Financial advice concerning an investment linked to a capital life insurance policy is an activity of insurance mediation falling within the ambit of Directive 2002/92/EC on insurance mediation and is not subject to MiFID rules relating to investment advice

Judgment
C-542/16
31.05.2018
PartiesJurisdictionFormationJudge RapporteurAdvocate GeneralSubject-matter
Preliminary rulingLänsförsäkringar Sak Försäkringsaktiebolag
v
Dödsboet efter Ingvar Mattsson
Court of JusticeFourth ChamberC. VajdaM. Campos Sánchez-BordonaEU Banking & Financial Law - insurance mediation
KeywordsPreliminary ruling — Directive 2002/92/EC — Scope — Concept of insurance mediation — Directive 2004/39/EC — Scope — Concept of ‘investment advice’ — Advice given in insurance mediation concerning the placement of capital in the context of capital life assurance — Classification of the activity of an insurance agent in the absence of his intention to conclude a genuine insurance contract
Significant points1. The concept of “insurance mediation” within the meaning of Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on insurance mediation includes preparatory work for the conclusion of an insurance contract, even in the absence of any intention on the part of the insurance intermediary concerned to conclude a genuine insurance contract.

As a matter of law, firstly, the concept of “insurance mediation” is defined therein by reference only to the steps objectively taken by the insurance intermediary (see the terms “activity”, “introducing”, “proposing”, “carrying out” and “assisting”). No specific intention on the part of that intermediary need accompany those activities.

Next, as regards the context of that provision, Article 4(4) of Directive 2002/92 requires Member States to take all necessary measures to protect customers against the inability of the insurance intermediary to transfer the premium to the insurance undertaking. In the absence of any stipulation to the contrary, it must be held that that provision is intended to protect customers against any failure of the intermediary to carry out such a transfer, whatever the reason. Consequently, that protection must also cover the failure to transfer the premium to the insurance undertaking where an employee of the insurance intermediary company has appropriated the premium during the work preparatory to the conclusion of an insurance contract.

Finally, that directive is intended in particular to enhance consumer protection in the area of insurance mediation. To this end, any person or any institution distributing insurance products must be covered by that directive. To make the inclusion of an activity within the scope of this directive subject to the subjective intention of the insurance intermediary who pursues it would run counter to the principle of legal certainty, to the detriment of the intermediary’s clients. In addition, such a legal position would mean that the insurance intermediary could invoke his own fraudulent behaviour to escape his liability with regard to his customers by virtue of Directive 2002/92.

2. In order to fall within the concept of ‘insurance contract’ referred to in Article 2(3) of Directive 2002/92, a capital life assurance contract, such as that at issue in the main proceedings, must stipulate the payment of a premium by the insured party and, in return for that payment, the supply of a service by the insurer in the event of the death of the insured party or the occurrence of another event specified in that contract. In the present case, it appears, subject to verification by the referring court, that the contract at issue in the main proceedings constitutes an insurance contract within the meaning of that provision.

3. Financial advice, such as one concerning the investment in the financial instrument linked to a capital life insurance, falls within the ambit of Directive 2002/92/EC and is not subject to MiFID rules (see paragraph 4 below).

First, the activities of insurance mediation listed in Article 2(3) of Directive 2002/92 are described in broad terms. In particular, they consist not only in the introduction and proposing of insurance contracts but also in carrying out other work preparatory to the conclusion thereof, without the type of preparatory work referred to being limited in any way.

Second, a placement in a financial instrument linked to a capital life insurance forms an integral part of the insurance contract, so that, the investment advice relating to that placement constitutes work preparatory to the conclusion of that insurance contract.

Such an interpretation is, moreover, consistent with the objective pursued by Directive 2002/92 seeking the enhancement of consumer protection in the field of insurance mediation. It follows therefrom that the advice in question is subject, in particular, to the requirements set out in Article 12(2) and (3) of that directive, under which, when the insurance intermediary informs the customer that he gives his advice on the basis of a fair analysis, he is obliged, on the one hand, to give that advice on the basis of an analysis of a sufficiently large number of insurance contracts available on the market, to enable him to make a recommendation regarding which insurance contract would be adequate to meet the customer’s needs and, on the other, he must at least specify, prior to the conclusion of any specific contract, the demands and the needs of that customer as well as the underlying reasons for any advice given to the customer on a given insurance product, and those details must be modulated according to the complexity of the contract being proposed.

4. Even though such financial advice could in itself be capable of falling within the concept of “investment advice” within the meaning of MiFID rules, Article 2(c) of Directive 2004/39 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 legal or regulatory provisions or a code of ethics governing the profession which do not exclude the provision of that service, such as the professional activity of insurance intermediation.

MiFID rules indeed do not apply to investment services or activities which are offered in the context of another regulated activity.

In addition, Directive 2014/65, which repeals and recasts Directive 2004/39, as is apparent from recital 87 thereof, has introduced into Directive 2002/92 new requirements enhancing investor protection in relation to insurance-based investment products in order to ensure in EU law regulating the activities of insurance intermediaries and insurance undertakings a consistent regulatory approach concerning the distribution of different financial products.
Noteworthy1. Once again, the CJEU has opted for an objective and broad definition of the scope of the activities covered by banking, financial and insurance EU regulations and directives in accordance with the wording of the provisions concerned, the general scheme of the directive in which they are enshrined and the pursued objectives. On the last point, the aim of protecting the consumers fully justifies that activities of insurance intermediation are defined on a purely objective basis, no matter the intent of the intermediary.

2. Regarding financial advice on the investment to which an insurance life agreement was linked, the CJEU gives prevalence to the Insurance Intermediary Directive over MiFID legislation on the basis of the principles of specialis generalibus derogant (according to which special, adapted rules should appy), the so-called effet utile (giving practical effect to the law) and of non-duplication (according to which an economic operator may not be subject to two separate sets of rules pursuing similar objectives). In the case at hand, the status of an insurance intermediary is subject to enough rules able to guarantee its competence and fairness that there is no need to impose additional, comparable duties stemming from the MiFID rules.

As a result, this judgment of the CJEU, which in addition confirms the well-foundedness of the interpretation of several provisions defining the scope of directives and regulations of EU banking and Financial law (Larcier 2009 and 2016) proposed in my books on EU banking and financial law, has to be approved.