The existing Investment Services Directive was finalised ten years ago in 1993. For a decade, the Directive served as the “constitution” of Europe’s securities markets. While seeking to respond to technological and structural changes properly, the new legislative project has to address two other acknowledged shortcomings of the existing Directive: its patchy implementation and loopholes in the mutual recognition of the passport which failed to eliminate cross-border barriers to the provision of investment services; and the lack of flexibility due to the absence of swift and flexible adaptation and implementation facilities.

In order to meet the Lisbon objective to make the European financial markets the most competitive in the world, it is essential that the new ISD finds the right balance in several aspects: between the need to facilitate competition and customer choice and the maintenance of appropriate levels of investor protection; between mutual recognition and measured levels of harmonisation of rules and, last but not least, between core principles at Level I (ISD level) and implementation legislation at levels II and III.