22. 2. 90 Official Journal of the European Communities No C 42/7 
COMMISSION 
Amended proposal for a council directive on investment services in the securities field 
(Submitted by the Commission on 8 February 1990) 
(90/C 42/06) 
THE COUNCIL OF THE EUROPEAN COMMUNITIES, 
Having regard to the Treaty establishing the European 
Economic Community, and in particular Article 57 
thereof, 
Having regard to the proposal from the Commission, 
In cooperation with the European Parliament, 
Having regard to the opinion of the Economic and 
Social Committee, 
Whereas this Directive is to constitute an instrument 
which is essential for achieving the internal market, a 
course determined by the Single European Act and set 
out in timetable form in the Commission's White Paper, 
from the point of view of both freedom of establishment 
and freedom to provide financial services, in the field of 
investment firms; 
Whereas the approach which has been adopted is to 
achieve only the essential harmonization necessary and 
sufficient to secure the mutual recognition of authori­
zation and of prudential supervision systems, making 
possible the granting of a single authorization 
recognized throughout the Community and the 
application of the principle of home Member State 
prudential supervision; 
Whereas it is necessary for reasons of fair competition, 
to ensure that non-bank investment firms benefit from 
similar freedom to create branches and provide services 
across frontiers as that provided for by the second 
Council Directive on the coordination of laws, regu­
lations and administrative provisions relating to the 
taking up and pursuit of the business of credit 
institutions; Whereas the principles of mutual recognition and of 
home Member State control require the competent autho­
rities of each Member State not to grant authorization 
or to withdraw it where factors such as the activities 
programme, the geographical distribution or the acti­
vities actually carried on make it quite clear that an 
investment firm has opted for the legal system of one 
Member State for the purpose of evading the stricter 
standards in force in another Member State in which it 
intends to carry on or carries on the greater part of its 
activities; whereas, for the purposes of this Directive, an 
investment firm which is a legal person shall be autho­
rized in the Member State in which it has its registered 
office; whereas the Member States must require that the 
head office be situated in the same Member State as the 
registered office; 
Whereas it is also necessary and appropriate to liberalize 
access to membership of stock exchange and financial 
futures and options markets in host Member States for 
investment firms authorized to carry out the relevant 
services in their home Member States; 
Whereas responsibility for supervising the financial 
soundness of an investment firm will rest with the 
competent authorities of its home Member State and 
whereas to permit this responsibility to be assumed fully 
by such competent authorities a further Directive will be 
necessary to coordinate rules in the area of market risk; 
Whereas the home Member State may also establish 
rules stricter than those laid down in Articles 3, 4, 10, 11 
and 20 for investment firms authorized by its competent 
authorities; 
Whereas, by virtue of mutual recognition, the approach 
chosen permits investment firms authorized in their 
home Member States to carry on, throughout the 
Community, any or all of the activities listed in the 
Annex by establishing branches or by providing services; 
No C 42/8 Official Journal of the European Communities 22. 2. 90 
Whereas the carrying-on of activities not listed in the 
Annex shall be governed by the general provisions of the 
Treaty concerning the right of establishment and the 
freedom to provide services; 
Whereas, the host Member State may, in connection 
with the exercise of the right of establishment and the 
freedom to provide services, require compliance with 
specific provisions of its own national laws or regulations 
on the part of firms not authorized as investment firms 
in their home Member States and with regard to acti­
vities not listed in the Annex provided that, on the one 
hand, such provisions are compatible with Community 
law and are intended to protect the general good and 
that, on the other hand, such firms or such activities are 
not subject to equivalent rules under the legislation or 
regulations of their home Member States; 
Whereas the Member States must ensure that there are 
no obstacles to carrying on activities receiving mutual 
recognition in the same manner as in the home Member 
State, as long as the latter do not conflict with legal 
provisions protecting the general good in the host 
Member State; 
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 
services under the second paragraph of Article 59 of the 
Treaty or the freedom of establishment in Member States 
other than those in which they are established; whereas, 
however, requests for the authorization of subsidiaries or 
of the acquisition of holdings made by undertakings 
governed by the laws of third countries are subject to a 
procedure intended to ensure that Community 
investment firms receive reciprocal treatment in the third 
countries in question; 
Whereas, the authorizations granted to investment firms 
by the competent national authorities pursuant to this 
Directive will have Community-wide, and no longer 
merely nation-wide, application, and whereas existing 
reciprocity clauses will henceforth have no effect; 
whereas a flexible procedure is therefore needed to make 
it possible to assess reciprocity on a Community basis; 
whereas the aim of this procedure is not to close the 
Community's financial markets but rather, as the 
Community intends to keep its financial markets open to 
the rest of the world, to improve the liberalization of the 
global financial markets in third countries; whereas, to 
that end, this Directive provides for procedures for nego­
tiating with third countries and, as a last resort, for the 
possibility of taking measures involving the suspension of 
new applications for authorization or the restriction of 
new authorizations; 
Whereas the smooth operation of the internal market in 
investment services will require not only legal rules but 
also close and regular cooperation between the competent authorities of the Member States; whereas for 
the consideration of problems concerning individual 
investment firms the Contact Committee constituted 
under this Directive is the most appropriate forum; 
whereas that committee is a suitable body for the mutual 
exchange of information provided for in this Directive; 
Whereas that mutual information procedure will not in 
any case replace the bilateral collaboration established by 
this Directive; whereas the competent host Member State 
authorities can, without prejudice to their powers of 
control proper, continue, either in an emergency, on 
their own initiative or following the initiative of the 
competent home Member State authorities, to verify that 
the activities of an investment firm established within 
their territories comply with the relevant laws and with 
the principles of sound administrative and accounting 
procedures and adequate internal control; 
Whereas technical modifications to the detailed rules laid 
down in this Directive may from time to time be 
necessary to take account of new developments in the 
investment services sector; whereas the Commission shall 
accordingly make such modifications as are necessary, 
after consulting the committee constituted under this 
Directive. 
