Investment Bankers in Conflict: The Regime of Inducements in MiFID II and the Member States’ Struggle for Fairness

Abstract

This article sheds light on the new legal treatment of inducements, under the revised Markets in Financial Instruments Directive, and seeks to address the question whether or not that regime is beneficial for market participants. Inducements constitute a common practice of day-to-day conduct of business by financial institutions. Accordingly, the rules that define their realm of operation are quintessential for both investment firms and investors. The relevant paradigm of conflicts of interest is used. MiFID II has to be implemented only by 3 January 2018. However, the forthcoming regime on inducements derives from gold-plating practices that are already in place in the UK. An examination and assessment of the impact of inducements policy and their adverse effect on retail investors in the UK is an adequate apparatus to draw parallels from. After highlighting the inherent problems of the EU provisions on inducements, an enhanced framework is designed.