The European Union's Investment Services Directive

The EU has become the world’s primary actor in accomplishing multinational regulatory harmony in the field of securities regulation. In its recent adoption of the Investment Services Directive, the EU has completed a critical chapter of its evolving regulatory code for the European capital markets. While the Directive’s multistate licensing scheme, critical to the establishment of an internal market for financial services, was from the beginning based on an uncontested conceptual verity, no similar consensus existed on a number of related controversies that emerged. This article describes the EU’s previous achievements in the field of securities regulation, including the policies underlying the proposal and adoption of the Investment Services Directive. It then surveys the scope and major provisions of the Directive and discusses the more controversial issues that divided the Member States into opposing camps. In its analysis of the Directive’s substantive terms, this article notes several of the Directive’s deficiencies, including the failure to establish minimum commonality in the areas of administrative and judicial remedies for investors, conduct-of-business rules and transactional disclosure. The article concludes by noting that the Directive, despite its limited success in achieving an integrated European market system, represents a remarkable advance in the development of the EU’s multinational securities code