovisions apply regardless of the Member State in which the issuer ofthe financial instrument is located or of the Member State on theregulated market of which the instrument was listed for the first time.
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4. The Commission shall report on the application of this Article no
later than 31 December 1997; the Council may, on a proposal from theCommission, decide by a qualified majority to amend this Article.
TITLE VI
Authorities responsible for authorization and supervision
Article 22
1. Member States shall designate the competent authorities which are
to carry out the duties provided for in this Directive. They shall informthe Commission thereof, indicating any division of those duties.
2. The authorities referred to in paragraph 1 must be either public
authorities, bodies recognized by national law or bodies recognized bypublic authorities expressly empowered for that purpose by nationallaw.
3. The authorities concerned must have all the powers necessary for
the performance of their functions.
Article 23
1. Where there are two or more competent authorities in the same
Member State, they shall collaborate closely in supervising the activitiesof investment firms operating in that Member State.
2. Member States shall ensure that such collaboration takes place
between such competent authorities and the public authorities respon-sible for the supervision of financial markets, credit and other financialinstitutions and insurance undertakings, as regards the entities whichthose authorities supervise.
3. Where, through the provision of services or by the establishment
of branches, an investment firm operates in one or more Member Statesother than its home Member State the competent authorities of all theMember States concerned shall collaborate closely in order more effec-tively to discharge their respective responsibilities in the area coveredby this Directive.
They shall supply one another on request with all the information
concerning the management and ownership of such investment firmsthat is likely to facilitate their supervision and all information likely tofacilitate the monitoring of such firms. In particular, the authorities ofthe home Member State shall cooperate to ensure that the authorities ofthe host Member State collect the particulars referred to in Article 19(2).
In so far as it is necessary for the purpose of exercising their powers of
supervision, the competent authorities of the home Member State shallbe informed by the competent authorities of the host Member State ofany measures taken by the host Member State pursuant to Article 19 (6)which involve penalties imposed on an investment firm or restrictionson an investment firm’s activities.
Article 24
1. Each host Member State shall ensure that, where an investment
firm authorized in another Member State carries on business within itsterritory through a branch, the competent authorities of the homeMember State may, after informing the competent authorities of the hostMember State, themselves or through the intermediary of persons theyinstruct for the purpose carry out on-the-spot verification of the infor-mation referred to in Article 23 (3).
2. The competent authorities of the home Member State may also ask
the competent authorities of the host Member State to have such verifi-cation carried out. Authorities which receive such requests must, withinthe framework of their powers, act upon them by carrying out theverifications themselves, by allowing the authorities who have requestedthem to carry them out or by allowing auditors or experts to do so.
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3. This Article shall not affect the right of the competent authorities
of a host Member State, in discharging their responsibilities under thisDirective, to carry out on-the-spot verifications of branches establishedwithin their territory.
Article 25
1. Member States shall provide that all persons who work or who
have worked for the competent authorities, as well as auditors andexperts instructed by the competent authorities, shall be bound by theobligation of professional secrecy. Accordingly no confidential informa-tion which they may receive in the course of their duties may bedivulged to any person or authority whatsoever, save in summary oraggregate form such that individual investment firms cannot be identi-fied, without prejudice to cases covered by criminal law.
Nevertheless, where an investment firm has been declared bankrupt or
is being compulsorily wound up, confidential information which doesnot concern third parties involved in attempts to rescue that investmentfirm may be divulged in civil or commercial proceedings.
2. Paragraph 1 shall not prevent the competent authorities of
different Member States from exchanging information in accordancewith this Directive or other Directives applicable to investment firms.That information shall be subject to the conditions of professionalsecrecy imposed in paragraph 1.
3. Member States may conclude cooperation agreements providing
for exchanges of information with the competent authorities of thirdcountries only if the information disclosed is covered by guarantees ofprofessional secrecy at least equivalent to those provided for in thisArticle.
4. Competent authorities receiving confidential information under
paragraph 1 or 2 may use it only in the course of their duties:
— to check that the conditions governing the taking up of the business
of investment firms are met and to facilitate the monitoring, on anon-consolidated or consolidated basis, of the conduct of that busi-ness, especially with regard to the capital adequacy requirementsimposed in Directive 93/6/EEC, administrative and accountingprocedures and internal-control mechanisms,
— to impose sanctions,— in administrative appeals against decisions by the competent author-
ities, or
— in court proceedings initiated under Article 26.
