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Investment research and financial analysts

Investment research and financial analysts

Outline of the Community (European Union) legislation about Investment research and financial analysts


These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Financial services: transactions in securities

Investment research and financial analysts

Document or Iniciative

Communication from the Commission to the Council and the European Parliament of 12 December 2006 entitled “Investment research and financial analysts” [COM(2006) 789 final – not published in the Official Journal].


Investment research provides financial information to ensure appropriate pricing, help issuers to raise capital and ensure deep and liquid secondary markets for financial instruments.

Financial analysts carry out this type of research by synthesising raw information to make it accessible. This work helps investors make decisions and facilitates research, investment advice and marketing communication by intermediaries.

Analysts are of great assistance for the financial markets. They do, however, face a variety of conflicts of interest. The interests of a firm or of clients may, for example, conflict with the interests of those to whom the research is directed. The Commission is therefore considering measures to improve the value and integrity of investment research.

This communication echoes the work done by the Forum Group on Financial Analysts and the International Organisation of Securities’ Commissioners Technical Committee (OICV-IOSCO). Work of the Forum Group and the OICV-IOSCO

The focus of the Forum Group’s report is the prevention, management, monitoring and disclosure of conflicts of interest relating to investment research. It gives recommendations to analysts involved in securities offerings or other finance work. It also advises companies on best practice, dissemination of investment research to the retail market, remuneration of analysts and securities dealing by analysts.

The OICV-IOSCO is focused on analysts working in integrated investment banks or broker-dealers, although the effects of conflicts of interest also affect other individuals. The report seeks to implement consistent rules relating to:

  • identification, avoidance, management, disclosure and elimination of conflicts of interest;
  • the integrity of analysts and their research;
  • education of investors concerning the conflicts of interest faced by analysts.

Market Abuse Directive and Markets in Financial Instruments Directive (MiFID)

Successive Directives on market abuses require information which advises an investment strategy to be fair and disclose the existence of conflicts of interest. The Commission has set up a disclosure regime for conflicts of interest that could influence investment data.

As soon as a firm provides investment services, it must be authorised by the MiFID and comply with its requirements. The MiFID requires firms to:

  • take steps to identify conflicts of interest;
  • disclose their conflicts of interest policy;
  • define and implement measures designed to serve their clients’ interests;
  • indicate where the steps taken are not sufficient to ensure the client’s interests;
  • inform their clients of the nature and origin of conflicts of interest.

Conflicts of interest – investment research

A recommendation described as “investment research” or something similar, or presented as objective and independent, is deemed to qualify as investment research. Generally directed at the client, such a recommendation may not constitute advice, as it must correspond to the needs of a specific client or be based on the specific situation of the client. Investment firms must effectively separate activities that serve clients and those that serve business interests. Thus, a firm that gives recommendations not constituting research must indicate that these are not given in accordance with standards designed to promote objectivity.

To guarantee their objectivity, investment firms must prevent persons involved from having certain dealings, particularly if they have knowledge of the timing or content of research before the public.

Firms disseminating information produced by third parties are not bound by these measures, provided that they have not altered this information and that they have verified the application of MiFID requirements.

Four outstanding issues

Work done by the Forum Group and the OICV-IOSCO has left four issues outstanding. The first relates to the possibility of mandatory registration by analysts of their qualifications. However, problems of analyst subjectivity do not derive from their lack of competence, but rather from the failure of firms to manage conflicts of interest affecting their research.

The second issue relates to the research services of independent firms and investment banks. Although the former are financed by their clients and the latter more indirectly, there are not necessarily quality differences between the two. For the research they carry out to be treated fairly, the MiFID permits investment firms to accept inducements, as long as these improve the quality of services and are disclosed to the client. This authorisation is valid for ‘bundled’ or ‘softed’ services provided by brokerage houses to portfolio managers.

The third issue relates to implementation of a best practice code to cover issuer relations with analysts. The rules set out by the Market Abuse Directive and the MiFID prohibit issuers from having undue editorial influence over research. They also prohibit them from disclosing price-sensitive information to analysts ahead of its release to the rest of the marketplace. For the Commission, the development of a best practice code will make relations between issuers and analysts more professional.

The final point relates to investor education. The Commission considers that it is the Member States, trade associations and investment firms that must take action in this area. The Commission itself undertakes to inform and educate consumers, notably through a conference that aims to bring together best practice in consumer education and to find out how to improve their financial literacy.

Stronger control measures for the synthetic drug BZP

Stronger control measures for the synthetic drug BZP

Outline of the Community (European Union) legislation about Stronger control measures for the synthetic drug BZP


These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Justice freedom and security > Combating drugs

Stronger control measures for the synthetic drug BZP

Document or Iniciative

Council Decision 2008/206/JHA of 3 March 2008 on defining 1-benzylpiperazine (BZP) as a new psychoactive substance which is to be made subject to control measures and criminal provisions.


BZP (1-Benzylpiperazine) is a new psychoactive substance that acts as a stimulant on the central nervous system. It a purely recreational drug, with no established or recognised medical value, which is sold over the Internet and at ‘herbalists’ and ‘smart shops’.

The risks associated with the ingestion of this substance are still little known. That is why the Commission asked the Council – on the basis of a joint European Monitoring Centre for Drugs and Drug Addiction EMCDDA / Europol report – to measure its health and social risks via a risk assessment based on Council Decision 2005/387/JHA on the information exchange, risk-assessment and control of new psychoactive substances.

The BZP risk assessment exercise produced the following results: 13 Member States and Norway have reported seizures of BZP in quantities from 1 to 64 900 tablets. There is no evidence of an organised crime link.

BZP is a psychoactive substance. The risks associated with its use may include:

  • increased heart rate;
  • raised blood pressure;
  • restlessness and hyperactivity.

