EU to ban execution only stockbrokers?


Established member
Thought my post might stir things up here a bit!!

emailed my local MEP's and got the same reply from 2 of them; my apologies if its a bit long for this thread but lots of you seem to find the subject of interest:

Dear Mr [pete]

Thank you for emailing me about Article 18 of the Investment Services Directive (ISD). I share your concerns about this aspect of the directive and my Conservative colleagues and I are working hard to eliminate the threat to execution only business.

In seeking to protect investors, we should not deprive them of the freedom to make their own decisions about their investments. As you point out, Article 18 of the European Commission's proposed Investment Services Directive could see the end low-cost, 'execution-only' share dealing. It requires brokers to conduct a lengthy 'fact-find' every time an account is opened, and give costly 'guidance and warnings on risk' for every share transaction. This could make low cost efficient "execution-only" and "direct offer" services uneconomic.

This would mean, that confident and knowledgeable investors would no longer be able to take their own investment decisions based on published information. They would instead be forced to pay for advice they do not want. I believe that non-advice services are already sufficiently regulated using contract law, conduct of business rules, product regulation, regulation of produce promotional and explanatory literature and money laundering rules.

Currently, an estimated 1.5 million shareholders in the UK benefit from execution only investing (which includes internet-based sharing dealing). Buying a unit trust or ISA via direct offer (for example from a newspaper advertisement) can be as much as 8 to 20 times cheaper than a fully advised sale.

The end of execution only services would deprive consumers of a low cost, simple method of saving. This is the last thing we should be doing at a time when an aging population makes it essential to encourage people to save more.

The European Parliament has appointed my colleague Theresa Villiers as the rapporteur for the Parliament's amendments to the Commission text. Her report will be voted on in the Economic and Monetary Affairs Committee on 17th June. She has tabled amendments to the ISD to lift the threat to execution-only business and confine suitability tests to advice services. They are supported by the key organisations campaigning on this issue. My Conservative colleagues and I will be supporting these amendments and will fight for the right of investors to make informed choices about their own investments.

Yours sincerely,

Chris Heaton-Harris MEP
East Midlands, Conservative Party

Office of Chris Heaton-Harris MEP
European Parliament
Rue Wiertz 60
Brussels, Belgium
Tel: +32.(0)2.284.7523
Fax: +32.(0)2.284.9523