UK - The European Commission has been attacked for introducing draft investment industry regulations without any analysis of their likely effects.
The Markets in Financial Instruments Directive – which is being introduced by the EC’s Committee of European Securities Regulators – will cover all aspects of the investment management industry and will supersede the UK’s Investment Services Directive in April 2006.
However, CESR has been attacked by the Investment Management Association for producing regulations without conducting any cost/benefit analysis to determine whether any additional costs to the industry were justified by the benefits to investors.
The regulations will require fund managers to brief clients annually about all the inducements received – such as theatre or football tickets – from brokers as well as set out conflict of interest policies and order execution policies.
IMA deputy chief executive Sheila Nicoll (pictured) said: “The directive is about political horse trading and it shows.
“We hope it won’t go further than the existing Financial Services Authority rules, but the devil will be in the detail.”
Beachcroft Wansbroughs Consulting managing director Oliver Hodge criticised CESR for producing “inflexible” regulations, which would be difficult to adapt to changing circumstances.
Additionally, the proposals will increase fund managers’ costs, which could be borne by investors.
“All of these things won’t be seen by investors, but they have to be put together; they will have to be adequate. All these things take time and therefore cost money.
“Introducing these proposals without carrying out a cost benefit analysis means that CESR does not know what the costs are likely to be and have not evaluated whether these costs are justified by the benefits.”
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