It may also have secondary effects, in the ‘down’ phase, that can last for up to 24 hours after the drug was taken. These can include:

  • vomiting and nausea;
  • headache and stomach ache;
  • loss of appetite;
  • anxiety and insomnia;
  • mood swings and irritability;
  • strange thoughts;
  • confusion;
  • palpitations and trembling.

The effects of using BZP are still largely unproven. Although clinical reports tend to establish a link between BZP and seizures, this conclusion is based on a very small number of cases, in which moreover the BZP was detected in post mortem specimens and its role in the death could not be determined since other factors were involved.

The risk assessment report reveals the lack of conclusive scientific proof establishing the global risks of this new substance. To be on the safe side, however, given that it does represent a health risk, it would be wise to make it subject to control and to take appropriate measures.

Final provisions

The Member States are required to make BZP subject to the control measures and criminal penalties provided under their national laws in accordance with the obligations imposed by the 1971 United Nations Convention on psychotropic substances.


A number of initiatives have already been taken. The EMCDDA risk assessment concluded that the use of BZP can result in health problems whose long-term effects are still unknown. Based on this finding, the Commission wants to have BZP made subject to control measures, as provided by the UN Convention on psychotropic substances. This proposal also takes account of the data that have been collected as a result of the new psychoactive substances risk assessment procedure.

Council Decision 2005/387/JHA of 10 May 2005 provides for a three-step procedure for placing this type of substance under control. The first step is to draw up a report collating all available information on BZP. This assessment was carried out by the EMCDDA and Europol before being submitted to the Council on 22 February 2007. The Council responded by asking for a more extensive study of the risks associated with BZP, to be conducted by:

  • the extended scientific committee of the EMCDDA;
  • the Commission;
  • Europol;
  • the European Medicines Agency (EMEA).


Act Entry into force – Date of expiry Deadline for transposition in the Member States Official Journal
Decision 2008/206/JHA 8.3.2008 OJ L 63 of 7.3.2008

Related Acts

Council Decision 2005/387/JHA of 10 May 2005 on the information exchange, risk-assessment and control of new psychoactive substances [Official Journal L 127 of 20.5.2005].

'Drug prevention and information' programme

‘Drug prevention and information’ programme

Outline of the Community (European Union) legislation about ‘Drug prevention and information’ programme


These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Justice freedom and security > Combating drugs

‘Drug prevention and information’ programme (2007-2013)

Document or Iniciative

Decision 1150/2007/EC of the European Parliament and of the Council of 25 September establishing for the period 2007-2013 the specific programme ‘Drug prevention and information’ as part of the General Programme ‘Fundamental Rights and Justice’.


The death rate from drug addiction in Europe is very high. It is essential to measure the immediate and long-term consequences of drug use on health and social and psychological development, and the equality of the chances of the individuals concerned.

The ‘Drug prevention and information’ programme set up by the European Union has three objectives. Specifically to:

  • prevent and reduce drug use, drug addiction and the associated inherent risks;
  • improve information about drug use;
  • support the implementation of the EU Drugs Strategy.

To this end, the programme supports transnational actions aimed at:

  • creating multi-disciplinary networks;
  • ensuring the expansion of the knowledge base, as well as the exchange of information and good practices;
  • raising awareness of the health and social problems caused by drug use;
  • preventing drug use.


The actions financed by this programme are:

  • the actions implemented by the Commission (research, surveys, conferences, campaigns, public events, analysis, Internet sites, etc.);
  • transnational projects of European interest presented by Member States or by candidate countries for membership of the EU;
  • the activities of non-governmental organisations and other bodies pursuing aims of general European interest.

The actions developed under this programme are open to public or private bodies, active in terms of preventing, or providing information, on drug use.

The programme is targeted at all groups implicated in drug use, but most particularly at ‘at risk groups’ such as young people, women, vulnerable groups and people living in socially disadvantaged areas.

Other targeted groups include educational staff, parents, teachers, social workers, local and national authorities, medical and paramedical personnel, judicial staff, law enforcement and penitentiary authorities, non-governmental organisations, trade unions and religious communities.


The programme has a budget for 2007-2013 of EUR 21.35 million. Grants are awarded by the Commission following calls for proposals, taking into account:

  • the conformity of the proposed action with the annual work programme;
  • the consistency of the expected results with the programme objectives;
  • the sum asked for and whether it is appropriate to the expected results;
  • the geographical and social impact of the action and its likely effect on the public;
  • citizen involvement in the organisation of the bodies concerned.


The EU has launched a number of initiatives in its fight against drugs. In addition to the EU Drugs Strategy for the period 2005-2012, an Action Plan was adopted in order to translate the strategy into concrete actions.

The ‘Drug prevention and information’ programme forms part of the general programme ‘Fundamental Rights and Justice’ 2007-2013 aimed at promoting freedom, security and justice in the EU. The latter also includes the Criminal Justice, Civil Justice, and Fundamental Rights and Citizenship specific programmes, and the Daphne III programme on combating violence.


Act Entry into force Deadline for transposition in the Member States Official Journal

Decision 1150/2007/EC


OJ L 257, 3.10.2007

Related Acts

Report on the interim evaluation of the specific Programme ‘Drug prevention and information’ for the period 2007-2013 [COM(2011) 246 final – Not published in the Official Journal].

The evaluation of the programme shows that it has recorded good results during the first three years of implementation and that several objectives have been achieved. The Commission regrets, however, the insufficient budget it has at its disposal and which prevents the programme from having a real effect at European level. It therefore proposes to increase the financial resources of the programme, and also to prioritise projects with a European dimension, to simplify the administrative procedures and to improve the dissemination of the results obtained.

This summary is for information only. It is not designed to interpret or replace the reference document, which remains the only binding legal text.