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Brussels, 08.05.1996 
COM(96) 169 final - COD 47 
OPINION OF THE COMMISSION 
pursuant to Article 189 b (2) (d) of the EC Treaty 
on the European Parliament's amendments 
to the Council's common position regarding the 
proposal for a 
EUROPEAN PARLIAMENT AND COUNCIL DIRECTIVE 
ON INVESTOR COMPENSATION SCHEMES 

OPINION OF THE COMMISSION 
pursuant to Article 189 b (2) (d) of the EC Treaty 
on the European Parliament's amendments 
to the Council's common position regarding the 
proposal for a 
EUROPEAN PARLIAMENT AND COUNCIL DIRECTIVE 
ON INVESTOR COMPENSATION SCHEMES 
1. STAGE REACHED IN THE PROCEDURE 
a) On 22 September 1993 the Commission adopted a proposal for a Council Directive 
on investor compensation schemes1. This proposal was forwarded to the Council on 
22 October 1993. 
The Council forwarded this text to Parliament and to the Economic and Social 
Committee and on 14 January 1994 began its own examination of the proposal. 
b) The Economic and Social Committee unanimously adopted an opinion on the 
Commission proposal at its 312th Plenary Session on 26 January 19942. 
c) The European Parliament adopted the legislative resolution embodying the opinion 
of Parliament on the Commission proposal at its sitting on 19 April 19943. 
d) The European Monetary Institute delivered an opinion on this proposal on 28 July 
1995. 
c) On 13 December 1994 the Commission adopted an amended proposal4 in the light of 
its consultation of Parliament and of the Economic and Social Committee. 
0 On 23 October 1995 the Council adopted the common position which is the subject 
of this communication. 
g) In the plenary session of 14 December 1995 the President of the Parliament 
acknowledged receipt of the common position. 
1 COM(93)381 final, OJ N" C 321, 27.1 1. 1993, p. 15 
2 OJN°C 127, 7.5.1994, p. I 
3 OJN° 128, 9.5.1994, p. 80 
1 COM(94) 585 final, OJ N"C 382, 31.12.1994, p. 27 
2 
h) On 12 March 1996 the European Parliament adopted unanimously eight amendments 
to the common position5. 
In accordance with the procedure described in Article 189 b (2) of the Treaty, the 
Commission has to deliver an opinion on these amendments. 
2. POSITION TAKEN BY THE COMMISSION REPRESENTATIVE AT THE 
PLENARY SITTING 
The Commission representative rejected all the eight amendments. 
3. COMMISSION OPINION ON THE AMENDMENTS VOTED BY THE 
EUROPEAN PARLIAMENT 
a) Purpose of the amendments 
Amendment N° 1 (Recital N° 16) 
Its aim is to eliminate the "export-ban" clause. 
Amendment N° 2 (Article 2.2,1st indent) 
Its aim is twofold. On the one hand, the rapporteur considers that schemes should 
compensate investors not only when the investment firm is in financial difficulties, but 
in all circumstances On the other hand, the rapporteur considers that the schemes should 
have the same power as the competent authorities to determine when investors must be 
compensated. 
Amendment N° 3 (Article 2.2, 2nd indent) 
Its aim and scope is similar to that of amendment N° 2. The only difference is thai the 
reference is to a judicial authority rather than to competent authorities. 
Amendment N° 4 (Article 2.4) 
It seeks to ensure that the value, to be stipulated by the scheme, of the securities 
belonging to investors will be their market value. 
Amendment N° 5 (Article 5.2) 
The twelve months' notice to exclude a firm from a scheme is considered too long, it is 
considered more appropriate to have immediate exclusion. 
cxt not yet published in the Official Journal 
Amendment N° 6 (Article 7.1, 2nd subparagraph) 
The same objective as amendment N° 1. 
Amendment N° 7 (Article 7.2, 2nd paragraph) 
The same as amendment N" S but applying to the case of branches which have become 
members of a scheme of a host Member State in order to top-up their coverage. 
Amendment N° S (Article 9.2) 
Its aim is to start counting the three months' period to compensate investors from the 
date the investment firm has been considered unable to meet its obligations (if the 
eligibility and the amount of the claim have been established). 
b) Need for consistency with the Deposit Guarantee Schemes Directive (DGSD^ 
The text of the common position is very similar to that of the DGSD. The Commission 
initial proposal differs in several aspects from the final text of the DGSD because when 
it was adopted (22.9.93) the DGSD was still under negotiation. The DGSD was adopted 
on 30.5.94 by co-decision (after passing through the conciliation committee). This 
means that the DGSD reflects both Council and Parliament's opinion on compensation 
schemes. 