HAS ADOPTED THIS DIRECTIVE: 
TITLE I 
Definitions and scope 
Article 1 
For the purpose of this Directive: 
1. credit institution shall mean a credit institution as 
defined with the first indent of Article 1 of Council 
Directive 77/780/EEC (') other than the institutions 
referred to in Article 2 (2) thereof; 
2. investment service shall mean any of the services 
relating to any of the instruments set out in the list 
in the Annex; 
3. investment firm shall mean any natural or legal 
person whose business it is to provide any investment 
service; 
4. home Member State shall mean: 
(a) where the investment firm is a natural person, 
the Member State where that person has his 
principal place of business; 
(') OJ No L 322, 17. 12. 1977, p. 30. 
22. 2. 90 Official Journal of the European Communities No C 42/9 
(b) where the investment firm is a legal person, the 
Member State where its registered office is 
situated or if it has no registered office then the 
Member State where its head office is situated; 
5. host Member State shall mean the Member State 
where an investment firm has a branch or in which it 
supplies services; 
6. branch shall mean a place of business which forms a 
legally dependent part of an investment firm and 
which provides an investment service for which the 
investment firm has been authorized; 
7. qualifying holding shall mean a direct or indirect 
holding in an investment firm which represents 10 % 
or more of the capital or of the voting rights or 
which makes it possible to exercise a significant 
influence over the management of the investment 
firm in which a holding subsists. 
For the purpose of this definition, in the context of 
Articles 4 and 10 and of the other levels of holding 
referred to in Article 10, the voting rights referred to 
in Article 7 of Council Directive 88/627/EEC (') 
shall be taken into consideration; 
8. parent undertaking shall mean a parent undertaking 
as defined in Articles 1 and 2 of Council Directive 
83/349/EECO; 
9. subsidiary shall mean a subsidiary undertaking as 
defined in Articles 1 and 2 of Directive 
83/349/EEC; any subsidiary of a subsidiary under­
taking shall also be regarded as a subsidiary of the 
parent undertaking which is at the head of those 
undertakings; 
10. members of a stock exchange or organized market shall 
mean any natural or legal person recognized by the 
relevant authorities of each organized market of the 
said country and placed under their supervision. 
Article 2 
This Directive shall apply to all investment firms. 
However, only Articles 9 (2), 11 and 13 shall apply to 
investment firms that are credit institutions authorized by 
their banking licence to engage in securities business. 
(') OJ No L 348, 17. 12. 1988, p. 62. 
(2) OJ No L 193, 18. 7. 1983, p. 1. TITLE II 
Harmonization of authorization conditions 
Article 3 
1. Investment firms shall obtain authorization in their 
home Member State before commencing to provide 
investment services. Such authorization shall be granted 
by the home Member State's competent authorities 
designated in accordance with Article 17. Following the 
granting of authorization the investment service in 
question may be engaged in forthwith by the investment 
firm, together with any activities that are ancillary 
thereto. 
2. Without prejudice to other conditions of general 
application laid down by national law, the competent 
authorities shall not grant authorization unless: 
— the investment firm has sufficient initial capital in 
accordance with the rules prescribed in Directive . . . 
having regard to the nature of the investment service 
in question, 
— the persons who effectively direct the business of the 
investment firm are of sufficiently good repute and 
experience. 
3. Member States shall also require applications for 
authorization to be accompanied by a programme of 
operations setting out inter alia the types of business 
envisaged and the structural organization of the 
investment firm. 
4. The applicant shall be notified within three months 
of submission of a complete application whether or not 
authorization is granted. Reasons shall be given 
whenever an authorization is refused. If no decision is 
notified within six months of submission of the complete 
application this shall be deemed to be a refusal. 
