CELEX: 51988PC0778
Language: en
Date: 1988-12-16
Title: PROPOSAL FOR A COUNCIL DIRECTIVE ON INVESTMENT SERVICES IN THE SECURITIES FIELD

22. 2. 89                            Official Journal of the European Communities                                 No C 43/7
                                                             II
                                                      (Preparatory Acts)
                                                COMMISSION
                      Proposal for a Council Directive on investment services in the securities field
                                                 COM(88)    778 - SYN 176
                                    (Submitted by the Commission on 3 January 1989)
                                                        (89/C 43/10)
THE COUNCIL OF THE EUROPEAN COMMUNITIES,                          Whereas responsibility for the financial soundness of an
                                                                  investment firm will rest with the competent authorities
                                                                  of its home Member State; whereas to permit this
Having regard to the Treaty establishing the European             responsibility fully to be assumed by such competent
Economic Community, and in particular Article 57                  authorities a further directive will be necessary to coor-
thereof,                                                          dinate rules in the area of market risk;
Having regard to the proposal from the Commission,                Whereas it is essential for the creation of the internal
                                                                  market for the home country supervisors to monitor all
                                                                  aspects of the investment firm's activities in host Member
In cooperation with the European Parliament,                      States whether such activities are carried on by the
                                                                  provision of services or the creation of branches there;
Having regard to the opinion of the Economic and
Social Committee,                                                 Whereas the Member States should ensure that there are
                                                                  no obstacles to the activities coming within the scope of
                                                                  this Directive being undertaken using the financial tech-
Whereas this Directive is to constitute an instrument             niques of the home Member State, so long as the latter
which is essential for achieving the internal market, a           are not in violation of the legal provisions governing the
course determined by the Single European Act and set              public good in the host Member State;
out in timetable form in the Commission's White Paper,
from the point of view of both the freedom of estab-
lishment and the freedom to provide financial services, in        Whereas requests for authorization of a subsidiary whose
the field of investment firms;                                    parent is governed by the laws of a third country or the
                                                                  acquisition of a participation by such a parent are subject
                                                                  to a procedure intended to ensure that Community
Whereas the approach which has been adopted is to                 investment firms are granted reciprocal treatment in the
 achieve only the essential harmonization necessary and           third countries in question;
 sufficient to secure mutual recognition of authorization
 and of supervisory systems, thus enabling the application
 of the principle of home country control and the                 Whereas the smooth running of the internal market in
granting of a single authorization recognized throughout          financial services will require, in addition to common
the Community;                                                     legislative standards, close and regular cooperation
                                                                  between the competent authorities of the Member States;
Whereas it is necessary, for reasons of fair competition,
 to ensure that non-bank investment firms have similar            Whereas in the case of problems concerning investment
 freedoms to create branches and provide services across           firms a contact committee is the appropriate forum for
 frontiers as those envisaged by'the proposal for a second         discussion and consultation;
 Council Directive in the field of credit institutions;
                                                                   Whereas it is necessary, in order to facilitate the
 Whereas it is also necessary and appropriate to liberalize        achievement of the objectives of this Directive and to
 access to membership of stock exchange and financial              take account of the rapid development of national and
 futures and options markets in host Member States for             international financial markets, to introduce a procedure
 investment firms authorized to carry out the relevant             for the adaptation of certain technical features; whereas,
 services in their home Member States;                             because of the important and sensitive nature of that
 ---pagebreak--- No C 43/8                               Official Journal of the European Communities                                22. 2. 89
adaptation, procedure III, type (a), as defined in Article                                  Article 2
2 of Council Decision 87/373/EEC ('), is the most
appropriate,                                                      This Directive shall apply to all investment firms.
                                                                  However, only Articles 3, 4, 5, 8, 9, 10 and 21 shall
                                                                  apply to investment firms that are credit institutions.
HAS ADOPTED THIS DIRECTIVE:
                                                                                            Article 3
                            TITLE I
                                                                  Member States must require that investment firms which
                    Definitions and scope                         are legal persons shall have their head office in the same
                                                                  Member State as their registered office.
