Eurocrat threat to low-cost brokers

LOW-COST UK stockbrokers who do not give advice suffered a blow after Eurocrats ruled they can only deal with investors who ask specifically for their services.

In a bizarre decision the European Council of Ministers voted that dealing without advice, known as 'executiononly', could only be carried out 'at the initiative of the client'. This could force many brokers to shut their dealing-only arms.

For two years, Britain has been fighting the plans, laid out in an EU Investment Services Directive, to force all stockbrokers to carry out 'suitability checks' on clients when they buy and sell shares.

These checks would be both timeconsuming and expensive for low-cost stockbrokers. Many fear they will be driven out of business. The European Parliament initially backed down over the directive, saying it would consider exempting deal-only stockbrokers.

Angela Knight, of the Association of Private Client Investment Managers and Stockbrokers, said: 'This moves the goalposts. They are totally reversing the traditional customer practice of share trading. It will really restrict what a firm can do.'

The directive now goes back to the European Parliament where it will be heard by spring.

Foster Bowman, managing director of internet and phone stockbrokers idealing, said: 'This seems unworkable.' But he sees loopholes that could enable low-cost brokers to survive.