5. The competent authorities may withdraw the autho­
rization issued to an investment firm subject to this 
Directive only where the investment firm: 
(a) does not make use of the authorization within 12 
months, expressly renounces the authorization or has 
ceased to engage in investment business for mor than 
six months, if the Member State concerned has made 
no provision for the authorization to lapse in such 
cases: 
(b) has obtained the authorization through false 
statements or any other irregular means; 
(c) no longer fulfils the conditions under which 
authorization was granted; 
(d) no longer possesses sufficient financial resources or 
can no longer be relied upon to fulfil its obligations 
towards its creditors, and in particular no longer 
provides security for the assets entrusted to it; 
No C 42/10 Official Journal of the European Communities 22. 2. 90 
(e) falls within one of the other cases where national law 
provides for withdrawal of authorization. 
Article 4 
The competent authorities shall not grant authorization 
for the taking-up of the business of investment firms 
before they have been informed of the identities of the 
shareholders or members, whether direct or indirect, 
natural or legal persons, that have qualifying holdings, 
and of the amounts of those holdings. 
The competent authorities shall refuse authorization if, 
taking into account the need to ensure the sound and 
prudent management of an investment firm, they are not 
satisfied as to the suitability of the abovementioned 
shareholders or members. 
Article 5 
Member States shall not apply to branches of investment 
firms having their registered office outside the 
Community, when commencing or carrying on their 
business, provisions that result in more favourable 
treatment than that accorded to branches of investment 
firms having their registered office in a Member State. 
Article 6 
There must be prior consultation with the competent 
authorities of the other Member State involved on the 
authorization of an investment firm which is: 
— a subsidiary of an investment firm authorized in 
another Member State, or 
— a subsidiary of the parent undertaking of an 
investment firm authorized in another Member State, 
or 
— controlled by the same persons, whether natural or 
legal, as control an investment firm 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 any authorization of a direct or indirect subsidiary 
one or more parent undertakings of which are 
governed by the laws of a third country. The 
Commission shall inform the committee constituted 
under Article 23 accordingly; (b) whenever such a parent undertaking acquires a 
holding in a Community investment firm such that 
the latter would become its subsidiary. The 
Commission shall inform the committee constituted 
under Article 23 accordingly. 
When authorization is granted to the direct or indirect 
subsidiary of one or more parent untertakings governed 
by the law of third countries, the structure of the group 
shall be specified in the notification which the competent 
authorities shall address to the Commission. 
2. The Member States shall inform the Commission of 
any general difficulties encountered by their investment 
firms in establishing themselves or carrying on activities 
in a third country. 
3. Initially no later than six months before the 
application of this Directive and thereafter periodically, 
the Commission shall draw up a report examining the 
treatment accorded to Community investment firms in 
third countries, in the terms referred to in paragraphs 4 
and 5, as regards establishment and the carrying on of 
investment activities, and the acquisition of holdings in 
third-country investment firms. The Commission shall 
submit those reports to the Council, together with any 
appropriate proposals. 
4. 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 a third country is not 
granting Community investment firms effective market 
access comparable to that granted by the Community to 
investment firms from that third country, the 
Commission may submit proposals to the Council for the 
appropriate mandate for negotiation with a view to 
obtaining comparable competitive opportunities for 
Community investment firms. The Council shall decide 
by a qualified majority. 
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 do not receive 
national treatment offering the same competitive oppor­
tunities as are available to domestic investment firms and 
that the conditions of effective market access are not 
fulfilled, the Commission may initiate negotiations 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 
initiating negotiations, in accordance with the procedure 
laid down in Article 23, that the competent authorities of 
the Member States must limit or suspend their decisions 
regarding requests pending at the moment of the 
decision or future requests for authorizations and the 
22. 2. 90 Official Journal of the European Communities No C 42/11 
acquisition of holdings by direct or indirect parent 
undertakings governed by the laws of the third country 
in question. The duration of the measures referred to 
may not exceed six months. 
Before the end of that six-month period, and in the light 
of the results of the negotiations, the Council may, 
acting on a proposal from the Commission, decide by a 
qualified majority whether the measures shall be 
continued. 
Such limitations or suspension may not apply to the 
setting up of subsidiaries by investment firms duly autho­
rized in the Community or by their subsidiaries, or to the 
acquisition of holdings in Community investment 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 inform it at its request: 
(a) of any request for the authorization of a direct or 
indirect subsidiary one or more parent undertakings 
of which are governed by the laws of the third 
country in question; 
(b) whenever they are informed in accordance with 
Article 10 that such an undertaking proposes to 
acquire a holding in a Community investment firm 
such that the latter would become its subsidiary. 
This obligation to provide information shall lapse 
whenever an agreement is reached with the third country 
referred to in paragraph 4 or 5 or when the measures 
referred to in the second and third subparagraphs of 
paragraph 5 cease to apply. 
7. Measures taken under this Article shall comply with 
the Community's obligations under any international 
agreements, bilateral or multilateral, governing the 
taking up and pursuit of the business of investment firms. 