The need for consistency between the proposal and the DGSD has been stressed not only 
by the Council and the Commission. It has also been requested by the Parliament6, by 
the ECOSOC7, and by Industry representatives (the Banking Federation of the EU). 
The need for legislative coherence between the proposal and the DGSD is particularly 
evident in the case of credit institutions because Article 2.3 of the common position 
allows them to belong to just one scheme to comply with both directives. Lack of 
consistency may produce undesirable distortions. 
c) Commission position 
For the Commission, the concern for consistency with the DGSD is an important 
argument, in addition to those developed below, to reject amendments N° 1, 2, 3, 5, 6 
and 7. 
6 Section B-2. Report A3-0209/94. First Reading. 
I'oint 3.3 of the ECOSOC opinion (CES 98.94) 
Amendments N° 1 and 6 (not acceptable) 
The text in the common position is equivalent to that in Recital N° 14 and in Article 4.1 
of the DGSD. The elimination of the export-ban clause, whereby branches in host 
Member States will not be allowed to otïer a higher protection than that offered by 
domestic scheme(s), would in principle increase the competition between, and 
presumably the efficiency of, the investment firms. This is in line with the philosophy 
underlying the single market. However, it may also produce unwanted volatility and 
instability in the financial markets. To strike a balance between a higher degree of 
competition and a higher degree of volatility is not easy "a priori". That is why it seems 
advisable to establish a short transitory period (in this case until 31.12.99) to watch 
developments closely . 
Amendments N° 2 and 3 (not acceptable) 
The text in the Common Position is equivalent to that in Articles I.3.i and 1.3.ii of the 
DGSD. Parliament proposes to go back to Article 2.2 of the initial Commission 
proposal. 
On the one hand, during the discussions in the Council with the Member States it 
became clear that only investment firms in financial difficulties should trigger the 
intervention of the scheme because if the investment firm is still financially sound it 
would be up to it to repair the damage caused to investors. Therefore the wording in the 
common position would cover, in practice, all common causes (fraud, etc.) for 
compensation. 
On the other hand, it seems more prudent to leave it up to the competent authorities (or 
judicial authorities) alone to decide when the scheme should intervene. This, in addition, 
will eliminate the risk of having disputes in case both the authorities and the scheme 
were allowed to make such a decision. 
Amendment N° 4 (not acceptable) 
Parliament proposes to go back to the concept of "market" value inserted in Article 2.4 
of the initial proposal. In the DGSD there is nothing equivalent because securities are not 
covered there. 
The concept of market value seems in principle attractive, and useful in some specific 
cases, but often in practice it may be very difficult to apply. In some cases there are 
several markets for the same instrument. In others, when securities are highly illiquid, 
the market value is unavailable. Frequently, there is no organised market for the relevant 
security. In the case of some derivatives (futures and options) the contracts may have 
already expired. 
Given these difficulties, with the use of market value as a general rule, it seems more 
advisable to give Member States some leeway to devise the precise methods to calculate 
the most appropriate value in each situation. 
Amendments N° 5 and 7 (not acceptable) 
The text in the common position is equivalent to that in Articles 3.3 and 4.4 of the 
DGSD. Parliament proposes to go back to Article 5 of the initial Commission proposal. 
In the case of amendment N° 5, the immediate exclusion of an investment firm from a 
scheme will not be to the benefit of the current investors because it will entail the 
immediate removal of the authorization (the European passport) of the investment firm 
and therefore it will have to cease immediately its operations. In the case of amendment 
N° 7, it does not produce the removal of the authorization but it will deprive investors of 
an extra coverage ("top-up") in case they had to be compensated. 
Amendment N° 8 (not acceptable) 
Parliament proposes to go back to the text in Article 10 of the initial Commission 
proposal. The text in Article 10 of the DGSD is not directly applicable here because 
"investment" in relation to "deposit" is a less standardised and more sophisticated 
activity. 
The text proposed by Parliament does not carry, in practice, any real additional 
protection to investors because the compensation is still conditional on the fact that the 
"eligibility and the amount of the claim have been established" and experience shows 
that in the case of securities it takes a long time (sometimes years) to determine the 
precise liabilities. 
