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2020 | OriginalPaper | Chapter

1. Introduction

Author : Marnix Wallinga

Published in: EU Investor Protection Regulation and Liability for Investment Losses

Publisher: Springer International Publishing

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Abstract

The chapter introduces the background of the study, focusing on mis-selling scandals which have demonstrated the vulnerability of consumers of investment products and the importance of their protection. In addition, the chapter describes how the study fits into the wider development of European regulatory private law and how the use by the EU legislator of the MiFID and MIFID II conduct of business rules for regulatory purposes gives rise to the need to investigate the relationship between these rules and national private law. Subsequently, the chapter introduces the aim of the study to investigate from an EU law and comparative law perspective how judicial enforcement of the MiFID and MiFID II conduct of business rules through private law means can contribute to retail investor protection. To this end, two main research questions are addressed in this book. The first is how can we conceptualise the interaction between the conduct of business rules and private law norms determining contractual or non-contractual (tort) liability of firms? The second question asks what gateways there are in national private law to the impact of the conduct of business rules on the firm’s liability to pay damages. Furthermore, the scope of the research and the terminology are explained. Lastly, the chapter outlines the structure of the research and how the parts of the book and chapters contribute to the book’s main argument.

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next chapter MiFID and MiFID II: The Development of EU Investor Protection Regulation

Moloney (2010), pp. 2 and 39.

Moloney (2018a), pp. 254 et seq.

Spindler (2011), p. 315.

In more detail: Sect. 5.2.3. See also Hoffmann (2011), p. 459.

The mis-selling of payment protection insurance provides one of the most notorious examples of widespread damage to individuals in the UK, see Ferran (2012), p. 247. Companies have been required to pay more than £30 billion in compensation to individuals who complained about the unsuitability of these financial products and related information disclosure inadequacies since 2011, see <https://www.fca.org.uk/news/ppi-monthly-refunds-compensation> accessed 12 February 2019.

Moloney (2012a), p. 176.

Cherednychenko (2014a, 2015b, c); Micklitz (2011), pp. 564 et seq. and 570 et seq.

Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC [2004] OJ L145/1; Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU [2014] OJ L173/349.

Micklitz (2009), p. 29; Micklitz (2005), pp. 554 and 555. See also: Cherednychenko (2014b), pp. 170 and 171; Cherednychenko (2014a), p. 38; Micklitz (2012), pp. 11 and 18; Micklitz (2011), p. 563; Collins (2008), p. 269; Cafaggi (2006a), p. 22; Schmid (2005).

With further references: Micklitz (2009), pp. 58 et seq.

See, for example: Collins (1999), in particular Part 2, who describes how contract law, as a result of the collision with economic and social regulation, is used for achieving policy objectives. For a more recent study on the regulatory function of private law, see Hellgardt (2016).

Micklitz (2014a), p. 473; Cherednychenko (2014c), p. 476; Micklitz (2009).

See, for example: Böhm (1966), p. 75.

For the use of this term in this context, see also Cherednychenko (2015c) and Moloney (2012a). The term can also be used to refer to a broader area of regulation such as information regulation and product regulation.

Cherednychenko (2015b).

See in more detail Sect. 3.3.2.

Cherednychenko (2015b), p. 638; Micklitz (2014b), p. 508; Cherednychenko (2015a), p. 485.

Press Release on A New Deal for Consumers: Commission strengthens EU consumer rights and enforcement, 11 April 2018, see <https://ec.europa.eu/commission/presscorner/detail/en/IP_18_3041> accessed 12 February 2019.

Proposal for a Directive of the European Parliament and of the Council on representative actions for the protection of the collective interests and repealing Directive 2009/22/EC COM(2018) 184, art. 2(1) jo. Annex I sub 45.

Cherednychenko (2014a). See in more detail: Sects. 2.3 and 2.4.

Also about this development, see: Cherednychenko (2015b), p. 624.

See in more detail: Chap. 3.

See also: Moloney (2012b), p. 416. For more general information about this, see Cafaggi (2006b), p. 241. The most notable exception of this is the introduction of civil liability for credit rating agencies in the CRA Regulation, art. 35a (Regulation (EU) No 462/2013). The 2003 Prospectus Directive, art. 6 (Directive 2003/71/EC) and the 2017 Prospectus Regulation, art. 11 (Regulation (EU) No 2017/1129) also refer to the issue of civil liability, leaving the matter of shaping this to the discretion of the Member States.

Caruso (1997), p. 3. See also: Micklitz (2011), p. 585.

