Proposal for a Directive of the European Parliament and of the Council of amending Directive 2004/39/EC on markets in financial instruments, as regards certain deadlines
Date: 2005-06-14
Institutions: European Commission
Subjects: credit institution, financial instrument, financial market, investment company, provision of services, securities

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 14.6.2005 
COM(2005) 253 final 

2005/0111 (COD) 

Proposal for a 

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL  

of  
amending Directive 2004/39/EC on markets in financial instruments, as regards certain 
deadlines 

(presented by the Commission) 

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EXPLANATORY MEMORANDUM 

1)  CONTEXT OF THE PROPOSAL 

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•  Grounds for and objectives of the proposal 

This proposal concerns extending the transposition deadline for Member States and the 
compliance  date  for  regulated  firms  of  Directive  2004/39/EC  on  Market  in  Financial 
Instruments  (MiFID).  This  is  because  serious  difficulties  have  been  reported  by 
industry  and  Member  States  in  relation  to  the  ability  of  regulated  entities  to  comply 
with the current deadline for transposition of the Directive (30 April 2006). 

1. 

Adoption of implementing measures in practice shortens transposition period 

The transposition deadline agreed in Council and by the European Parliament was the 
standard  24  months  after  the  entry  into  force  of  the  directive.  However,  a  significant 
part  of  that  transposition  period  will  be  taken  up  by  the  preparation  of  the  necessary 
implementing  measures  for  17  provisions  of  the  directive,  which  cannot  be  effective 
without  such  measures.  Under  current  planning,  the  Commission  expects  to  have 
adopted  the  complete  set  of  implementing  measures  by  the  beginning  of  2006.  The 
adoption of these measures cannot be accelerated both because of their complexity, the 
need to consult widely and building consensus as well as because the process must be 
carried  out  in  accordance  with  the  comitology  procedure  specified  in  Decision 
1999/468/EC.  Transposition  of  those  provisions  of  the  Directive  which  are  linked  to 
implementing measures cannot proceed until the concomitant implementing measures 
have been finalised. In fact, this delay in turn affects the timely transposition of other 
provisions  of  the  Directive  related  to  the  provisions  that  require  implementing 
measures.  As  a  result,  Member  States  will  not  have  sufficient  time  to  complete  the 
transposition of the entire Directive in the period between the expected adoption of the 
implementing measures (beginning 2006) and the current transposition deadline (April 
2006).  Therefore  in  order  to  ensure  the  effective  and  uniform  implementation  of  the 
MIFID  in  all  Member  States  from  the  transposition  deadline,  it  is  appropriate  to 
postpone that deadline.  

2. 

Practical implications for the firms 

The Commission services have been informed by a wide range of industry participants 
that  the  current  MIFID  implementing  timetable  imposes  impossible  deadlines  for  the 
entities within its scope. These contend that compliance with the MIFID may require 
significant  time  consuming  modifications  to  their  technological  infrastructure,  IT 
software, record-keeping and reporting systems. In addition, firms may have to adapt 
internal  policies  and  guidelines  concerning  client  relations,  the  segregation  of  assets, 
and the management of conflicts of interest.  

Moreover, market participants claim not to be able to make definitive decisions as to 
what operational steps will be needed until implementing measures are finally adopted. 
Directive 2004/39/EC only sets general principles with respect to these requirements; 
the precise technical details will be provided for in the implementing legislation which 

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120 

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will not be available until year end.  

•  General context 

Technical modification of directive 2004/39/EC.  

•  Existing provisions in the area of the proposal 

Directive 2004/39/EC 

•  Consistency with other policies and objectives of the Union 

Directive 2004/39/EC 

2)  CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT 

•  Consultation of interested parties 

Though no specific consultation has been launched for this proposal its presentation is 
justified because : 

-  There  have  been  numerous  comments  from  the  industry  to  the  Commission, 
providing extensive evidence that an extension of the deadline for the application of the 
Directive is essential to allow market participants sufficient time to adapt systems and 
procedures to comply with the MiFID;  

- Discussions with Member States in the European Securities Committee have shown 
that  Member  States,  having  consulted  their  markets  and  evaluated  their  transposition 
needs,  are  almost  unanimously  in  favour  of  the  proposed  extension  of  both  the 
transposition and application deadlines;  

- Responses received to a general consultation on legislative procedures in the field of 
securities markets have indicated very broad support for the extension of transposition 
deadlines generally  in  this  field;  a  number of respondents referred to the MiFID as a 
specific  example  of  a  directive  the  complexity  of  which  justified  an  extended 
transposition deadline.  