EUROPEAN PARLIAMENT 
5 March 1996 A4-0047/1 
AMENDMENT 1 
tabled by the Committee on Legal Affairs and Citizens' Rights 
RECOMMENDATION FOR SECOND READING (A4-0047/96) 
Rapporteur: Mr Janssen Van Raay 
INVESTOR-COMPENSATION SCHEMES 
Common position of the Council 
(C4-0523/95 - 00/0471(COD)) 
Common position of the Council Amendment 
(Amendment 1 j 
Recital 16 
16. Whereas market disturbances could Deleted 
be caused bv branches of investment 
firms established in Member States 
other than their Member States of 
origin which offer levels of cover 
higher than those offered bv 
investment firms authorized in their 
host Member States; whereas it not 
appropriate that the level or scope 
of cover offered by compensation 
schemes should become an instrument 
of competition; whereas it is 
therefore necessary, at least during 
an initial period, to stipulate that 
neither the level nor the scope of 
cover offered by a home Member 
State's scheme to investors at 
branches located in another Member 
State should exceed the maximum level 
or scope offered bv the corresponding 
scheme in the host Member State; 
whereas any market disturbances 
should be reviewed after a number of 
years, on the basis of the experience 
acquired and in the light of 
developments in the financial sector; 
f PE 197.378/1 
Or. en 
EUROPEAN PARLIAMENT 
5 March 1996 A4-0047/2 
AMENDMENT 2 
tabled by the Committee on Legal Affairs and Citizens' Rights 
RECOMMENDATION FOR SECOND READING 
Rapporteur: Mr Janssen Van Raay (A4-0047/96) 
INVESTOR-COMPENSATION SCHEMES 
Common position of the Council 
(C4-0523/95 - 00/0471(COD)) 
Common position of the Council Amendment 
(Amendment 2) 
Article 2(2), 1st subparagraph, 1st indent 
the competent authorities have 
determined that in their view an 
investment firm appears, for the 
time being, for reasons directly 
related to its financial 
circumstances, to be unable to 
meet its obligations arising out 
of investors' claims and has no 
early prospect of being able to 
do so, or the competent authorities or 
investor-compensation scheme have 
determined that in their view an 
investment firm appears, for the 
time being, to be unable to meet 
its obligations arising out of 
investors' claims and has no 
early prospect of being able to 
do so, or 
PE 197.378/2 
Or. en 
EUROPEAN PARLIAMENT 
5 March 1996 A4-0047/3 
AMENDMENT 3 
tabled by the Committee on Legal Affairs and Citizens' Rights 
RECOMMENDATION FOR SECOND READING 
Rapporteur: Mr Janssen Van Raay (A4-0047/96) 
INVESTOR-COMPENSATION SCHEMES 
Common position of the Council 
(C4-0523/95 - 00/0471(COD)) 
Common position of the Council Amendment 
(Amendment 3) 
Article 2(2), 1st subparagraph, 2nd indent 
a judicial authority has made a 
ruling, for reasons directly 
related to an investment firm's 
financial circumstances. which 
has the effect of suspending 
investors' ability to make claims 
against it, a judicial authority or investor-
compensation scheme has made a 
ruling which has the effect of 
suspending investors' ability to 
make claims against it, 
r tm~ 378/3 
Or. en 
EUROPEAN PARLIAMENT 
5 March 1996 A4-0047/4 
AMENDMENT 4 
tabled by the Committee on Legal Affairs and Citizens' Rights 
RECOMMENDATION FOR SECOND READING 
Rapporteur: Mr Janssen Van Raay (A4-0047/96) 
INVESTOR-COMPENSATION SCHEMES 
Common position of the Council 
(C4-0523/95 - 00/0471(COD)) 
Common position of the Council Amendment 
(Amendment 4) 
Article 2(4) 
4. The amount of an investor's claim 
shall be calculated in accordance 
with the legal and contractual 
conditions, in particular those 
concerning set off and counter 
claims, that are applicable to the 
assessment, on the date of the 
determination or ruling referred to 
in paragraph 2, of the amount of the 
money or the value of the instruments 
belonging to the investor which the 
investment firm is unable to pay or 
return. 4. The amount of an investor's claim 
shall be calculated in accordance 
with the legal and contractual 
conditions, in particular those 
concerning set off and counter 
claims, that are applicable to the 
assessment, on the date of the 
determination or ruling referred to 
in paragraph 2, of the amount of the 
money or the market value of the 
instruments belonging to the investor 
which the investment firm is unable 
to pay or return. 
