Conflicts of interest in investment services: The price and uncertain impact of MiFID's regulatory framework

The Markets in Financial Instruments Directive (MiFID) lays down organizational and conduct-of-business rules on conflicts of interest of investment firms and banks providing investment services. It is easy to predict that, as a consequence of the home country control principle, the MiFID will lead to de facto complete harmonization of the rules on conflicts of interest: Member States will refrain from enacting further rules on conflicts of interest so as to avoid putting domestic firms at a competitive disadvantage vis-à-vis EC firms. This chapter inquires into this prospective uniformity, making two points. Firstly, the uniformity will be more apparent than real. Secondly, that the uniform rules on conflicts of interests will lower the degree of investor protection in at least some Member States (namely, Italy) where regulation would be most needed in light of the lower degree of competition in the financial services industry, the lower level of investor education, and the unimpressive record of the financial services authority.