-  The  need  to  extend  deadlines  was  also  confirmed  in  the  3rd  Report  of  the  Inter-
institutional  Monitoring  Group  on  the  monitoring  of  the  Lamfalussy  process  of  17th 
November .  

•  Collection and use of expertise 

There was no need for external expertise. 

•  Impact assessment 

See Directive 2004/39/EC  

3)  LEGAL ELEMENTS OF THE PROPOSAL 

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305 

•  Summary of the proposed action 

The purpose of the present proposal is to remedy to the difficulties that Member States 
and the industry will face in the transposition and application of the Directive. To this 
end it is proposed to : 

- extend the deadline by which Member States must transpose the MiFID into national 
law by 6 months, i.e. until October 2006; 

- grant an extra 6 month period, after transposition into national law, for the effective 
application of the MiFID in order to allow firms sufficient time to adapt their systems 
and internal procedures so as to comply with the requirements of the Directive i.e. until 
April 2007. 

Given  the  close  interaction  between  the  various  parts  of  the  MiFID,  these  proposals 
apply to the whole Directive (and not just those provisions which will be supplemented 
by implementing measures).  

1. 

Technical modifications 

All  modifications  to  Directive  2004/39/EC  have  been  included  in  one  single  Article 
(Article 1). These are : 

the  substitution  of  the  transposition  deadline  for  Member  States  with  the  new 

1) 
date of 30.10.06 . 

a  further  deadline  of  6  months  for  Member  States  to  defer  the  application  of 

2) 
new domestic laws implementing the MiFID until 30.4.07. 

3) 

A number of further consequential amendments are required to - 

a. 
The  date of repeal of Directive 93/22/EC (the Investment Services Directive), 
which is to be replaced by the MiFID, must be postponed by 6 months to coincide with 
the extended transposition deadline of the MiFID in order to avoid a legislative void. 
However, it is proposed that Member States should be required to retain their current 
national  regulatory  regime  implementing  Directive  93/22/EC  for  a  further  6  months 
after that Directive has been repealed in order to avoid a legal void;  

The date of entry into force of the transitional provisions in Article 71. These 
b. 
provisions should come into force at the same time as the full application of the MiFID 
in Member States; 

The dates by which the Commission is required to produce a series of reports 
c. 
concerning  matters relating to  the  MiFID  and  its  operation. The  timetable  for  reports 
was  designed  to  allow  the  Commission  to  monitor  the  practical  application  of  the 
MiFID - and so logically they also should be deferred by 12 months. 

These  modifications  are  purely  technical,  and  are  necessary  to  preserve  the  timetable 
for the various stages of entry into force and the review of the directive. 

2. 

Transposition - entry into force 

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For reasons of coherence the transposition deadline for this proposal has been aligned 
to  the  proposed  extended  transposition  deadline  (i.e.  30  October  2006)  for  Directive 
2004/39/EC  (Article  2).  However,  national  legislation,  implementing  the  previous 
regime  established  by  Directive  93/22/EC  may  remain  into  force  until  the  full 
application  of  the  MiFID  into  national  law  (i.e.  30  April  2007).  The  proposal,  once 
adopted by the Council and EP should enter into force on the day following that of its 
publication. 

This  is  a  proposal  of  a  Directive  for  modifying  a  basic  Directive  providing  for 
harmonisation  of  authorisation  conditions  in  order  to  ensure  effective  freedom  of 
establishment  and  free  provision  of  services  ("coordination  directive").  The  proposal 
only includes some technical adaptations strictly linked to the extension of the various 
deadlines  included  in  the  basic  Directive;  no  further  substantial  modification  is 
provided for in the proposal.  

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•  Legal basis 

Article 47(2) of the EC Treaty 

•  Subsidiarity principle 

The  subsidiarity  principle  applies  insofar  as  the  proposal  does  not  fall  under  the 
exclusive competence of the Community. 

