EU investor protection regulation and private law:A comparative analysis of the interplay between MiFID & MiFID II and liability for investment losses

Abstract

Mis-selling scandals across the EU have demonstrated the vulnerability of retail investors, who rely on investing in financial markets for their future welfare, and the importance of protecting their interests. The conduct of business rules contained MiFID and MiFID II, such as the duty to disclose risk information and the duty to tailor advice to the client, govern the relationship between firms and investors and are designed to protect the latter. The main aim of this thesis is to research how enforcement by civil courts of the EU investor protection regulation embodied in the MiFID and MiFID II conduct of business rules can contribute to retail investor protection. This thesis answers two main research questions. The first is how can we conceptualise the interaction between the conduct of business rules originating at the EU level and private law norms that determine the liability of firms, such as violation of a duty of care, causation, contributory negligence, and limitation. The second question asks what gateways there are in private law to the impact of these rules on the firm’s liability, comparing German, Dutch, and English law. The research concludes that the complementarity model is the preferred model of the interaction between the conduct of business rules and private law norms. This model preserves the autonomy of private law norms governing the liability of firms towards investors, while presupposing that courts should give regard to the conduct of business rules when adjudicating individual disputes. In addition, this study shows that retail investors have benefited from the conduct of business rules in financial litigation in the legal systems in question, albeit to a varying degree. The research also demonstrates a hybridisation of judicial reasoning in the enforcement process resulting from the accommodation of the EU investor protection regulation into the private law discourse. This hybridisation illustrates the significant potential of judicial enforcement of the conduct of business rules through private law means to contribute to retail investor protection