The European Court of Justice (ECJ) has ruled in the case of Khorassani v Pflanz that Article 4(1)(2) of MiFID, read in conjunction with point 1 of Section A of Annex I to that directive, must be interpreted as meaning that an investment service consisting in the reception and transmission of orders in relation to one or more financial instruments does not include brokering with a view to concluding a contract covering portfolio management services.

The ECJ ruled that:

“…the answer to the question referred is that Article 4(1)(2) of Directive 2004/39, read in conjunction with point 1 of Section A of Annex I to that directive, must be interpreted as meaning that the investment service consisting in the reception and transmission of orders in relation to one or more financial instruments does not include brokering with a view to concluding a contract covering portfolio management services.”

Earlier in its ruling the ECJ rejected an argument from the German and UK Governments that the scope of the MiFID provisions on the definition of investment advice suggested that the activity of reception and transmission of orders did not relate to specific transactions. The ECJ’s ruling stated:

“The German and United Kingdom Governments further observe that ‘investment advice’, defined in Article 4(1)(4) of Directive 2004/39 and listed in point 5 of Section A of Annex I thereto, consists, according to the wording of Article 52 of Directive 2006/73, in recommending the completion of a transaction in relation to a particular financial instrument. They infer therefrom that the lack of reference to a ‘particular’ financial instrument in point 1 of Section A of Annex I to Directive 2004/39 indicates that the scope of that provision is not limited to the reception and transmission of orders relating directly to a particular financial instrument.

That argument cannot be accepted.”

View Judgment of ECJ of 14 June 2017 – Mohammad Zadeh Khorassani v Kathrin Pflanz, 14 June 2017