The European Commission (EC) has referred the Member States of Spain, Poland and Czech Republic to the European Court of Justice for failing to implement the Markets in Financial Instruments Directive (MiFID).
While MiFID came into effect on 1 November, 2007, the deadline for transposition of its provisions into national legislation expired on 31 January, 2007. Spain, Poland and Czech Republic, however, have still not written MiFID into their national laws.
For Bob McDowall, senior analyst, TowerGroup, Spain, Portugal and Czech Republic’s non-compliance does not in itself hinder the effectiveness of MiFID. “Spain, Poland and the Czech Republic are not the most significant financial markets in Europe and do not present significant barriers to MiFID. Their delayed approach will not have a significant impact on the effectiveness of MiFID,” he comments.
However, the announcement could herald big problems for non-compliant countries if financial institutions follow in the footsteps of the EC by taking them to court. “While the countries that are not conforming can be subject to fines, the bigger embarrassment would be that financial institutions took those countries to the EU courts alleging they were financially disadvantaged by being unable to transact cross-border business into those countries,” notes McDowall.
To be MiFID-compliant, EC Member States must incorporate the Directive’s provisions into the rule books of their national financial services regulators following transposition into national legislation. The period of nine months between transposition and application was intended to provide financial market participants with the required time to adapt to the new rules. However, a large majority of Member States have not yet completed this second step, according to Bob McDowall, senior analyst, TowerGroup.