The  objectives  of  the  proposal  cannot  be sufficiently  achieved  by  the  Member  States 
for the following reason(s): 

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see Directive 2004/39/EC  

Community action will better achieve the objectives of the proposal for the following 
reason(s): 

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see Directive 2004/39/EC  

The proposal therefore complies with the subsidiarity principle: 

•  Proportionality principle 

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The proposal complies with the proportionality principle for the following reason(s): 

The  proposed  extensions  are  balanced  and  proportionate.  They  grant  Member  States 
and  regulated  entities  the  additional  time  needed  to  comply  properly  with  the 
requirements of the Directive, but do not go beyond what is necessary. 

•  Choice of instruments 

Proposed instruments: Directive. 

Other means would not be adequate for the following reason(s). 

Modifying  Directive  including  technical  adaptations  to  Directive  2004/39/EC:  A 

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directive can only be modified by another directive. 

4)  BUDGETARY IMPLICATION 

The proposal has no implication for the Community budget. 

5)  ADDITIONAL INFORMATION 

The  Member  States  are  required  to  communicate  to  the  Commission  the  text  of 
national  provisions  transposing  the  Directive.  No  obligation  to  provide  a  correlation 
table  is  included  in  this  Directive  since  this  obligation  had  not  been  included  in  the 
basic Directive either. . 

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2005/0111 (COD) 

Proposal for a 

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL  

of  
amending Directive 2004/39/EC on markets in financial instruments, as regards certain 
deadlines 

(Text with EEA relevance) 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, and in particular Article 
47(2) thereof, 

Having regard to the proposal from the Commission1, 

Acting in accordance with the procedure laid down in Article 251 of the Treaty, 

Whereas: 

(1) 

(2) 

(3) 

Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 
on  markets  in  financial  instruments  amending  Council  Directives  85/611/EEC  and 
93/6/EEC  and  Directive  2000/12/EC  of  the  European  Parliament  and  of  the  Council 
and  repealing  Council  Directive  93/22/EEC2  introduces  a  comprehensive  regulatory 
regime to ensure a high quality of execution of investor transactions. 

Directive  2004/39/EC  provides  that  Member  States  shall  adopt  the  laws,  regulations 
and  administrative  provisions  to  comply  with  that  Directive  by  30  April  2006  at  the 
latest.  In  order  to  ensure  uniform  application  in  the  Member  States,  a  significant 
number  of  complex  provisions  of  that  Directive  need  to  be  supplemented  by 
implementing  measures,  to  be  adopted  by  the  Commission  during  the  period  for 
transposition  by  Member  States.  Because  Member  States  cannot  fully  prepare  and 
finalise  their  domestic  laws  until  the  content  of  the  implementing  measures  is  clear, 
they may have difficulty in meeting the current transposition deadline. 

In  order  to  comply  with  the  requirements  of  Directive  2004/39/EC  and  domestic 
implementing  legislation,  investment  firms  and  other  regulated  entities  may  have  to 
introduce  new  Information  Technology  systems,  new  organisational  structures,  and 
reporting  and  record-keeping  procedures,  or  to  make  significant  modifications  to 
existing  systems  and  practices.  This  can  only  be  done  once  the  contents  of  both  the 

1 
2 

OJ …., …., p. …. 
OJ L 145, 30.4.2004, p. 1. 

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(4) 

(5) 

(6) 

implementing  measures  to  be  adopted  by  the  Commission  and  domestic  legislation 
transposing the Directive are settled. 

It  is  also  necessary  that  Directive  2004/39/EC  and  its  implementing  measures  be 
transposed into national law or apply directly in Member States simultaneously for the 
Directive to produce its full effect. 

It  is  therefore  appropriate  to  extend  the  deadline  for  Member  States  to  transpose 
Directive  2004/39/EC  into  national  law.  Similarly,  the  deadline  for  investment  firms 
and banks to comply with the new requirements should be deferred for a period after 
the transposition into national law has been completed by the Member States. 

