Investor Protection in European Union: Post FSAP Directives and MiFID

Abstract

A single European market will promote competition between service providers and improve the efficiency of financial systems and allocation of resources across Europe. To achieve the ambitious goal of the single European securities market, cooperation and harmonization among Member States, by a strong commitment to the integration of the market, is especially important. Nevertheless, the EC securities regulations did not fit well with the different national securities regimes and the fragmented market structures before the FSAP. This working paper aimed to assess European securities regulation from the perspective of investor protection. Beginning with the introduction of the FSAP, the four key directives of the FSAP will be discussed.Among the four directives, the Directive on MiFID should be considered as a milestone for investor protection since it pursues the progressive approach by the EC of systemic protection, when compared to the approaches adopted in the previous three directives that pursued fair distribution of investment information to investors. By increasing the role of the intermediaries in the European financial regulation, however, the MiFID gives the EC more centralized regulatory power on the fragmented European securities regulations. However, the EC should complement the directive with more comprehensive coverage over a broader range of investment instruments while supplementing ambiguous terms in the following implementing directives. The paper proceeds as follows: Section One briefly outlines the FSAP and these three early directives with respect to investor protection via information disclosure; and Section Two starts with a discussion of the MiFID regulatory framework and the significant progress made in European investor protection by its introduction. The MiFID, by imposing the duty of information disclosure and investor protection on the intermediaries, strengthens the nexus between the implemented regime and actual protection.