118 4 Debt
services to clients,^158 among other things. According to the MiFID, detailed im-
plementing rules should differentiate the levels of protection according to the na-
ture of the clients (retail, professional) and the nature of the service.
As the MiFID applies to investment firms and regulated markets,^159 it can gen-
erally apply to banks (which are typical investment firms)^160 and some entities that
are central counterparties (provided that they have been authorised as a regulated
market by their home Member State).^161 As a result, such entities must comply
with a code of conduct when providing investment services to clients.^162 For ex-
ample, there is a “know-your-customer” rule applicable to investment advice (see
Volume I).^163
However, the MiFID does not apply to non-financial corporations and the fi-
nancing arms of industrial corporations. This is because the MiFID does not ap-
ply: to investment activities that do not belong to the regular business of the per-
son;^164 to “persons which provide investment services exclusively for their parent
undertakings, for their subsidiaries or for other subsidiaries of their parent under-
takings”;^165 and to most persons who do not provide any investment services or ac-
tivities other than dealing on own account.^166
Furthermore, it is not the purpose of the MiFID to require the application of
pre-trade transparency rules to transactions carried out on an OTC basis.^167 It is
worth noting that this does not exclude the application of the code of conduct
when an investment firm provides investment services in the context of OTC
transactions.^168
Clearing and settlement code of conduct. Clearing and settlement go hand in
hand with trading but have so far been neglected by the MiFID. The MiFID does
not regulate the operations of CCPs and CSDs as such,^169 as CCPs and CSDs do
not provide “investment services” under the MiFID.^170 The MiFID has left clear-
ing and settlement systems to be regulated by the market.
There is a code of conduct based on industry self-regulation. In 2006, the three
main industry associations (FESE, EACH, ECSDA) prepared a European Code of
Conduct for Clearing and Settlement that was signed today by all their members.
The measures detailed in the Code address three main issues: (a) transparency of
prices and services; (b) access and interoperability; and (c) unbundling of services
(^158) Article 19 of Directive 2004/39/EC (MiFID).
(^159) Article 1(1) of Directive 2004/39/EC (MiFID).
(^160) Article 4(1)(1) of Directive 2004/39/EC (MiFID).
(^161) Article 36 of Directive 2004/39/EC (MiFID).
(^162) Article 19 of Directive 2004/39/EC (MiFID).
(^163) Article 19(4) of Directive 2004/39/EC (MiFID).
(^164) Article 4(1)(1) of Directive 2004/39/EC (MiFID).
(^165) Article 2(1)(b) of Directive 2004/39/EC (MiFID).
(^166) Article 2(1)(d) of Directive 2004/39/EC (MiFID).
(^167) Recital 53 of Directive 2004/39/EC (MiFID). For pre-trade transparency rules, see Arti-
cles 29 and 44.
(^168) Article 19 of Directive 2004/39/EC (MiFID).
(^169) See nevertheless Articles 34, 35 and 46 of Directive 2004/39/EC (MiFID).
(^170) See Annex I, Section A of Directive 2004/39/EC (MiFID).