Investor protection and the evolution of financial advice regulations

Abstract

The topic of financial advice has been the focus of the most recent EU regulation, the so-called Mifid II. Directive 2014/65 / EU (so-called "MiFID II") - whose transposition deadline in the Member States of the Union, originally set for 3 January 2017, and then extended, expired on 3 January 2018 - marks another evolution of regulation of the financial market in Europe, in the wake of the numerous reforms that, in many areas, have taken place after the great crisis. Its entry into force has overlapped with all the prevailing regulatory interventions that have affected the three main "silos" in which, for some time, the European regulation of the financial market has been articulated: banks, capital markets, insurance and social security sectors. - for all, that of banks - within which there has been a real re-foundation of the entire discipline, MiFID II is placed, with respect to the previous system, in a perspective characterized by elements, both of continuity and discontinuity. In recent years, the number of investors operating in the financial markets has increased and the wide range of services and tools offered to them has become even more complex. In light of these developments, the legal framework of the Union should govern all activities aimed at investors. It is therefore necessary to ensure an adequate degree of harmonization in order to be able to offer investors a high level of protection by responding precisely to the principle of the need for protection of the weak investor. Many of the clients of the intermediaries are in fact individuals who decide to invest their capital within the markets despite lacking the necessary skills. These subjects are similar in the retail investor profile. The law protects this figure through a particular series of obligations to which intermediaries are subjected. The purpose of MiFIDII is therefore to protect investors, with particular attention to the protection of the small saver; strengthen the integrity, efficiency and transparency of the markets; stimulate competition, both by allowing the trading of financial instruments on multiple markets, and by ensuring more uniform trading rules and conditions in the various countries of the Union. In defining the guidelines of the Directive, the European legislator was inspired by the idea of a true single market, where customers and financial operators can move within a clear and transparent framework, with shared rules and principles. Compared to MiFID I, the main novelty concerns the introduction of "independent" advice. This is one of the most delicate investment services as it could lead the client to unsatisfactory investments in case this service is not properly supervised and regulated.

MiFID II introduces the concept of advice on an independent basis, meaning investment advice provided with reference to a wide range of products and without the perception of fees, commissions or non-monetary benefits from parties other than the Client (" Incentives "). Therefore, intermediaries must clearly explain what kind of service model they have chosen to offer to their customers. Authorized intermediaries can provide three different types of investment services and activities: receipt and transmission of orders in mere execution mode (Execution only); reception and transmission of orders, execution of orders on behalf of clients and trading on own account in relation to instruments, placement of financial products and investment services; and ultimately investment and portfolio management advice.