1.Investment firms which hold clients' money and/or securities and which offer one or more of the following services shall have initial capital of ECU 125 000:
the reception and transmission of investors' orders for financial instruments,
the execution of investors' orders for financial instruments,
the management of individual portfolios of investments in financial instruments,
provided that they do not deal in any financial instruments for their own account or underwrite issues of financial instruments on a firm commitment basis.
The holding of non-trading-book positions in financial instruments in order to invest own funds shall not be considered as dealing for the purposes set out in the first paragraph or for the purposes of paragraph 2.
The competent authorities may, however, allow an investment firm which executes investors' orders for financial instruments to hold such instruments for its own account if:
such positions arise only as a result of the firm's failure to match investors' orders precisely,
the total market value of all such positions is subject to a ceiling of 15 % of the firm's initial capital,
the firm meets the requirements imposed in Articles 4 and 5, and
such positions are incidental and provisional in nature and strictly limited to the time required to carry out the transaction in question.
2.Member States may reduce the amount referred to in paragraph 1 to ECU 50 000 where a firm is not authorized to hold clients' money or securities, to deal for its own account, or to underwrite issues on a firm commitment basis.
3.All other investment firms shall have initial capital of ECU 730 000.
4.The firms referred to in point (b) of Article 2(2) shall have initial capital of EUR 50 000 in so far as they benefit from the freedom of establishment or to provide services under Articles 31 or 32 of Directive 2004/39/EC.
(4a) Pending revision of Directive 93/6/EC, the firms referred to in point (c) of Article 2(2) shall have:
initial capital of EUR 50 000; or
professional indemnity insurance covering the whole territory of the Community or some other comparable guarantee against liability arising from professional negligence, representing at least EUR 1 000 000 applying to each claim and in aggregate EUR 1 500 000 per year for all claims; or
a combination of initial capital and professional indemnity insurance in a form resulting in a level of coverage equivalent to points (a) or (b).
The amounts referred to in this paragraph shall be periodically reviewed by the Commission in order to take account of changes in the European Index of Consumer Prices as published by Eurostat, in line with and at the same time as the adjustments made under Article 4(7) of Directive 2002/92/EC of the European Parliament and the Council of 9 December 2002 on insurance mediation 12.
(4b) When an investment firm referred to in Article 2(2)(c), is also registered under Directive 2002/92/EC it has to comply with the requirement established by Article 4(3), of that Directive and in addition it has to have:
initial capital of EUR 25 000; or
professional indemnity insurance covering the whole territory of the Community or some other comparable guarantee against liability arising from professional negligence, representing at least EUR 500 000 applying to each claim and in aggregate EUR 750 000 per year for all claims; or
a combination of initial capital and professional indemnity insurance in a form resulting in a level of coverage equivalent to points (a) or (b).
5.Notwithstanding paragraphs 1 to 4, Member States may continue the authorization of investment firms and firms covered by paragraph 4 in existence before this Directive is applied the own funds of which are less than the initial capital levels specified for them in paragraphs 1 to 4. The own funds of such firms shall not fall below the highest reference level calculated after the date of notification of this Directive. That reference level shall be the average daily level of own funds calculated over a six-month period preceding the date of calculation. It shall be calculated every six months in respect of the corresponding preceding period.
6.If control of a firm covered by paragraph 5 is taken by a natural or legal person other than the person who controlled it previously, the own funds of that firm must attain at least the level specified for it in paragraphs 1 to 4, except in the following situations:
in the case of the first transfer by inheritance after the application of this Directive, subject to the competent authorities' approval, for not more than 10 years after that transfer;
in the case of a change in the composition of a partnership, as long as at least one of the partners at the date of the application of this Directive remains in the partnership, for not more than 10 years after the date of the application of this Directive.
7.In certain specific circumstances and with the consent of the competent authorities, however, in the event of a merger of two or more investment firms and/or firms covered by paragraph 4, the own funds of the firm produced by the merger need not attain the level specified in paragraphs 1 to 4. Nevertheless, during any period when the levels specified in paragraphs 1 to 4 have not been attained, the own funds of the new firm may not fall below the merged firms' total own funds at the time of the merger.
8.The own funds of investment firms and firms covered by paragraph 4 may not fall below the level specified in paragraphs 1 to 5 and 7. If they do, however, the competent authorities may, where the circumstances justify it, allow such firms a limited period in which to rectify their situations or cease their activities.