TITLE IV 
Harmonization of the conditions governing pursuit of the 
business of investment firms 
Article 8 
1. An investment firm's own funds may not fall below 
the amount of initial capital required pursuant to Article 
3 at the time of its authorization. 2. The Member States may decide that investment 
firms already in existence when the Directive is 
implemented, the own funds of which do not attain the 
levels for initial capital referred to in Article 3, may 
continue to carry on their acitivities. In that event, their 
own funds may not fall below the highest level reached 
after the date of the notification of this Directive. 
3. If control of an investment firm falling within the 
category referred to in paragraph 2 is taken by a natural 
or legal person other than the person who controlled it 
previously, its own funds must attain at least the level for 
initial capital referred to in Article 3. 
4. However, where there is a merger of two or more 
investment firms falling within the category referred to in 
paragraph 2, in certain specific circumstances and with 
the consent of the competent authorities, the own funds 
of the new investment firm resulting from the merger 
need not attain the level of initial capital referred to in 
Article 3. However, the own funds of the new investment 
firm may not fall below the total own funds of the 
merged firms at the time of the merger, as long as the 
appropriate levels referred to in Article 3 have not been 
obtained. 
5. However, if, in the cases referred to in paragraphs 
1, 2 and 4, the own funds should be reduced, the 
competent authorities may, where the circumstances 
justify it, allow an investment firm a limited period in 
which to rectify its situation or cease its activities. 
Article 9 
1. The competent authorities of the home Member 
State shall require continuing compliance by an 
investment firm authorized by them with the conditions 
referred to in Article 3 (2). 
2. The competent authorities of the home Member 
State shall require that investment firms authorized by 
them make sufficient provision against market risk in 
accordance with the rules prescribed in Directive . . . 
3. The supervision of compliance with the conditions 
referred to in Articles 3 (2) and 4 shall be within the 
exclusive regulatory competence of the home Member 
State's competent authorities irrespective of whether or 
not the investment firm establishes a branch or provides 
services in another Member State. 
No C 42/12 Official Journal of the European Communities 22. 2. 90 
Article 10 
1. The Member States shall require any natural or 
legal person who proposes to acquire, directly or indi­
rectly, a qualifying holding in an investment firm first to 
inform the competent authorities, telling them of the size 
of the intended holding. Such a person must likewise 
inform the competent authorities if he proposes to 
increase his qualifying holding so that the proportion of 
the voting rights or of the capital held by him would 
reach or exceed 20, 33 or 50 % or so that the investment 
firm would become his subsidiary. 
Without prejudice to the provisions of paragraph 2, the 
competent authorities shall have a maximum of three 
months from the date of the notification provided for in 
the first subparagraph to oppose such a plan if, in view 
of the need to ensure sound and prudent management of 
the investment firm, they are not satisfied as to the suit­
ability of the person referred to in the first 
subparagraph. If they do not oppose the plan, they may 
fix a maximum period for its implementation. 
2. If the acquirer of the holdings referred to in 
paragraph 1 is an investment firm authorized in another 
Member State or the parent undertaking of an 
investment firm authorized in another Member State or 
a natural or legal person controlling an investment firm 
authorized in another Member State and if, as a result of 
that acquisition, the firm in which the acquirer proposes 
to acquire a holding would become a subsidiary or 
subject to the control of the acquirer, the assessment of 
the acquisition must be the subject of the prior consul­
tation referred to in Article 6. 
3. The Member States shall require any natural or 
legal person who proposes to dispose, directly or indi­
rectly, of a qualifying holding in an investment firm first 
to inform the competent authorities. Such a person must 
likewise inform the competent authorities if he proposes 
to reduce his qualifying holding so that the proportion of 
the voting rights of or the capital held by him would fall 
below 20, 33 or 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 in their capital that cause holdings 
to exceed or fall below one of the thresholds referred to 
in paragraphs 1 and 3. 
They shall also, at least once a year, inform them of the 
names of shareholders and members possessing quali­
fying holdings and the sizes of such holdings as shown, for example, by the information received at the annual 
general meetings of shareholders and members or as a 
result of compliance with the regulations relating to 
companies listed on stock exchanges. 
5. The Member States shall require that, where the 
influence exercised by the persons referred to in 
paragraph 1 is likely to operate to the detriment of the 
prudent and sound management of the investment firm, 
the competent authorities shall take appropriate measures 
to put an end to that situation. Such measures may 
consist, for example, in injunctions, sanctions against 
directors and managers, or the suspension of the exercise 
of the voting rights attaching to the shares held by the 
shareholders or members in question. 
Similar measures shall apply to natural or legal persons 
failing to comply with the obligation to provide prior 
information, as laid down in paragraph 1. If a holding is 
acquired despite the opposition of the competent autho­
rities, the Member States shall, regardless of any other 
sanctions to be adopted, provide either for exercise of 
the corresponding voting rights to be suspended, or for 
the nullity of votes cast or for the possibility of their 
annulment. 