5. Paragraphs 1 and 4 shall not preclude the exchange of informa-
tion:
(a) within a Member State, where there are two or more competent
authorities, or
(b) within a Member State or between Member States, between
competent authorities and
— authorities responsible for the supervision of credit institutions,
other financial organizations and insurance undertakings and theauthorities responsible for the supervision of financial markets,
— bodies responsible for the liquidation and bankruptcy of invest-
ment firms and other similar procedures and
— persons responsible for carrying out statutory audits of the
accounts of investment firms and other financial institutions,
in the performance of their supervisory functions, or the disclosure
to bodies which administer compensation schemes of informationnecessary for the performance of their functions. Such informationshall be subject to the conditions of professional secrecy imposed inparagraph 1.
6. This Article shall not prevent a competent authority from
disclosing to those central banks which do not supervise credit institu-tions or investment firms individually such information as they mayneed to act as monetary authorities. Information received in this context
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shall be subject to the conditions of professional secrecy imposed in
paragraph 1.
7. This Article shall not prevent the competent authorities from
communicating the information referred to in paragraphs 1 to 4 to aclearing house or other similar body recognized under national law forthe provision of clearing or settlement services for one of their MemberState’s markets if they consider that it is necessary to communicate theinformation in order to ensure the proper functioning of those bodies inrelation to defaults or potential defaults by market participants. Theinformation received shall be subject to the conditions of professionalsecrecy imposed in paragraph 1. The Member States shall, however,ensure that information received under paragraph 2 may not bedisclosed in the circumstances referred to in this paragraph without theexpress consent of the competent authorities which disclosed it.
8. In addition, notwithstanding the provisions referred to in para-
graphs 1 and 4, Member States may, by virtue of provisions laid downby law, authorize the disclosure of certain information to other depart-ments of their central government administrations responsible for legis-lation on the supervision of credit institutions, financial institutions,investment firms and insurance undertakings and to inspectorsinstructed by those departments.
Such disclosures may, however, be made only where necessary for
reasons of prudential control.
Member States shall, however, provide that information received under
paragraphs 2 and 5 and that obtained by means of the on-the-spotverifications referred to in Article 24 may never be disclosed in thecases referred to in this paragraph except with the express consent ofthe competent authorities which disclosed the information or of thecompetent authorities of the Member State in which the on-the-spotverification was carried out.
9. If, at the time of the adoption of this Directive, a Member State
provides for the exchange of information between authorities in order tocheck compliance with the laws on prudential supervision, on the organ-ization, operation and conduct of commercial companies and on theregulation of financial markets, that Member State may continue toauthorize the forwarding of such information pending coordination ofall the provisions governing the exchange of information betweenauthorities for the entire financial sector but not in any case after 1 July1996.
Member States shall, however, ensure that, where information comes
from another Member State, it may not be disclosed in the circum-stances referred to in the first subparagraph without the express consentof the competent authorities which disclosed it and it may be used onlyfor the purposes for which those authorities gave their agreement.
The Council shall effect the coordination referred to in the first subpara-
graph on the basis of a Commission proposal. The Council notes theCommission’s statement to the effect that it will submit proposals by 31July 1993 at the latest. The Council will act on those proposals withinthe shortest possible time with the intention of bringing the rulesproposed into effect on the same date as this Directive.
Article 26
Member States shall ensure that decisions taken in respect of an invest-
ment firm under laws, regulations and administrative provisions adoptedin accordance with this Directive are subject to the right to apply to thecourts; the same shall apply where no decision is taken within sixmonths of its submission in respect of an application for authorizationwhich provides all the information required under the provisions inforce.
Article 27
Without prejudice to the procedures for the withdrawal of authorization
or to the provisions of criminal law, Member States shall provide thattheir respective competent authorities may, with regard to investment
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firms or those who effectively control the business of such firms that
infringe laws, regulations or administrative provisions concerning thesupervision or carrying on of their activities, adopt or impose in respectof them measures or penalties aimed specifically at ending observedbreaches or the causes of such breaches.
Article 28
Member States shall ensure that this Directive is implemented without
discrimination.
