The European Court of Justice (Court of Justice) has ruled that a temporary prohibition on the activities of a tied agent fall outside the scope of MiFID.
A request for a preliminary ruling from the Court of Justice was made in proceedings between Mr Antonio Pasquale Mastromartino and the Commissione Nazionale per le Società e la Borsa (Consob) (National Companies and Stock Exchange Commission, Italy).
Mr Mastromartino provides services as a financial adviser authorised to provide offsite services. By a decision of 11 November 2015, based on Article 55(2) of Legislative Decree No 58, consolidating all provisions in the field of financial intermediation, within the meaning of Articles 8 and 21 of Law No 52 of 6 February 1996) of 24 February 1998 (TUF), Consob temporarily prohibited him from exercising that activity for the period of one year, on account of certain criminal proceedings against him.
Mr Mastromartino brought an appeal against that decision before the Regional Administrative Court for Lazio, Italy. Before that court, Mr Mastromartino claimed, inter alia, that Article 55(2) of the TUF, which serves as a legal basis for the temporary prohibition on exercising the activity of financial adviser at issue in the main proceedings, was incompatible with the provisions of MiFID. Furthermore, Mr Mastromartino claimed that the extent of Consob’s discretion under national legislation for the purposes of imposing such a temporary prohibition had failed to have regard to the principles of transparency and objectivity laid down in the case-law of the Court of Justice relating to the fundamental freedoms.
Consob disputed these arguments on the ground, inter alia, that MiFID is not applicable to the dispute in the main proceedings.
Issues before the Court of Justice
The Regional Administrative Court for Lazio decided to stay the proceedings and refer the following questions to the Court of Justice for a preliminary ruling:
- Is a “tied agent” covered by the harmonisation provided for in [MiFID], and from what aspects?
- Is the correct application of [MiFID], in particular Articles 8, 23 and 51 of that Directive, and of the principles and rules of the Treaties with regard to non-discrimination, proportionality, freedom to provide services and the right of establishment precluded by provisions of national law, such as those in Article 55(2) of [the TUF], as amended, and also Article 111, paragraph 2 of the [Regulation laying down the rules implementing Legislative Decree No 58 of 24 February 1998 on intermediaries, adopted by Consob by Resolution No 16190 of 29 October 2007], that:
- allows the “discretionary” prohibition of the exercise of the activity of a “tied agent” (adviser authorised to offer offsite services) in relation to actions not entailing the loss of good repute, as defined by national law, and at the same time do not concern compliance with the provisions implementing [that Directive];
- allows the “discretionary” prohibition for up to one year of the exercise of the activity of “tied agent” (consultant authorised to provide offsite services) in proceedings seeking to prevent the “strepitus” deriving from the charge in criminal proceedings whose duration is as a rule much longer than a year?’
Court of Justice ruling
The ECJ’s ruling provides that Articles 8, 23, 50 and 51 of MiFID, Articles 49 and 56 TFEU and the principles of non-discrimination and proportionality must be interpreted as meaning that, a temporary prohibition on exercising the activity of financial adviser authorised to provide offsite services falls neither within the scope of MiFID, nor that of Articles 49 and 56 TFEU or the principles of non-discrimination and proportionality. In such circumstances, Articles 8, 23, 50 and 51 of MiFID, Articles 49 and 56 TFEU and the principles of non-discrimination and proportionality do not preclude such a prohibition.