Article 11 
1. Member States shall draw up prudential rules to be 
observed on a continuing basis by investment firms autho­
rized by their competent authorities. Supervision of such 
prudential rules shall be within the exclusive competence 
of the home Member State's competent authorities irres­
pective of whether or not the investment firm establishes 
a branch or provides services in another Member State. 
Such rules shall require that the investment firm: 
— has sound administrative and accounting procedures 
and internal control mechanisms, 
— arranges for securities belonging to investors to be 
kept separately from its own securities, 
— except in the case of investment firms that are credit 
institutions, arranges for money belonging to 
investors to be placed in an account or in accounts 
which are separate and distinct from the firm's own 
account, 
— is either a member of a general compensation scheme 
designed to protect investors who are prevented from 
having claims satisfied because of the bankruptcy or 
default of the investment firm or makes individual 
arrangements which provide investors with equivalent 
protection. Pending further harmonization of 
compensation schemes branches of investment firms 
shall be subject to the compensation scheme in force 
in the host Member State provided that payment or 
contribution to such a compensation scheme shall be 
22. 2. 90 Official Journal of the European Communities No C 42/13 
calculated by reference to their income in respect of 
investment activity carried out in that State, 
— provides the competent authorities of the home 
Member State with such information on request and 
at such intervals as they may determine (but not less 
frequently than quarterly) in order that they may 
assess its financial soundness, including the adequacy 
of its provision in respect of market risk, 
— arranges for adequate records to be kept relating to 
executed transactions which shall be at least sufficient 
to enable the home Member State's authorities to 
monitor compliance with prudential rules which they 
are responsible for applying, including rules relating 
to market risk. Such records shall be retained for 
periods to be laid down by the competent authorities, 
— is organized in such a way that conflicts of interest 
between the firm and its clients or between one of its 
clients and another do not result in clients' interests 
being prejudiced. 
2. Member States may provide that the rules set out in 
the second, third and fourth indents of paragraph 1 shall 
not apply where the service is provided to business or 
professional investors or where the investment service 
does not involve the investment firm in handling any 
money or securities on behalf of clients. 
TITLE V 
Freedom of establishment and freedom to provide 
services 
Article 12 
1. Host Member States shall ensure that any 
investment service and any activities which are ancillary 
thereto may be provided in their territories, in 
accordance with the provisions of Articles 14 to 16, 
either by the establishment of a branch or by way of the 
provision of services, by an investment firm authorized 
to provide the relevant service under this Directive by the 
competent authorities of its home Member State. 
2. Host Member States may not make the estab­
lishment of a branch or the provision of services under 
paragraph 1 subject to an authorization requirement or 
to a requirement to provide endowment capital or any 
measure having equivalent effect. 
Article 13 
1. Without prejudice to the exercise of the freedom of 
establishment and the freedom of services referred to in 
Article 12, host Member States shall ensure that investment firms which are authorized to provide 
broking, dealing or market-making services by the 
competent authorities of their home Member State can 
have access, either directly or indirectly, to membership 
of stock exchanges and organized securities markets of 
host Member States where similar services are provided 
and also to membership of clearing and settlement 
systems there which are available to members of such 
exchanges and markets. 
2. In order to meet their obligation set out in 
paragraph 1, host Member States shall ensure that the 
investment firms referred to in that paragraph have the 
option to become either: 
— direct members of host Member States' stock 
exchanges or organized securities markets by setting 
up a branch in the host Member State, or 
— indirect members by setting up a subsidiary in the 
host Member State or by the acquisition of an 
existing member firm. 
In these cases membership shall be on the basis that the 
rules governing the structure and organization of the 
relevant host stock exchange or organized securities 
market and clearing and settlement systems are complied 
with. 
3. Where the stock exchange or organized securities 
market of the host Member State operates without any 
requirement for a physical presence the investment firms 
referred to in paragraph 1 may become members of it on 
a similar basis without having any establishment in the 
host Member State. Home Member States shall allow 
host stock exchanges or markets to provide appropriate 
facilities within the home Member States' territory so as 
to permit their investment firms to become members of 
the host exchange or market in accordance with this 
paragraph. 
4. Host Member States shall likewise ensure that 
investment firms which are authorized to deal in 
financial futures and options by the competent autho­
rities of their home Member State can have access to 
membership of financial futures and options exchanges 
and membership of clearing houses in the host Member 
State under the same conditions as are set out in para­
graphs 1, 2 and 3. 
Article 14 
1. In addition to meeting the obligations set out in 
Article 3, an investment firm wishing to establish a 
branch in the territory of another Member State shall 
notify the competent authorities of its home Member 
State. 
2. The Member States shall require every investment 
firm wishing to establish a branch in another Member 
State to provide the following information when 
effecting the notification referred to in paragraph 1: 
No C 42/14 Official Journal of the European Communities 22. 2. 90 
(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 business envisaged and the structural organ­
ization of the branch; 
(c) the address in the host Member State from which 
documents may be obtained; 
(d) the names of the managers of the branch. 