See also: Cherednychenko (2015b), p. 621; MacNeil (2015), p. 414.

Andenas and Della Negra (2017), p. 504; Andenas and Chiu (2014), p. 223; Moloney (2012b), p. 421.

Weber and Faure (2015), p. 525; Vandendriessche (2015), pp. 48 et seq.; Cherednychenko (2015b), pp. 640 et seq.; Cherednychenko (2015a), p. 487; Collins (2011), p. 460; Jackson and Roe (2009), p. 207; Cafaggi (2006b), pp. 195 et seq.; La Porta et al. (2006); Collins (1999), pp. 61 and 62; Shavell (1984), p. 365. It should be noted that the compensatory function of private law can also create deterrence and that public supervisory authorities are experimenting with hybrid mechanisms of enforcement whereby these authorities provide compensation within the administrative law structure to individuals who suffer damage.

Micklitz (2009), p. 29; Micklitz (2005), pp. 554 and 555.

Cherednychenko (2014a).

Cherednychenko (2015c). For more information, see: Chap. 3.

For such an account of the relationship between regulation and private law which extends beyond the ordoliberal school including further references, see Grundmann (2009, 2017).

Tison (2010). See also recently Della Negra (2019).

Busch and DeMott (2012).

For a comparative study on the issue of causation in relation to investor losses, see Vandendriessche (2015).

Kruithoff (2011). For more detail about the client classification system and the third recognised category, eligible counterparties, see: Sect. 2.5.1.

Art. 4(1) sub 12 MiFID and art. 4(1) sub 11 MiFID II.

Annex II to MiFID and to MiFID II.

On the unclear relationship, at the EU level, between the definition of retail investors and consumers (of investment services), see Moloney (2012a); Moloney (2010), p. 40. For a recent study focusing on retail corporate investors, see Bugeja (2019).

See also art. 4(1) sub 1 MiFID and 4(1) sub 1 MiFID II.

Moloney (2007), p. 393.

Also, in this regard, see MacNeil (2012), p. 206.

Art. 4(4) MiFID; art. 4(4) MiFID II and art. 9 MiFID II Delegated Regulation (EU) 2017/565 on organisational requirements and operating conditions for investment firms [2017] OJ L87/11.

See also: CESR Q&A, Understanding the definition of advice under MiFID (CESR/10-293). In German law, see Zahrte (2019), no. 27 and 119; Grundmann (2018), no. 82; Hannöver and Walz (2017), no. 25. Including further references to literature and case law, for Dutch law, see Labeur (2015). For UK law, see Edwards (2018); Davies (2015); McMeel and Virgo (2014), no. 1.49 et seq.; Mitchell (2014).

More in general: BPE Solicitors v Hughes-Holland [2017] UKSC 21, as per Lord Sumption at [39]. Also, on the distinction between information and advice, see McMeel and Virgo (2014), no. 18.10 et seq.

The reason why the research does not (also) focus on, for instance, the MiFID and MiFID II regime of conflicts of interests in investment services is that the duty to avoid conflicts of interests has not featured (prominently) in Dutch case law, one of the legal systems chosen for this research (see in more detail Sect. 1.5) in general, nor in Dutch case law regarding the relationship between regulatory conduct of business rules and private law in particular. For a recent study that touches on conflicts of interests under Dutch law, see Broekhuizen (2016). For (the central role of) conflicts of interests in MiFID and MiFID II including further literature references, see Grundmann and Hacker (2017).

See in more detail: Sect. 2.5.1.

The Commission Proposal on representative actions COM(2018) 184 does not intend to affect rules establishing contractual and non-contractual remedies under EU law or national law for breaches of EU investor protection regulation falling within the ambit of the proposal, see art. 2(2).

Cherednychenko (2015b), p. 640.

The Commission of European Contract Law (2000) and European Group on Tort Law (2005).

Moloney (2018a), pp. 253 and 302; Moloney (2018b), pp. 189 and 190. In more detail about the ESMA’s role in shaping EU retail investor protection regulation, see Sect. 2.4.2.

For the concept of equivalence in this regard, see Wymeersch (2017), Armour (2017), Ahern and Kho (2017) and Reynolds and Comyn (2017).

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Title: Introduction
Author: Marnix Wallinga
Publisher: Springer International Publishing
Book: EU Investor Protection Regulation and Liability for Investment Losses
Print ISBN: 978-3-030-54000-5

Electronic ISBN: 978-3-030-54001-2

Copyright Year: 2020
DOI: https://doi.org/10.1007/978-3-030-54001-2_1