                            Article 1
For the purposes of this Directive:
                                                                                            TITLE II
— 'credit institution' is defined in accordance with the
                                                                          Harmonization of authorization conditions
    first indent of Article 1 of Council Directive
    77/780/EEC (2),
                                                                                            Article 4
— 'investment firm' means any natural or legal person
    whose business it is to engage in one or more of the          1.    Investment firms wishing to engage in one or more
    activities set out in the Annex to this Directive,            of the activities referred to in the Annex within one or
                                                                  more Member States shall obtain authorization in their
— 'home Member State' means:                                      home Member State before commencing such activities.
                                                                  Such authorization shall be granted by the home
    — where the investment firm is a natural person, the          Member State's competent authorities designated in
         Member State where that person has his                   accordance with Article 14. Following the granting of
         residence,                                               authorization the investment activity in question may be
                                                                  engaged in forthwith by the investment firm together
    — where the investment firm is a legal person, the            with any activities that are ancillary thereto.
         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,          2.    Without prejudice to other conditions of general
                                                                  application laid down by national law, the competent
                                                                  authorities shall not grant authorization unless:
— 'host Member State' means the Member State where
    an investment firm has a branch or into which it
    supplies services,                                            — the investment firm has sufficient initial financial
                                                                      resources having regard to the nature of the activity
— 'branch' means a place of business which forms a                    in question,
    legally dependent part of an investment firm and
    which provides an investment service for which the            — the persons who effectively direct the business of the
    investment firm has been authorized,                              investment firm are of sufficiently good repute and
                                                                      experience,
— 'qualified participation' means a holding, direct or
    indirect, in an investment firm which represents 10 %
    or more of the capital or of the voting rights or             — holders of qualified participations in it are suitable
    which enables the exercise of a significant influence             persons.
    over it within the meaning of Article 33 of Council
    Directive 83/349/EEC (3),
                                                                  3.    Member States shall also require applications for
                                                                  authorization to be accompanied by a programme of
— 'parent undertaking' is defined in accordance with              operations setting out inter alia the types of business
    Articles 1 and 2 of Directive 83/349/EEC,                     envisaged and the structural organization of the
                                                                  investment firm.
— 'subsidiary' means a subsidiary undertaking in
    accordance with Articles 1 and 2 of Directive
    83/349/EEC.                                                   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
(') OJ No L 197, 18. 7. 1987, p. 33.                              whenever an authorization is refused. If no decision is
O OJ No L 322, 17. 12. 1977, p. 30.                               notified within six months of submission of the complete
O OJ No L 193, 18. 7. 1983, p. 1.                                 application this shall be deemed to be a refusal.
 ---pagebreak--- 22. 2. 89                              Official Journal of the European Communities                               No C 43/9
5.    The authorization referred to in paragraph 1 shall          4.    The competent authorities of the Member State
not be required where the investment firm is a credit            concerned must suspend their decision regarding
institution whose authorization as a credit institution by        requests as referred to in paragraphs 1 and 3 until the
the competent authorities specified in Article 3 of              procedure provided for in paragraphs 5 and 6 is
Directive 77/780/EEC includes authorization of the               completed.
investment activity concerned.
                                                                  5.    The Commission shall, within three months of
6.     The competent authorities may withdraw the auth-          receiving the information provided for in paragraphs 2
orization issued to an investment firm subject to this           and 3, examine whether all Community investment firms
Directive only where the investment firm:                        enjoy reciprocal treatment, in particular regarding the
                                                                  establishment of subsidiaries or the acquisition of partici-
(a) does not make use of the authorization within 12             pations in investment firms in the third country in
     months, expressly renounces the authorization or has        question.
     ceased to engage in business for more than six
     months, if the Member State concerned has made no            6.     If the Commission finds that reciprocity is not
     provision for the authorization to lapse in such cases;      ensured it may extend suspension of the decision
                                                                  referred to in paragraph 4, using the procedure provided
(b) has obtained the authorization through              false     for in Article 20.
     statements or any other irregular means;
                                                                  7.     The Commission shall present suitable proposals to
(c) no longer fulfils the conditions under which author-          the Council with a view to achieving reciprocity with the
     ization was granted;                                         third country in question.