3. Unless the competent authorities of the home 
Member State have reason to doubt the adequacy of the 
administrative structure or the financial situation of the 
investment firm, taking into account the activities 
envisaged, they shall, within three months of receipt of 
the information referred to in paragraph 2, communicate 
that information to the competent authorities of the host 
Member State and shall inform the investment firm 
concerned accordingly. 
The competent authorities of the home Member State 
shall also communicate the amount of own funds of the 
investment firm. 
Where the competent authorities of the home Member 
State refuse to communicate the information referred to 
in paragraph 2 to the competent authorities of the host 
Member State, they shall give reasons for their refusal to 
the investment firm concerned within three months of 
receipt of all the information. That refusal or failure to 
reply shall be subject to a right to apply to the courts in 
the home Member State. 
4. Before the branch of an investment firm 
commences its activities the competent authorities of the 
host Member State shall, within two months of receiving 
the information mentioned in paragraph 3, prepare for 
the supervision of the investment firm in accordance with 
Article 16 and, if necessary, indicate the conditions 
under which, in the interest of the general good, those 
activities must be carried on in the host Member State. 
5. On receipt of a communication from the competent 
authorities of the host Member State, or in the event of 
the expiry of the period provided for in paragraph 4 
without receipt of any communication from the latter, 
the branch may be established and commence its acti­
vities. 
6. In the event of a change in any of the particulars 
communicated pursuant to paragraph 2 (b), (c) or, (d), 
an investment firm shall give written notice of the change 
in question to the competent authorities of the home and 
host Member States at least one month before making 
the change so as to enable the competent authorities of 
the home Member State to take a decision under 
paragraph 3 and the competent authorities of the host 
Member State to take a decision on the change under 
paragraph 4. Article 15 
1. Any investment firm wishing to exercise the 
freedom to provide services by carrying on its activities 
within the territory of another Member State for the first 
time shall notify the competent authorities of the home 
Member State of the investment service or services which 
it intends to carry on. 
2. The competent authorities of the home Member 
State shall, within one month of receipt of the notifi­
cation mentioned in paragraph 1, send that notification 
to the competent authorities of the host Member State. 
Article 16 
1. Host Member States may, for statistical purposes, 
require that all investment firms having branches within 
their territories shall report periodically on their activities 
in those host Member States to the competent authorities 
of those host Member States. 
2. Where the competent authorities of a host Member 
State ascertain that an investment firm having a branch 
or providing services within its territory is not complying 
with the legal provisions adopted in that State pursuant 
to the provisions of this Directive involving powers of 
the host Member State competent authorities, those 
authorities shall require the investment firm concerned to 
put an end to the irregular situation. 
3. If the investment firm concerned fails to take the 
necessary steps, the competent authorities of the host 
Member State shall inform the competent authorities of 
the home Member State accordingly. The competent 
authorities of the home Member State shall, at the 
earliest opportunity, take all appropriate measures to 
ensure that the investment firm concerned puts an end to 
that irregular situation. The nature of those measures 
shall be communicated to the competent authorities of 
the host Member State. 
4. If, despite the measures taken by the home Member 
State or because such measures prove inadequate or are 
not available in the Member State in question, the 
investment firm persists in violating the legal rules 
referred to in paragraph 2 in force in the host Member 
State, the latter State may, after informing the competent 
authorities of the home Member State, take appropriate 
measures to prevent or to punish further irregularities 
and, insofar as is necessary, to prevent that investment 
firm from initiating further transactions within its 
territory. The Member States shall ensure that within 
their territories it is possible to serve the legal documents 
necessary for these measures on investment firms. 
22. 2. 90 Official Journal of the European Communities No C 42/15 
5. The foregoing provisions shall not affect the power 
of host Member States to take appropriate measures to 
prevent or to punish irregularities committed within their 
territories which are contrary to the legal rules they have 
adopted in the interest of the general good. This shall 
include the possibility of preventing offending investment 
firms from initiating any further transactions within their 
territories. 
6. Any measure adopted pursuant to paragraphs 3, 4 
and 5 involving penalties or restrictions on the activities 
of an investment firm must be properly justified and 
communicated to the investment firm concerned. Every 
such measure shall be subject to a right of appeal to the 
courts in the Member State the authorities of which 
adopted it. 
7. Before following the procedure set out in para­
graphs 2 to 4 the competent authorities of the host 
Member State may, in emergencies, take any pre­
cautionary measures necessary to protect the interests of 
investors and others to whom services are provided. The 
Commission and the competent authorities of the other 
Member States must be informed of such measures at the 
earliest opportunity. 
The Commission may, after consulting the competent 
authorities of the Member States concerned, decide that 
the Member State in question must amend or abolish 
those measures. 
