LONDON: Banks and investment firms should be banned from being paid commission on financial products they sell to avoid the temptation of offering pricier services to customers, European Union lawmakers will propose on Friday.
The 27-country bloc is revising its securities trading rules known as Mifid to apply lessons from the financial crisis and play catch-up with advances in trading technology.
The European Parliament, which has joint say with member states, votes in full session on Friday, and some lawmakers want to toughen what was agreed in committee.
Instead of placing curbs on some types of investment advice, the lawmakers want a complete ban on commission, according to a copy of the amendment seen by Reuters.
Investment firms would be paid only by "charges payable by or on behalf of the client."
Commission is typically linked to the cost of the product, so there can be an incentive to push pricier products to get a larger commission.
The amendment is backed by the Greens, the hard left, the UK centre right and some socialists but its adoption is not guaranteed as much could hinge on what the main centre right party, the biggest in the assembly, decides.
The ballot will be by roll-call, so how each lawmaker votes will be made public.
Banks in countries like Germany are opposed to a ban on commission while Britain is bringing in such a prohibition in January to help end two decades of mis-selling of financial products from pensions to mortgages and loan insurance.
After Friday's vote, parliament will sit down with EU states to agree a final text that will become law around 2014.
Tough curbs on commission, if not an effective ban, look inevitable after the financial crisis and taxpayer rescues of banks galvanised support for tougher consumer protection.
The latest member-state compromise, being circulated by the EU's Cypriot presidency, says "it is appropriate to further restrict the possibility for firms to accept and retain fees, commissions or any monetary and non-monetary benefits."
Such payments should be passed "in full" to the customer.
"Only minor non-monetary benefits such as training on the features of the products and, for firms providing portfolio management, services related to research should be allowed," the compromise seen by Reuters says.
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