(d) no longer possesses sufficient financial resources or
     can no longer be relied upon to fulfil its obligations                                 TITLE III
     towards its creditors, and in particular no longer
     provides security for the assets entrusted to it;            Harmonization of conditions relating to the pursuit of
                                                                                the business of investment firms
(e) falls within one of the other cases where national law
     provides for withdrawal of authorization.                                              Article 7
                                                                  1.     Member States shall require any natural or legal
                           Article 5                              person who is considering the acquisition of a qualified
                                                                  participation in an investment firm to first inform the
Member States shall not apply to branches of investment
                                                                  competent authorities, telling them of the size of the
firms having their registered office outside the
                                                                  intended participation. The abovementioned persons
Community, when commencing or carrying on their
                                                                  must similarly inform the competent authorities if they •
business, provisions that result in more favourable
                                                                  propose to increase their qualified participation such that
treatment than that accorded to branches of investment
                                                                  the investment firm would become a subsidiary. The
firms having their registered office in a Member State.
                                                                  competent authorities shall assess the suitability of the
                                                                  abovementioned persons.
                           Article 6
                                                                  2.     Investment firms shall each year furnish the
 1.    Requests for authorization of a subsidiary whose
                                                                  competent authorities of the home Member State with
parent undertaking is governed by the laws of a third
                                                                  the names of major shareholders and members as
country or the acquisition of a participation as provided
                                                                  referred to in paragraph 1 and the size of their qualified
for in paragraph 3 shall be subject to the procedure laid
                                                                  participations, in accordance with the names registered
down in this Article.                                             at the annual general meeting of shareholders and
                                                                  members or in accordance with information received as a
2.     The competent authorities of the relevant Member           result of compliance with the regulations relating to
State shall inform the competent authorities of the other         companies quoted on stock exchanges.
Member States and the Commission of the request for
authorization.                                                     3.    Member States shall require that in cases where the
                                                                  persons referred to in paragraph 1 exercise their
 3.    In the same manner, when informed, according to             influence in a way which is likely to be to the detriment
the provisions of Article 7, that an undertaking governed          of the prudent and sound management of the activities
by the laws of a third country is considering the                  of the investment firm, the competent authorities shall
 acquisition of a participation in a Community investment          take appropriate measures to bring such a situation to an
 firm such that the latter would become its subsidiary, the        end. Such measures may consist in particular in
 competent authorities of the relevant Member State shall          injunctions, sanctions against directors and managers or
 inform the competent authorities of the other Member              the suspension of voting rights in respect of the shares
 States and the Commission.                                        held by the shareholders or members in question.
 ---pagebreak--- No C 43/10                             Official Journal of the European Communities                                  22. 2. 89
                          Article 8                              — arranges for adequate records to be kept relating to
                                                                      executed transactions which shall be at least sufficient
 1.   The competent authorities of the home Member
                                                                      to enable the home Member State's authorities to
State shall require continuing compliance by an
                                                                      monitor compliance with prudential rules which they
investment firm authorized by them with the conditions
                                                                      are responsible for applying including rules relating
referred to in Article 4 (2). In appropriate circumstances,
                                                                      to market risk. Such records shall be retained for
the competent authorities may allow an investment firm
                                                                      periods to be laid down by the competent authorities,
a certain limited period to restore its financial resources
to the agreed initial minimum. The competent authorities
of the home Member State shall also require that
investment firms authorized by them make sufficient              — is organized in such a way that conflicts of interest
provision against market risk in accordance with rules to             between the firm and its clients or between one of its
be prescribed in a further coordinating directive.                    clients and another are reduced to a minimum.
2.    The supervision of compliance with the conditions
referred to in Article 4 (2) shall be within the exclusive       2.     If the rules contained in paragraph 1 are not appro-
regulatory competence of the home Member State's                 priate to the nature of the investment service in question,
competent authorities irrespective of whether or not the         Member States may adapt them or provide that they
investment firm establishes a branch or provides services        shall not apply.
in another Member State.