8. In the event of withdrawal of authorization the 
competent authorities of the host Member State shall be 
informed and shall take appropriate measures to prevent 
the investment firm concerned from initiating further 
transactions within its territory and to safeguard the 
interests of investors. Every two years the Commission 
shall submit a report on such cases to the committee 
constituted under Article 23. 
9. The Member States shall inform the Commission of 
the number and type of cases in which there has been a 
refusal pursuant to Article 14 or measures have been 
taken in accordance with the provisions of paragraph 4. 
Every two years, the Commission shall submit a report 
on such cases to the committee constituted under Article 
23. 
10. Nothing in this Article shall prevent investment 
firms authorized in other Member States from adver­
tising their services through all available means of 
communication in the host Member State, subject to any 
rules governing the form and the content of such adver­
tising adopted in the interest of the general good. TITLE VI 
The authorities responsible for authorization and super­
vision 
Article 17 
1. The Member States shall designate the authorities 
which are to carry out the duties provided for in this 
Directive. They shall inform the Commission thereof, 
indicating any division of duties. 
2. The authorities referred to in paragraph 1 must be 
public authorities or bodies officially recognized by 
national law or by public authorities to be part of the 
supervisory system prevailing in the relevant Member 
State. 
3. The authorities concerned must be granted all the 
powers necessary to carry out their task. 
Article 18 
1. Where there are several competent authorities in 
the same Member State they shall collaborate closely in 
order to supervise the activities of investment firms 
operating there. 
2. Member States shall also permit such collaboration 
to take place between such competent authorities and 
public authorities responsible for the supervision of credit 
and other financial institutions and insurance companies 
as regards the respective entitles supervised by them. 
3. Where investment services are provided on a 
services basis across frontiers or by the establishment of 
branches in one or more Member States other than the 
home Member State the competent authorities of the 
Member States concerned shall collaborate closely in 
order to supervise the activities of the investment firms 
concerned. They shall supply one another on request 
with all information concerning the management and 
ownership of such investment firms that is likely to 
facilitate their supervision and the examination of the 
conditions for their authorization and all information 
likely to facilitate the monitoring of such firms. 
Article 19 
1. Host Member States shall ensure that, where an 
investment firm authorized in another Member State 
carries on its activities there through a branch, the 
competent authorities of the home Member State may, 
after having first informed the competent authorities of 
the host Member State, carry out themselves or through 
the intermediary of persons they appoint for that purpose 
on-the-spot verification of the information referred to in 
Article 18 (3). 
No C 42/16 Official Journal of the European Communities 22. 2. 90 
2. The competent authorities of the home Member 
States may also ask the competent authorities of the host 
Member State for this verification to be carried out. The 
authorities which have received such a request must, 
within the framework of their competence, act upon it 
either by carrying out the verification themselves, or by 
allowing the authorities who made the request to carry it 
out, or by allowing an auditor or expert to carry it out. 
3. This Article shall not affect the right of the 
competent authorities of the host Member State to carry 
out, in the discharge of their responsibilities unter this 
Directive, on-the-spot verifications of branches estab­
lished within their territory. 
Article 20 
1. The Member States shall provide that all persons 
working or who have worked for the competent auth­
orities, as well as auditors or experts acting on behalf of 
the competent authorities, shall be bound by the obli­
gation of professional secrecy. This means that no 
confidential information which they may receive in the 
course of their duties may be divulged to any person or 
authority whatsoever, except in summary or collective 
form such that individual investment firms cannot be 
identified, 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 does not concern third 
parties involved in attempts to rescue that investment 
firm may be divulged in civil or commercial proceedings. 
2. Notwithstanding paragraph 1, the competent auth­
orities of the various Member States and the public auth­
orities responsible for the supervision of credit and other 
financial institutions shall be authorized to exchange 
information in accordance with the provisions of Article 
18 where appropriate for the efficient discharge of their 
respective responsibilities. This information shall be 
subject to the conditions of professional secrecy referred 
to in paragraph 1. 
3. Member States may conclude cooperation 
agreements, providing for exchanges of information, 
with the competent authorities of third countries only if 
the information disclosed is subject to guarantees of 
professional secrecy at least equivalent to those referred 
to in this Article. 
4. Competent authorities receiving confidential infor­
mation under paragraphs 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 the entities supervised by them are 
met and to facilitate the monitoring of the conduct of 
such business, the administrative and accounting 
procedures and the mechanisms of internal control, or 
— to impose sanctions, 
or 
— in an administrative appeal against a decision of the 
competent authority, 
or 
— in court proceedings instituted pursuant to Article 21. 
5. Paragraphs 1 and 4 shall not preclude the exchange 
of information within a Member State, or between 
Member States, between competent authorities and: 
— authorities responsible for the supervision of financial 
markets, 
— bodies involved in the liquidation and bankruptcy of 
investment firms and in other similar procedures, 
— persons responsible for carrying out statutory audits 
of the accounts of investment firms and other 
financial institutions, 
in the discharge of their supervisory functions, and the 
disclosure to bodies which administer compensation 
schemes of information necessary to the exercise of their 
functions. This information shall be subject to the 
conditions of professional secrecy referred to in 
paragraph 1. 