Given  the  interaction  between  the  different  provisions  of  Directive  2004/39/EC,  it  is 
appropriate  that  any  extension  of  those  deadlines  apply  to  all  the  provisions  of  that 
Directive.  Any  extension  of  the  transposition  and  application  deadlines  should  be 
proportionate  to,  and  not  exceed,  the  needs  of  the  Member  States  and  regulated 
entities.  In  order  to  avoid  fragmentation  that  could  hamper  the  functioning  of  the 
Internal Market in securities, Member States should apply the provisions of Directive 
2004/39/EC from the same time. 

(7) 

Further  consequential  amendments  are  necessary  to  defer  the  dates  for  the  repeal  of 
Directive  93/22/EEC  and  for  the  transitional  provisions  laid  down  in  Directive 
2004/39/EC, and to extend the timetable for the Commission’s reporting obligations. 

(8) 

Directive 2004/39/EC should therefore be amended accordingly, 

HAVE ADOPTED THIS DIRECTIVE: 

Article 1 

Directive 2004/39/CE is amended as follows: 

(1) 

Article 65 is amended as follows: 

(a) 

paragraphs 1 to 4 are replaced by the following: 

“1.  By  30  April  2007  at  the  latest,  the  Commission  shall,  on  the  basis  of 
public  consultation  and  in  the  light  of  discussions  with  competent 
authorities, report to the European Parliament and to the Council on the 
possible  extension  of  the  scope  of  the  provisions  of  this  Directive 
concerning pre and post-trade transparency obligations to transactions in 
classes of financial instruments other than shares. 

2. 

3. 

By 30 April 2008 at the latest, the Commission shall present a report to 
the European Parliament and to the Council on the application of Article 
27. 

By 30 October 2007 at the latest, the Commission shall, on the basis of 
public  consultations  and  in  the  light  of  discussions  with  competent 
authorities, report to the European Parliament and to the Council on: 

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(a) 

(b) 

(c) 

the  continued  appropriateness  of  the  exemption  provided  for  in 
Article 2(1)(k) for undertakings whose main business is dealing on 
own account in commodity derivatives;  

the  content  and  form  of  proportionate  requirements  for  the 
authorisation  and  supervision  of  such  undertakings  as  investment 
firms within the meaning of this Directive;  

the  appropriateness  of  rules  concerning  the  appointment  of  tied 
agents  in  performing  investment  services  and/or  activities,  in 
particular with respect to the supervision on them; 

(d) 

the  continued  appropriateness  of  the  exemption  provided  for  in 
Article 2(1)(i). 

4. 

By 30 October 2007 at the latest, the Commission shall present a report 
to the European Parliament and to the Council on the state of the removal 
of  the  obstacles  which  may  prevent  the  consolidation  at  European  level 
of the information that trading venues are required to publish.” 

(b)  Paragraph 6 is replaced by the following: 

“6.  By  30  April  2006  at  the  latest,  the  Commission  shall,  in  the  light  of 
discussions with competent authorities, report to the European Parliament 
and to the Council on the continued appropriateness of the requirements 
for  professional  indemnity  insurance  imposed  on  intermediaries  under 
Community law.” 

(2) 

Article 69 is replaced by the following: 

“Article 69 
Repeal of Directive 93/22/EEC 

1.  Directive 93/22/EEC is repealed with effect from 30 October 2006.References 
to  Directive  93/22/EEC  shall  be  construed  as  references  to  this  Directive. 
References  to  terms  defined  in,  or  Articles  of,  Directive  93/22/EEC  shall  be 
construed  as  references  to  the  equivalent  term  defined  in,  or  Article  of,  this 
Directive. 

2.  Member States shall provide that national laws, regulations and administrative 
provisions adopted in order to comply with Directive 93/22/EC shall remain in 
force until the measures adopted under Article 70 are applied, and in any event, 
no later than 30 April 2007.” 

(3) 

In Article 70, Paragraph 1 is replaced by the following: 

“Member States shall adopt the laws, regulations and administrative provisions 
necessary to comply with this Directive by 30 October 2006 at the latest. They 
shall  forthwith  inform  the  Commission  thereof.  They  shall  apply  these 
provisions from 1 May 2007.” 

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(4) 

In Article 71, paragraphs 1 to 4 are replaced by the following: 

“1. 