                                                                 3.     Member States may provide that the rules set out in
                          Article 9                              the second and third indents of paragraph 1 shall not
1.    Member States shall draw up prudential rules to be         apply where the service is provided to business or
observed on a continuing basis by investment firms auth-         professional investors.
orized by their competent authorities. Supervision of
such prudential rules shall be within the exclusive
competence of the home Member State's competent
authorities irrespective of whether or not the investment                                   TITLE IV
firm establishes a branch or provides services in another
Member State. Such rules shall require that the                  Provisions relating to freedom of establishment and
investment firm:                                                                   freedom to provide services
— has sound administrative and accounting procedures
    and internal control mechanisms,                                                        Article 10
                                                                  1.    Host Member States shall ensure that at least the
— arranges for securities belonging to investors to be
                                                                 activities set out in the list in the Annex and any activities
    kept separately from its own securities and for money
                                                                 which are ancillary thereto may be pursued in their terri-
    belonging to investors to be placed in an account or
                                                                 tories, in accordance with the provisions of Articles 11,
    in accounts which are separate and distinct from the
                                                                  12 and 13, either by the establishment of a branch or by
    firm's own account,
                                                                 way of the provision of services, by an investment firm
                                                                 authorized to engage in such activities under this
— is either a member of a general compensation scheme            Directive by the competent authorities of its home
    designed to protect investors who are prevented from         Member State.
    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         2.     Host Member States may not make the estab-
    compensation schemes branches of investment firms             lishment of a branch or the provision of services under
    shall be subject to the compensation scheme in force         paragraph 1 subject to an authorization requirement or
    in the host Member State provided that payment or            to a requirement to provide endowment capital or any
    contribution to such a compensation scheme shall be           measure having equivalent effect.
    calculated by reference to their income in respect of
    investment activity carried out in that State,
                                                                  3.    Host Member States shall ensure that investment
— provides the competent authorities of the home                  firms which are authorized to provide broking, dealing
    Member State with such information on request and             or market-making services in their home Member States
    at such intervals as they may determine (but not less         can enjoy the full range of trading privileges normally
    than quarterly) in order that they may assess its             reserved to members of the stock exchanges and
    financial soundness, including the adequacy of its            organized securities markets of host Member States
    provision in respect of market risk,                          where similar services are provided.
 ---pagebreak--- 22. 2. 89                             Official Journal of the European Communities                             No C 43/11
4.    In order to meet their obligation set out in              any additional activities which it may envisage which are
paragraph 3, host Member States shall ensure that the            not precluded under the conditions of authorization in
investment firms referred to in that paragraph have the          its home Member State and which are not contained on
option to become members of host Member States' stock           the list in the Annex.
exchanges or organized securities markets by setting up
either a branch or a subsidiary in the host Member State
which complies with rules governing the structure and                                     Article 12
organization of the relevant host stock exchange or
organized securities market or by the acquisition of an          1.    Any investment firm wishing to exercise the
existing member firm.                                           freedom to supply services in the territory of another
                                                                Member State for the first time shall notify the
                                                                competent authorities of the home and host Member
5.    Pending further harmonization, host Member                States of the activities included in the list in the Annex
States which do not accept credit institutions as members       which it intends to undertake.
of their stock exchanges or organized securities market
are not required to accept, as members, branches of
those investment firms referred to in paragraph 3 which         2.     The investment firm may begin to provide such
are credit institutions.                                        services and any activities which are ancillary thereto in
                                                                the host Member State one month after notification.
6.    Host Member States shall likewise ensure that
investment firms which are authorized to deal in                                          Article 13
financial futures and options in their home Member
                                                                 1.    If the competent authorities of the host Member
State can enjoy the full range of trading facilities on
                                                                State ascertain that an investment firm having a branch
financial futures and options exchanges in the host
                                                                or providing services in the territory of that Member
Member State under the same conditions as are set out
                                                                State is not complying with the legal provisions in force
in paragraphs 3, 4 and 5.
                                                                therein which are justified on the the grounds of the
                                                                public good, those authorities shall request the
                         Article 11                             investment firm concerned to put an end to the irregular
                                                                situation.