6. In addition, notwithstanding the provisions referred 
to in paragraphs 1 and 4, the Member States may, by 
virtue of provisions laid down by law, authorize the 
disclosure of certain information to other departments of 
their central government administrations responsible for 
legislation on the supervision of credit institutions, 
financial institutions, investment firms and insurance 
companies and to inspectors acting on behalf of those 
departments. 
However, such disclosures may be made only where 
necessary for reasons of prudential control. 
However, the Member States shall provide that infor­
mation received under paragraphs 2 and 5 and that 
obtained by means of the on-the-spot verification 
referred to in Article 19 may never be disclosed in the 
cases referred to in this paragraph except with the 
express consent of the competent authorities which 
disclosed the information or of the competent authorities 
of the Member State in which on-the-spot verification 
was carried out. 
Article 21 
Member States shall ensure that decisions taken in 
respect of an investment firm pursuant to laws, regu­
lations and administrative provisions adopted in 
accordance with this Directive may be subject to the 
right to apply to the courts. The same shall apply where 
an application for authorization is deemed to be refused 
in accordance with Article 3 (4). 
22. 2. 90 Official Journal of the European Communities No C 42/17 
Article 22 
Without prejudice to the procedures for the withdrawal 
of authorizations and the provisions of criminal law, 
Member States shall provide that their respective 
competent authorities may, as against investment firms, 
or those who effectively control the business of such 
firms which infringe laws, regulations or administrative 
provisions concerning the supervision or pursuit of their 
activities, adopt or impose in respect of them penalties or 
measures aimed specifically at ending observed breaches 
or the causes of such breaches. 
TITLE VII 
Final provisions 
Article 23 
1. The technical adaptations to be made to this 
Directive in the following areas shall be adopted in 
accordance with the procedure laid down in paragraph 
2: 
— expansion of the content of the list in the Annex or 
adaptation of the terminology used in that list to take 
account of developments on financial markets, 
— alteration of the amount of initial capital referred to 
in Article 3 to take account of developments in the 
economic and monetary field, 
— the areas in which the competent authorities must 
exchange information as listed in Article 18, 
— clarification of the definitions in order to ensure 
uniform application of this Directive throughout the 
Community, 
— clarification of the definitions in order to take 
account in the implementation of this Directive of 
developments on financial markets, 
— the alignment of terminology on and the framing of 
definitions in accordance with subsequent measures 
on investment firms and related matters. 
2. The Commission shall be assisted by a committee 
composed of representatives of the Member States and 
chaired by a representative of the Commission. 
The representative of the Commission shall submit to the 
committee a draft of the measures to be taken. The 
committee shall deliver its opinion on the draft within a 
time limit which the chairman may lay down according 
to the urgency of the matter. The opinion shall be 
delivered by the majority laid down in Article 148 (2) of 
the Treaty in the case of decisions which the Council is 
required to adopt on a proposal from the Commission. 
The votes of the representatives of the Member States within the committee shall be weighted in the manner set 
out in that Article. The chairman shall not vote. 
The Commission shall adopt the measures envisaged if 
they are in accordance with the opinion of the 
committee. 
If the measures envisaged are not in accordance with the 
opinion of the committee, or if no opinion is delivered, 
the Commission shall, without delay, submit to the 
Council a proposal relating to the measures to be taken. 
The Council shall act by a qualified majority. 
If, on the expiry of three months from the date of 
referral to the Council, the Council has not acted, the 
proposed measures shall be adopted by the Commission. 
Article 24 
1. Investment firms already authorized to provide 
investment services in their home Member State before 
the entry into force of the provisions adopted in 
implementation of this Directive shall be deemed to be 
authorized for the purposes of this Directive provided 
that the authorization was given under equivalent 
conditions to those set out in Articles 3 (2) and 4. 
2. Branches which have commenced their activities, in 
accordance with the provisions in force in their host 
Member States, before the entry into force of the 
provisions adopted in implementation of this Directive 
shall be presumed to have been subject to the procedures 
envisaged in Article 14 (1), (2) and (3). They shall be 
governed, from the date of that entry into force, by the 
provisions of Articles 12, 14 (6), 16 and 19. 
3. Article 15 shall not affect rights acquired before the 
entry into force of the provisions adopted in implemen­
tation of this Directive by investment firms providing 
services. 
Article 25 
1. Member States shall bring into force the laws, 
regulations and administrative provisions necessary to 
comply with this Directive by 1 January 1993. They shall 
forthwith inform the Commission thereof. 
The provisions adopted pursuant to the first 
subparagraph shall make express reference to this 
Directive. 
2. Member States shall communicate to the 
Commission the texts of the main provisions of national 
law which they adopt in the field covered by this 
Directive, 
Article 26 
This Directive is addressed to the Member States. 
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