Investment  firms  already  authorised  in  their  home  Member  State  to  provide 
investment services before 30 April 2007 shall be deemed to be so authorised 
for the purposes of this Directive, if the laws of that Member State provide that 
to  take  up  such  activities  they  must  comply  with  conditions  comparable  to 
those provided for in Articles 9 to 14. 

2.  A  regulated  market  or  a  market  operator  already  authorised  in  its  home 
Member State before 30 April 2007 shall be deemed to be so authorised for the 
purposes  of  this  Directive,  if  the  laws  of  that  Member  State  provide  that  the 
regulated  market  or  market  operator,  as  the  case  may  be,  must  comply  with 
conditions comparable to those provided for in Title III. 

3. 

4. 

Tied agents already entered in a public register before 30 April 2007 shall be 
deemed  to  be  so  registered  for  the  purposes  of  this  Directive,  if  the  laws  of 
those  Member  States  provide  that  tied  agents  must  comply  with  conditions 
comparable to those provided for in Article 23. 

Information communicated before 30 April 2007 for the purposes of Articles 
17,  18  or  30  of  Directive  93/22/EEC  shall  be  deemed  to  have  been 
communicated for the purposes of Articles 31 and 32 of this Directive.” 

Article 2 

Member  States  shall  bring  into  force  the  laws,  regulations  and  administrative  provisions 
necessary to comply with this Directive by 30 October 2006 at the latest. They shall forthwith 
communicate to the Commission the text of those provisions. 

When Member States adopt those provisions, they shall contain a reference to this Directive 
or be accompanied by such a reference on the occasion of their official publication. Member 
States shall determine how such reference is to be made. 

This Directive shall enter into force on the day following that of its publication in the Official 
Journal of the European Union. 

Article 3 

Article 4 

This Directive is addressed to the Member States. 

Done at Brussels,  

For the European Parliament 
The President 

For the Council 
The President 

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ANNEX  

FINANCIAL STATEMENT 

[…] 

1. 

BUDGET HEADING: - None – NO FINANCIAL IMPLICATION 

DATE: […] 

APPROPRIATIONS: 
None 

2. 

TITLE:  

PROPOSAL  FOR  A  DIRECTIVE  AMENDING  DIRECTIVE  2004/39/EC  ON  MARKETS  IN 
FINANCIAL INSTRUMENTS 

3. 
4. 

5. 

5.0 

LEGAL BASIS: Article 47 (2)  
AIMS: Extend the transposition deadline for Directive 2004/39/EC and defer the application 
deadline; adjust consequently further deadlines included in this Directive 

FINANCIAL IMPLICATIONS – not 
applicable  

12 MONTH 
PERIOD 

(EUR million) 

CURRENT 
FINANCIAL 
YEAR 
[n] 
(EUR million) 

FOLLOWING 
FINANCIAL 
YEAR 
[n+1] 
(EUR million) 

CHARGED TO THE EC BUDGET 

EXPENDITURE - not applicable 
- 
(REFUNDS/INTERVENTIONS) 
- 
- 

NATIONAL AUTHORITIES 
OTHER 

5.1  REVENUE - not applicable 

OWN RESOURCES OF THE EC  

- 
(LEVIES/CUSTOMS DUTIES) 
NATIONAL 
- 

5.0.1  ESTIMATED EXPENDITURE 
5.1.1  ESTIMATED REVENUE 
5.2  METHOD OF CALCULATION: 

[n+2] 

[n+3] 

[n+4] 

[n+5] 

6.0  CAN THE PROJECT BE FINANCED FROM APPROPRIATIONS ENTERED IN THE 

RELEVANT CHAPTER OF THE CURRENT BUDGET? not applicable 

6.1  CAN THE PROJECT BE FINANCED BY TRANSFER BETWEEN CHAPTERS OF 

THE CURRENT BUDGET? 

6.2  WILL A SUPPLEMENTARY BUDGET BE NECESSARY? 
6.3  WILL APPROPRIATIONS NEED TO BE ENTERED IN FUTURE BUDGETS? 
OBSERVATIONS: 

YES NO 

YES NO 
YES NO 
YES NO 

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