CJEU ruling on unit-linked and insurance-based investment products

The Court of Justice of the European Union (“CJEU”) has decided in its ruling of 31 May 2018 (C-542/16) that advising on unit-linked and insurance-based investment products does not fall under directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (“MiFID I”).

The Swedish Supreme Court asked the CJEU whether advice to invest in an investment certificate related to unit-linked product that was given by a registered insurance intermediary should be construed as insurance mediation that falls within the scope of directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on insurance mediation (“IMD”), or whether it must be classified as investment advice covered by MiFID I.

According to the CJEU – insurance mediation consists not only in proposing of insurance contracts but also in carrying out other preparatory work to the conclusion thereof (without the type of preparatory work being limited in any way). Against this backdrop, the CJEU stated that financial advice relating to the placement of capital given in the context of insurance mediation falls within the category of preparatory works. Hence, such an advice is covered by the IMD, and not by MiFID I.

Interestingly, the CJEU admitted that the financial advice at issue is in itself capable of falling within the concept of ‘investment advice’, as defined in MiFID I. Nonetheless, MiFID I excludes from its scope persons providing an investment service where that service is provided incidentally in the course of a professional activity and that activity is regulated by other provisions, which do not exclude the provision of investment advice.

Moreover, according to the CJEU, this interpretation is further supported by directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments (“MiFID II”).

For more information, please get in touch with your contact person at CMS Cameron McKenna Nabarro Olswang.