1.    An investment firm wishing to establish a branch in
the territory of another Member State shall give notifi-
cation thereof to the competent authorities of the home         2.     If the investment firm concerned fails to take the
Member State and relevant host Member State. At the             necessary steps, the competent authorities of the host
same time it must send the latter authorities:                  Member State shall inform the competent authorities of
                                                                the Member State accordingly. The authorities of the
                                                                home Member State shall take, in the shortest time
(a) an attestation by the competent authorities of the
                                                                possible, all appropriate measures to ensure that the
    home Member State to the effect that the investment
                                                                investment firm concerned puts an end to the irregular
    firm is duly authorized there in respect of the
                                                                situation. The nature of those measures shall be
    investment service proposed to be provided and that
                                                                communicated to the competent authorities of the host
    it otherwise fulfils the conditions imposed by this
                                                                Member State.
    Directive;
(b) a programme of operations setting out inter alia the        3.     If, despite the measures taken by the home Member
    types of business envisaged and the structural organ-       State pursuant to paragraph 2, or because such measures
    ization of the branch;                                      prove inadequate or are not taken by the Member State
                                                                in question, the investment firm persists in violating the
(c) the names of the managers of the branch;                    legal rules referred to in paragraph 1 in force in the host
                                                                Member State, the latter State may, after informing the
                                                                competent authorities of the home Member State, take
(d) the address in the host Member State from which             appropriate measures to prevent further irregularities
    documents can be obtained.                                  including, in so far as is necessary, the prevention of the
                                                                initiation of further transactions by that investment firm
2.    An investment firm may establish a branch in the          within its territory. Member States shall ensure that
other Member State one month after the notification             within their territory it is possible to serve the legal
referred to in paragraph 1.                                     documents necessary for those measures on investment
                                                                firms.
3.    An investment firm wishing to change any of the
matters notified pursuant to paragraph 1 shall give             4.     Any measures adopted pursuant to paragraphs 1, 2
written notice of the proposed change to the competent          and 3 involving penalties or restrictions on the provision
authorities in the host Member State at least one month         of services must be properly justified and communicated
before making the change. If necessary those authorities        to the investment firm concerned. Every such measure
may decide whether it will not be possible, in the interest     shall be subject to a right to apply to the courts in the
of the public good, for the investment firm to engage in        Member State whose authorities adopted it.
 ---pagebreak---   No C 43/12                           Official Journal of the European Communities                                  22. 2. 89
 5.    Before following the procedure set out in para-            order to supervise the activities of the investment firms
 graphs 1, 2 and 3 the competent authorities of the host          concerned. They shall supply one another on request
 Member State may, in exceptional circumstances, take             with all information concerning the management and
 measures necessary to protect the interests of investors         ownership of such investment firms that is likely to
 and others to whom services are provided. The                    facilitate their supervision and the examination of the
 Commission and the other Member States shall be                  conditions for their authorization and all information
 informed of such measures in the shortest possible time.         likely to facilitate the monitoring of such firms.
 In this event the Commission may, after consulting the
 Member States concerned, decide that the Member State
 in question shall amend or abolish the measures.                                           Article 16
                                                                  1.     Host Member States shall ensure that, where an
 6.   In the event of withdrawal of authorization the             investment firm authorized in another Member State
 competent authorities of the host Member State shall be          conducts its business there through a branch, the
 informed and shall take appropriate measures to prevent          competent authorities of the home Member State are
the investment firm concerned from undertaking further            able, after having first informed the competent auth-
transactions in the territory of that Member State.               orities of the host Member State, to carry out themselves
                                                                  on-the-spot verification of the information referred to in
7.    Member States shall inform the Commission of the           Article 15 (3).
number and type of cases in each Member State in which
measures have been taken in accordance with the                  2.     This Article shall not affect the right of the
provisions of paragraph 3. Every two years, the                  competent authorities of the host Member State to carry
Commission shall submit a report summarizing such                out on-the-spot verification of branches established in
cases to the committee set up under Article 20.                  their territory in the discharge of their responsibilities
                                                                 under this Directive.
