The European Union’s plans for increased investor protection and transparency in financial markets could take the region further toward the creation of a single capital market in Europe, says economic research firm Global Insight Inc.

The European Commission presented its proposals to the European Parliament and the European Securities Committee yesterday. A decision on the new rules is expected in June 2006, and the new measures will then come into force in 2007.

In a research note, Global Insight explains that the main objectives of the plans presented yesterday are to: enable investors to invest and procure investment services across EU borders more easily, remove obstacles to the use of the EU passport by investment firms, foster competition and ensure a level playing field between Europe’s trading venues, and ensure appropriate levels of protection for investors and consumers of investment services across Europe.

The plans were drafted following a series of consultations with stakeholders over a two-year period. “It is therefore hoped that the measures, once implemented, will provide firms with clear and predictable rules, and offer greater security to investors and consumers who buy services from foreign firms,” the firm says.

“By updating investment rules in the EU, the Commission is inching closer towards its objective of creating one giant European capital market,” Global Insight says. “By cutting red tape for investors and allowing them to shop around for securities across borders, the plans will also spur economic growth across the 25-nation bloc.”

“The plans presented yesterday provide for the lowering of technical and administrative barriers to securities competition between banks and brokerages. Investors will be able to shop around more easily for cross-border securities options without encountering the cumbersome red tape which currently acts as a deterrent to such practices,” it notes.

“Key elements of the proposals focus on laying down strict rules in order to avoid conflicts of interest, as well as to improve research and advice for investors. Furthermore, one of the more radical provisions presented to the Parliament calls for an end to the obligation in some member states for banks and brokerage houses to route client orders through exchanges,” it adds.

Global Insight says that the European Commission is eager to see obstacles to cross-border investment broken down in order to stimulate much-needed economic growth in the bloc. Speaking yesterday, the head of the Commissions internal market division, David White, was optimistic that if the planned objectives ‘drive down the costs of capital both for retail consumers, small businesses and big businesses, we can do an awful lot of good for the European economy.’

The firm says that the Commission’s proposals are likely to be under review in both the Parliament and the ESC for the next few months; an eventual implementation of the new rules, once approved, is expected in November 2007, when they will need to be incorporated into the individual legal systems of each EU member state.