Execution Only

Among the most prominent characteristic traits of the EU is that it believes we need protecting from ourselves by over regulation - whether we wish it or need it - and that if an EU proposal fails at the first hurdle then it'll keep coming back again and again until it succeeds.

This mindset is neatly illustrated by the latest proposals by the EU Commission to overhaul its Markets in Financial Instruments Directive. Dubbed Mifid II it's another power grab on the City of London a review of the original with the aim of regulating all those investment services it missed the first time around.

One of the most radical parts of Mifid II is a proposal to ban execution-only investments. 'Execution only' is a form of business where a customer has requested a specific investment but has chosen not to receive independent financial advice. This is aimed primarily at professional investors who have enough knowledge to make their own choices, thus cutting out unnecessary advice which in turn reduces paperwork and costs. Execution only has been an established market in the UK for nearly 30 years. People making their own choices by their own free will.

Freedom of choice (and the right to lose our own money) is an anathema to the EU project, so they propose a ban (my emphasis):

Do you consider that, in the light of the intrinsic complexity of investment services, the "execution-only" regime should be abolished.

In other words people are too stupid to make their own decisions so they need their hand held:

Deleting Article 19(6)

This implies abolition of the execution only regime. In support of this option it may be argued that retail clients – who are essentially concerned by the provision of execution only – should always expect a higher standard of service from intermediaries...

The net effect being that investors will be forced to pay for something that they neither want nor need. Unsurprisingly it's not the first time that this ban has been proposed, this from 2003:

Theresa Villiers, a British MEP, announced last week that she is taking up the cudgels in support of cheap, no-frills, execution-only stockbroking, which looks like becoming the latest victim of EU interfering bureaucracy.

Investors who want the freedom to use such a service should sit up and take notice because the EU nannies are suggesting that some of us are not "suitable" investors.

Villiers is the Rapporteur for the EU Investment Services Directive which, as currently drafted, would require stockbrokers to run suitability checks on all clients' investments - even those that have opted to trade without advice through execution-only share dealing services.

The proposal was dropped after opposition from the UK Government, but one wonders how hard this Government will fight. Not very I suspect.

What it does prove though is that the EU never ever takes no for an answer.

Cameron Sell Out

Ironies Too alerts me to this particular passage in this European Council report (page 6) from June:

16. The European Council agrees that Member States should introduce systems of levies and taxes on financial institutions to ensure fair burden-sharing and to set incentives to contain systemic risk.¹

Such levies or taxes should be part of a credible resolution framework. Further work is urgently required on their main features and issues of level playing field and cumulative impacts of various regulatory measures should be carefully assessed. The European Council invites the Council and the Commission to take this work forward and report back in October 2010.

And the footnote at the bottom of the page?

¹ The Czech Republic reserves its right not to introduce these measures.

Despite the desperate "thou doth protest too much" claims of Tories that this is all UKIP's fault, it's clear that Cameron can't sign up to EU measures fast enough, and he was voted in as leader by the...er...Tory Party.

They are not signing up to these measures under duress, but willingly and without a whimper. The Tory sceptics could say and do something but they choose not too. Not even a protest.

Power before principles. The perfect coalition then!

Déjà vu

Further proof, if any were needed, in the FT's interview with George Osborne, that Hannan's First Law: 'no party is ever eurosceptic while in office', is still alive and kicking.

Osborne's interview refers to the news that Gordon Brown has been out-maneuvered a French commissioner is in charge of EU financial services, which poses a threat to the status of the City of London as a financial centre.

On a positive note, Osborne indicates that, at least, he's prepared for the horse-trading nature of EU politics, which so dogged and overwhelmed John Major during the Maastricht Treaty negotiations:

“We have to be realistic at how we play the European game,”

That the FT is one of the most pro-European UK newspapers would account for some of Osborne's softer tone, unfortunately the article is still liberally sprinkled with heard-it-all-before phrases:

“We’re prepared to trade some other things in order to secure Britain’s vital national interests on financial services.”

and:

"a Eurosceptic Conservative government would not become isolated in Europe"

and:

"the overall policy would have to be “deliverable”"

The Tories claim that; 'We won't let matters rest there', is again ultimately exposed as nothing more than an empty promise. The article continues:

He said he would base a Tory minister in Brussels “for the next year or two” to ensure a “much more aggressive Treasury presence” as EU legislation is drafted.

Aggressive presence eh? I bet that has the EU quaking in their boots, because that aggressive presence has hardly been a success up to now, as demonstrated when the UK's finance team recently walked out of the negotiations on financial supervision by the French.

Partly the French's posturing delight over the City, and the snub over CAP negotiations, is because they know a dying, incompetent UK Government when they see one.

Conversely the Conservatives should have a stronger hand to negotiate with, by (probably) having a successful mandate next year, as a so-called eurosceptic party.

Despite that however, experience teaches us, that what really happens with a so-called eurosceptic Tory party is:

• Britain claims proposals are unacceptable.
• Britain attends negotiations isolated, and so a row ensues.
• Behind the scenes lots of horse-trading happens.
• Neville Chamberlain George Osborne will emerge waving a white piece of paper exclaiming that they have secured the required opt-outs for the City, and that they've got the best deal for Britain.
• It later emerges that far more was given away than won.
• Said opt-outs will erode over time, especially now EU law is supreme and thus they will leak like a sieve.
• Britain will, as a result, be integrated further into the EU supranational state.

It all sounds so depressingly familiar.