TITLE VII
Final provisions
Article 29
Pending the adoption of a further Directive laying down provisions
adapting this Directive to technical progress in the areas specifiedbelow, the Council shall, in accordance with Decision 87/373/EEC (
1),20acting by a qualified majority on a proposal from the
Commission, adopt any adaptations which may be necessary, asfollows:
— expansion of the list in Section C of the Annex,
— adaptation of the terminology of the lists in the Annex to take
account of developments on financial markets,
— the areas in which the competent authorities must exchange infor-
mation as listed in Article 23;
— clarification of the definitions in order to ensure uniform application
of this Directive in the Community,
— clarification of the definitions in order to take account in the imple-
mentation of this Directive of developments on financial markets,
— the alignment of terminology and the framing of definitions in
accordance with subsequent measures on investment firms andrelated matters,
— the other tasks provided for in Article 7 (5).
Article 30
1. Investment firms already authorized in their home Member States
to provide investment services before 31 December 1995 shall bedeemed to be so authorized for the purpose of this Directive, if the lawsof those Member States provide that to take up such activities they mustcomply with conditions equivalent to those imposed in Articles 3 (3)and 4.
2. Investment firms which are already carrying on business on 31
December 1995 and are not included among those referred to in para-graph 1 may continue their activities profided that, no later than 31December 1996 and pursuant to the provisions of their home MemberStates, they obtain authorization to continue such activities in accord-ance with the provisions adopted in implementation of this Directive.
Only the grant of such authorization shall enable such firms to qualify
under the provisions of this Directive on the right of establishment andthe freedom to provide services.
3. Where before the date of the adoption of this Directive investment
firms have commenced business in other Member States either throughbranches or under the freedom to provide services, the authorities ofeach home Member State shall, between 1 July and 31 December 1995,communicate, for the purposes of Articles 17 (1) and (2) and 18, to theauthorities of each of the other Member States concerned the list offirms that comply with this Directive and operate in those States,indicating the business carried on.
(1) OJ No L 197, 18. 7. 1987, p. 33.
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4. Natural persons authorized in a Member State on the date of theadoption of this Directive to offer investment services shall be deemedto be authorized under this Directive, provided that they fulfil therequirements imposed in Article 1 (2), second subparagraph, secondindent, and third subparagraph, all four indents.
Article 31
No later than 1 July 1995 Member States shall adopt the laws, regula-
tions and administrative provisions necessary for them to comply withthis Directive.
These provisions shall enter into force no later than 31 December 1995.
The Member States shall forthwith inform the Commission thereof.
When Member States adopt the provisions referred to in the first para-
graph they shall include a reference to this Directive or accompanythem with such a reference on the occasion of their official publication.The manner in which such references are to be made shall be laid downby the Member States.
Article 32
This Directive is addressed to the Member States.
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ANNEX
SECTION A
Services
1. (a) Reception and transmission, on behalf of investors, of orders in relation
to one or more of the instruments listed in Section B.
(b) Execution of such orders other than for own account.
2. Dealing in any of the instruments listed in Section B for own account.3.►
C2Managing portfolios of investments in accordance with mandates given
by investors on a discretionary, ◄client-by-client basis where such portfo-
lios include one or more of the instruments listed in Section B.
4. Underwriting in respect of issues of any of the instruments listed in Section B
and/or the placing of such issues.
SECTION B
Instruments
1. (a) Transferable securities.
(b) Units in collective investment undertakings.
2. Money-market instruments.3. Financial-futures contracts, including equivalent cash-settled instruments.4. Forward interest-rate agreements (FRAs).5. Interest-rate, currency and equity swaps.6. Options to acquire or dispose of any instruments falling within this section of
the Annex, including equivalent cash-settled instruments. This categoryincludes in particular options on currency and on interest rates.
SECTION C
Non-core services
1. Safekeeping and administration in relation to one or more of the instruments
listed in Section B.
2. Safe custody services.3. Granting credits or loans to an investor to allow him to carry out a transaction
in one or more of the instruments listed in Section B, where the firm grantingthe credit or loan is involved in the transaction.
4. Advice to undertakings on capital structure, industrial strategy and related
matters and advice and service relating to mergers and the purchase ofundertakings.
5. Services related to underwriting.6. Investment advice concerning one or more of the instruments listed in Section
B.
7. Foreign-exchange service where these are connected with the provision of
investment services.