                          TITLE V
                                                                                            Article 17
Provisions concerning the authorities responsible for             1.    Member States shall ensure that all persons now or
               authorization and supervision                     in the past employed by the competent authorities, as
                                                                 well as auditors or experts acting on behalf of the
                         Article 14                              competent authorities, are bound by the obligation of
                                                                 professional secrecy. This means that any confidential
 1.   The Member States shall designate the authorities          information which they may receive in the course of
which are to carry out the duties provided for in this           their duties may not be divulged to any person or
Directive. They shall inform the Commission thereof,             authority, without prejudice to cases covered by criminal
indicating any division of duties.                               law.
2.    The authorities referred to in paragraph 1 must be         2.     Notwithstanding paragraph 1, the competent auth-
public authorities or bodies appointed by public                 orities of the various Member States and the public auth-
authorities.                                                     orities responsible for the supervision of credit and other
                                                                 financial institutions shall be authorized to exchange
3.    The authorities concerned must be granted all the          information in accordance with the provisions of this
powers necessary to carry out their task.                        Directive where appropriate for the efficient discharge of
                                                                 their respective responsibilities. This information shall be
                                                                 subject to the same conditions of professional secrecy as
                         Article 1")                             those indicated in paragraph 1.
1.    Where there are several competent authorities in
the same Member State they shall collaborate closely in          3.     Member       States   may     conclude    cooperation
order to supervise the activities of investment firms            agreements, providing for exchanges of information,
operating there.                                                 with the competent authorities of third countries only if
                                                                 the information communicated is subject to guarantees
2.    Member States shall also permit such collaboration         of professional secrecy equivalent to those referred to in
to take place between such competent authorities and             this Article.
public authorities responsible for the supervision of credit
and other financial institutions and insurance companies         4.     The authorities receiving information under para-
as regards the respective entities supervised by them.           graphs 1 or 2 shall use it only:
3.    Where investment services are provided on a                — to examine the conditions for the        taking-up of the
services basis across frontiers or by the establishment of            business of the entities supervised    by them and to
branches in one or more Member States other than the                  facilitate monitoring of the pursuit  of such business,
home Member State the competent authorities of the                    the administrative and accounting       procedures and
Member States concerned shall collaborate closely in                  mechanisms of internal control, or
 ---pagebreak--- 22. 2. 89                              Official Journal of the European Communities                            No C 43/13
— when the decisions of the authorities are the subject                                   TITLE VI
     of an administrative appeal, or
                                                                                       Final provisions
— in court proceedings initiated pursuant to Article 18.
                                                                                          Article 20
                                                                  1.   Technical amendments to this Directive in the
5.     Paragraphs 1 and 4 shall not preclude within a            following areas:
Member State or between Member States the exchange
of information between the competent authorities and
                                                                 — extension of the activities on the list set out in the
persons responsible for carrying out statutory audits of
                                                                     Annex,
the accounts of investment firms.
                                                                 — the fields in which the competent authorities must
The authorities and institutions to which such infor-                exchange information, as enumerated in Article 15,
mation is sent shall use it only in the discharge of their
supervisory functions. The information received shall fall       shall be made according to the procedure set out in
within the professional secrecy rules by which those             paragraph 2.
authorities and institutions are bound.
                                                                 2.    The Commission shall be assisted by a committee
6.     Notwithstanding paragraph 1, Member States may            composed of representatives of the Member States and
authorize, by virtue of provisions laid down by law, the         chaired by a representative of the Commission.
disclosure, when it is necessary for reasons of prudential
control, of certain information to other departments of          The representative of the Commission shall submit to the
their central government administration. Member States           committee a draft of the measures to be taken. The
shall ensure that information received in accordance with        committee shall deliver its opinion on the draft within a
paragraph 2 is not disclosed in such cases, except where         time limit which the chairman may lay down according
there is the explicit consent of the authorities which have      to the urgency of the matter. The opinion shall be
communicated the information.                                    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 in
7.     Member States shall ensure that the professional
                                                                 the committee shall be weighted in the manner set out in
secrecy provisions laid down by this Article shall apply to
                                                                 that Article. The chairman shall not vote.
information given by the competent authorities to
persons responsible for carrying out statutory audits of
the accounts of investment firms.                                The Commission shall adopt the measures envisaged if
                                                                 they are in accordance with the opinion of the
                                                                 committee.
