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Tories win Euro reprieve for execution-only deals

European Commission plans to make execution-only business prohibitively expensive have been defeated following a series of amendments being passed to the Investment Services Directive.

Conservative economic affairs spokeswoman and MEP Theresa Villiers successfully pushed through the amendments – which she tabled – at an economic and monetary affairs committee meeting last week.

As it stood, the ISD would have required brokers to conduct a suitability test on every new client and provide guidance and risk warnings every time that shares were bought and sold. The industry had been fiercely lobbying against the move, arguing that it would have suffocated executiononly business, which thrives on its speed and low cost, by increasing dealing costs and transaction times.

Despite the fact that around 60 per cent of private investing is conducted without advice, there were fears that the amendments would be voted against at committee stage.

Although they have passed this latest hurdle, the amendments still face further tests in the European Parliament and Council of Ministers, both of which can make changes to the ISD.

But the industry has welcomed the clearing of the first barrier, which some providers feared could have an impact on all non-advice-led aspects of their businesses.

Fidelity head of public affairs John Ingamells says: “It is a step forward and the recognition of the principle of non-advised sales is welcome. We can breathe more easily for the time being but there are still a number of hoops for the ISD to jump through.”

Chelsea Financial Services head of research Juliet Schooling says: “It is not only good news for us but for clients too – many of them have know-ledge and expertise to make their own decisions without advice and they should be able to do that without incurring extra costs.”

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