4 PE 197.378/4 
Or. en 
EUROPEAN PARLIAMENT 
5 March 1996 A4-0047/5 
AMENDMENT 5 
tabled by the Committee on Legal Affairs and Citizens' Rights 
RECOMMENDATION FOR SECOND READING 
Rapporteur: Mr Janssen Van Raay (A4-0047/96) 
INVESTOR-COMPENSATION SCHEMES 
Common position of the Council 
(C4-0523/95 - 00/0471(COD)) 
Common position of the Council Amendment 
(Amendment 5) 
Article 5(2) 
2. If those measures fail to secure 
compliance on the part of the 
investment firm, the scheme may, 
where national law permits the 
exclusion of a member, with the 
express consent of the competent 
authorities, give not less than 
twelve months notice of its intention 
of excluding the investment firm from 
membership of the scheme. The scheme 
shall continue to provide cover under 
the second subparagraph of Article 
2(2) in respect of investment 
business transacted during that 
period. If, on expiry of the period 
of notice, the investment firm has 
not met its obligations. the 
compensation scheme mav. again having 
obtained the express consent of the 
competent authorities, proceed to 
exclusion. 2. If those measures fail to secure 
compliance on the part of the 
investment firm, the scheme may, 
where national law permits the 
exclusion of a member, with the 
express consent of the competent 
authorities exclude the investment 
firm from membership of the scheme. 
The coverage of money or instruments 
belonging to investors and held by 
the investment firm or branch thereof 
at the date of exclusion shall be 
maintained for twelve months from the 
date of exclusion. 
41 PE 197.378/5 
Or. en 
EUROPEAN PARLIAMENT 
5 March 1996 A4-0047/6 
AMENDMENT 6 
tabled by the Committee on Legal Affairs and Citizens' Rights 
RECOMMENDATION FOR SECOND READING (A4-0047/96) 
Rapporteur: Mr Janssen Van Raay 
INVESTOR-COMPENSATION SCHEMES 
Common position of the Council 
(C4-0523/95 - 00/0471(COD)) 
Common position of the Council Amendment 
(Amendment 6) 
Article 7(1), 2nd subparagraph 
Until 31 December 1999. neither the Deleted 
level nor the scope, including the 
percentage, of the cover provided for 
may exceed the maximum level or scope 
of the cover offered by the 
corresponding compensation scheme 
within the territory of the host 
Member State. Before that date the 
Commission shall draw up a report on 
the basis of the experience acquired 
in applying this subparagraph and 
shall consider the need to continue 
those provisions. If appropriate, 
the Commission shall submit a 
proposal for a Directive to the 
European Parliament and the Council, 
with a view to the extension of their 
validity. 
PE 197.378/6 
Or. en 
•\i 
EUROPEAN PARLIAMENT 
5 March 1996 A4-0047/7 
AMENDMENT 7 
tabled by the Committee on Legal Affairs and Citizens' Rights 
RECOMMENDATION FOR SECOND READING 
Rapporteur: Mr Janssen Van Raay (A4-0047/96) 
INVESTOR-COMPENSATION SCHEMES 
Common position of the Council 
(C4-0523/95 - 00/0471(COD)) 
Common position of the Council Amendment 
(Amendment 7) 
Article 7(2), 2nd paragraph 
If those measures fail to ensure that 
the branch meets the obligations 
referred to in this Article, after an 
appropriate period of notice of not 
less than 12 months the compensation 
scheme may, with the consent of the 
competent authorities which issued 
the authorization, exclude the 
branch. Investment business 
transacted before the date of 
exclusion shall continue to be 
covered after that date by the 
compensation scheme of which the 
branch was a voluntary member. 
Investors shall be informed of the 
withdrawal of the supplementary cover 
and of the date on which it takes 
effect. If those measures fail to ensure that 
the branch meets the obligations 
referred to in this Article, the 
compensation scheme may, with the 
consent of the competent authorities 
which issued the authorization, 
exclude the branch. Investment 
business transacted before the date 
of exclusion shall continue to be 
covered after that date by the 
compensation scheme of which the 
oranch was a voluntary member. 
Investors shall be informed of the 
withdrawal of the supplementary cover 
and of the date on which it takes 
effect. 
ft PE 197.378/7 
Or. en 
EUROPEAN PARLIAMENT 
5 March 1996 A4-0047/8 
AMENDMENT 8 
tabled by the Committee on Legal Affairs and Citizens' Rights 
RECOMMENDATION FOR SECOND READING (A4-0047/96) 
Rapporteur: Mr Janssen Van Raay 
INVESTOR-COMPENSATION SCHEMES 
Common position of the Council 
(C4-0523/95 - 00/0471(COD)) 
• Common position of the Council Amendment 
(Amendment 8) 
Article 9(2), 1st subparagraph 
2. The scheme shall be in a position 2. The scheme shall be in a position 
to pay an investor's claim within to pay an investor's claim within 
three» months of the establishment of three months of the date of the 
the eligibility and the amount of the determination or ruling referred to 
claim. in Article 2(2) if the eligibility 
and the amount of the claim have been 
established. 
PE 197.378/8 
j. Or. en 
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