                          Article 18
                                                                 If the measures envisaged are not in accordance with the
Member States shall ensure that decisions taken in               opinion of the committee, or if no opinion is delivered,
respect of an investment firm in pursuance of laws, regu-        the Commission shall, without delay, submit to the
lations and administrative provisions adopted in                 Council a proposal relating to the measures to be taken.
accordance with this Directive may be subject to the             The Council shall act by a qualified majority.
right to apply to the courts. The same shall apply where
an application for authorization is deemed to be refused
in accordance with Article 4 (4).                                If, on the expiry of a period to be laid down in each act
                                                                 to be adopted by the Council under this paragraph but
                                                                 which may in no case exceed three months from the day
                                                                 of referral to the Council, the Council has not acted, the
                          Article 19                             proposed measures shall be adopted by the Commission.
Member States shall ensure that their respective
competent authorities may adopt, as against investment                                    Article 21
firms or those who effectively control the business of
such firms which breach legislative, regulatory or admin-         1.   Investment firms already authorized to provide
istrative provisions concerning the control of their busi-       investment services in their home Member State before
nesses or the pursuit of their activities, penalties or          the entry into force of the provisions adopted in
measures aimed specifically at ending observed breaches          implementation of this Directive shall be deemed to be
or the causes of such breaches. Those penalties shall            authorized for the purposes of this Directive provided
include procedures for the suspension or withdrawal of           that the authorization was given under equivalent
authorizations.                                                  conditions to those set out in Article 4 (2).
 ---pagebreak--- No C 43/14                               Official Journal of the European Communities                                         22. 2. 89
2.    Branches which have commenced their activities, in                                            Article 22
accordance with the provisions in force in the host
Member State, before the entry into force of the                          1.   Member States shall bring into force the laws,
provisions adopted in implementation of this Directive                   regulations and administrative provisions necessary to
are presumed to have been subject to the procedures                      comply with this Directive by 1 January 1993. They shall
envisaged in Article 11 (1), (2) and (3). They shall be                  forthwith inform the Commission thereof.
governed, from the date of entry into force of the                       2.    Member       States     shall   communicate     to   the
provisions adopted in implementation of this Directive,                  Commission the texts of the main laws, regulations and
by the provisions of Articles 10, 11 (3) and 13.                         administrative provisions which they adopt in the field
                                                                         covered by this Directive.
3.   Article 12 shall not adversely affect rights acquired
before the entry into force of the provisions adopted in
                                                                                                    Article 23
implementation of this Directive by investment firms
operating through the supply of services.                                This Directive is addressed to the Member States.
                                                                ANNEX
                    INVESTMENT ACTIVITIES C O M I N G W I T H I N T H E SCOPE O F THIS DIRECTIVE
                                                             SECTION A
                                                                Activities
             1. Brokerage, i.e. the acceptance of investors' orders relating to any or all of the instruments referred to in
                Section B below and/or the execution of such orders on an exchange or market on an agency basis
                against payment of commission.
             2. Dealing as principal, i.e. the purchase and sale of any or all of the instruments referred to in Section B
                below for own account and at own risk with a view to profiting from the margin between bid and offer
                prices.
             3. Market making, i.e. maintenance of a market in any or all of the instruments referred to in Section B
                below by dealing in such instruments.
             4. Portfolio management, i.e. the management against payment of portfolios composed of any or all of the
                instruments referred to in Section B below undertaken for investors otherwise than on a collective basis.
             5. Arranging or offering underwriting services in respect of issues of the instruments referred to in point 1
                of Section B below and distribution of such issues to the public.
             6. Professional investment advice given to investors on an individual basis or on the basis of private
                subscription in connection with any or all of the instruments referred to in Section B below.
             7. Safekeeping and administration of any of the instruments referred to in Section B below otherwise than
                in connection with the management of a clearing system.
                                                              SECTION B
                                                               Instruments
             1. Transferable securities including units in undertakings for collective investment in transferable securities.
             2. Money market instruments (including certificates of deposit and Eurocommercial paper).
             3. Financial futures and options.
             4. Exchange rate and interest rate instruments.