- Protection of investors and of financial market integrity
- Establishment of a single European financial market by:
- stimulating market transparency and efficiency
- stimulating harmonisation of stock exchange trading and investment markets.
Relationship with the CRD
Investment firms which have been authorised under the MiFID must meet regulations regarding own funds and solvency. These rules have been laid down in the recast Capital Adequacy Directive (CAD – 2006/48/EC). By way of the CAD, Directive 2006/49/EC also applies (in part). Thus, the CRD largely applies mutatis mutandis to investment firms. However, contrary to the situation for credit institutions, the authorisation regime for investment firms has not been laid down in the same Directive as the solvency requirements.
Introduction of the MiFID
The MiFID entered into force on 1 November 2007, replacing the Investment Services Directive (ISD – Directive 93/22/EEC), which had been in force since 1995. The scope of the MiFID is broader than that of the ISD, introducing new and more extensive obligations to be met by investment firms and market operators, regarding in particular sound and prudent management, conduct of business rules, reporting of transactions and market transparency.
Comparison with the ISD
Compared with the ISD, the MiFID contains:
- extensive conduct of business rules for investment firms which are no longer within the competence of the Member State where the services are provided, but within the competence of the investment firm’s home Member State;
- extensive rules for the finalisation, implementation and transparency of transactions in financial instruments through Multilateral Trading Facilities (MTF) or through regulated markets;
- a more single liberal European licence regime for investment firms’ permitted operations in other Member States;
- an authorisation system for the operation or management of regulated markets, supplemented with rules for access to regulated markets and the possibility for (market operators of) regulated markets to provide appropriate arrangements in Member States other than their home Member State so as to permit members or participants of those regulated markets to obtain (remote) access to those markets.
The MiFID stipulates which supervisory authority is responsible in the case of cross-border services. Authorisation and ongoing supervision of investment firms and market operators are the responsibility of the supervisory authority of the home Member State. Supervision of investment firms’ compliance with conduct of business rules is exercised by the supervisory authority of the home Member State (home country control), with the proviso that, in respect of branches of investment firms, the supervisory authority of the host Member State is responsible for supervising compliance with conduct of business rules, including rules regarding order handling, best execution, market transparency and integrity (host country control).
The (authorisation) requirements for investment firms relate to the fit and proper qualities of the persons determining the firm’s day-to-day policy (trustworthiness and expertise), the fit and proper qualities of holders of qualifying holdings, the own funds and the solvency calculated in accordance with the requirements set in the CRD, management, conduct of business and (market) transparency.
The authorisation requirements for (market operators of) of regulated markets are in line with the requirements for investment firms and, in addition, comprise rules regarding the systems of regulated markets, requirements regarding management, the admission of financial instruments to trading, the suspension and removal of financial instruments from trading, access to regulated markets and rules regarding market transparency.
Legal structure of the MiFID
The structure of the MiFID relies on all three levels of European regulation.