Why MiFID & MiFID II Do (not) Matter to Private Law: Liability to Compensate for Investment Losses for Breach of Conduct of Business Rules

Abstract

The role of enforcement by civil courts of the Markets in Financial Instruments Directive (MiFID) and MiFID II conduct of business in contributing to retail investor protection is often overlooked at the EU level. The EU legislator, primarily, focuses on the harmonization of public enforcement by supervisory authorities through administrative law means. However, it can be argued that the (relative) lack of attention for judicial enforcement through private law means does not do justice to this enforcement avenue. This article, therefore, explores the potential of judicial enforcement through holding investment firms liable to pay damages on the basis of national private law to contribute to retail investor protection. The aim of the article is to establish the extent to which retail investors can invoke the MiFID and MiFID II conduct of business rules and, thereby, benefit from these rules in claiming damages. The article will argue, in the first place, that MiFID and MiFID II leave intact the freedom of Member States and civil courts to shape the effect of a breach of the conduct of business rules contained therein on a firm’s private law liability to pay damages. However, that does not mean that the MiFID and MiFID II conduct of business rules are of no relevance to a firm’s liability on the basis of national private law. The article will show that the private law regimes of the Netherlands, England & Wales, and Germany contain distinct avenues of judicial enforcement of the MiFID and MiFID II conduct of business rules through private law liability, which can significantly contribute to retail investor protection.