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Protecting investors - your thoughts, please - 08/12/2010

A computer screen showing stock prices and a hand holding a pen © iStock/archives

Public consultations on the Markets in Financial Instruments Directive and on financial services sanctions.

The global economic crisis prompted the EU to act quickly to fix shortcomings in the financial services market and safeguard its stability.

The reforms aim to prevent a similar situation from recurring by requiring financial sector firms to be more open about how they conduct business. They provide more effective regulatory oversight and protect consumers.

Now, the bloc is working to implement a second wave of reforms . Public consultations are underway on two key proposals.

Markets in Financial Instruments Directive

MiFID is a comprehensive framework for the regulation of investment firms. In force for the past three years, it has toughened up investor protection rules, while allowing stock exchanges and investment firms to conduct business more easily across the EU's single market.

It aims to make the securities market more competitive, potentially resulting in better and cheaper services for investors. The Commission is proposing to review the rules in order to address recent changes in the market brought about by new technologies and financial products. This should secure a robust regulatory framework to avoid the risk of loopholes.

The MiFID consultation asks how the rules should be updated to cover all investment services and activities, strengthen supervision and protect investors.

The consultation will feed into the Commission's proposals, to be made in May 2011.

Financial services sanctions

The second consultation seeks suggestions about new EU measures setting minimum standards for sanctions against financial services firms that break the rules.

Currently, EU countries have different penalties and enforcement standards against violators. The crisis also highlighted the lack of uniformity in applying the rules across the EU, encouraging firms to set up in a country where they face the mildest sanctions.

The Commission proposes to set common standards for penalties, fines and enforcement across the EU. Common rules will improve the working of the single market and ensure that violations of EU financial rules are effectively sanctioned wherever they are committed.

Comments resulting from the consultation will help the Commission decide on possible proposals to be made next year.

More information on financial services reform

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