The Markets in Financial Instruments Directive (“MiFID”) has influenced financial market regulation by introducing extensive conduct of business rules. Despite their public law nature, the standards in the form of information disclosure obligations and the obligation to know one’s client shape the relationship between financial institutions and investors – a relationship traditionally governed by private law. Even though private law appears to fall outside its scope, it has been argued that the maximum harmonisation the MiFID is said to aim for prohibits autonomous private law norm setting. Considering that the push towards maximum harmonisation has intensified under MiFID II, the question could be raised whether the European Securities and Markets Authority’s (“ESMA”) strengthened power to provide guidance on conduct of business rules could enable ESMA to bring private law under MiFID II’s scope.
It has been contended that the MiFID aims for maximum harmonisation. Relating to the conduct of business rules, in the event of a breach of a disclosure obligation, this prevents civil judges from deciding there has not been a violation of a private law standard. And, conversely, in the absence of a breach of a disclosure obligation, from deciding a private law standard has been violated nonetheless. However, a closer look at the MiFID reveals that it deals with the issue of harmonisation rather inconclusively. The MiFID contains a patchwork approach to harmonisation, remaining silent on the meaning for conduct of business rules. Meanwhile, the ban on goldplating contained in the MiFID Implementing Directive prohibiting Member States from imposing farther-reaching requirements seems not to apply to the conduct of business rules in the MiFID.
After having failed to incorporate maximum harmonisation conclusively in the MiFID, the Commission harnessed the financial crisis to push for further harmonisation by establishing a single European rulebook as one of the main objectives of MiFID II. Although this seems to have resulted in the harmonisation of conduct of business rules being dealt with more clearly, it remains unclear what degree of harmonisation MiFID II exactly aims to realise. Considering, additionally, that the Commission’s proposal to incorporate a principle of civil liability in the new regulatory measure was blocked, it is left unclear how MiFID II affects private law norm setting.
Amidst the aforementioned uncertainty, the Commission has succeeded in putting ESMA in charge of leading the battle for further harmonisation. Under MiFID II, ESMA’s convergence powers have been greatly reinforced in order to contribute to the realisation of the single rulebook. Extensive guidance on how to comply with disclosure obligations laid down in MiFID II by prescribing in detail what kind of information in which manner should be provided to investors could result in de facto harmonisation of private law. ESMA’s highly technical expertise, adding to its authority, and the strengthened nature of its guidance combined with the more explicit way in which harmonisation of conduct of business rules is dealt with could move civil judges to rely on MiFID II when deciding whether a private law standard has been violated. Although the introduction of a principle of civil liability was blocked, the ESMA could, therefore, succeed in bringing private law under the scope of MiFID II.