Requirements for professional Indemnity insurance (PII) in the Markets in Financial Instruments Directive (MiFID) are likely to remain.
MiFID is to be introduced to replace the current Investment Services Directive (ISD), which sets the legislative framework for investment firms and securities markets in the European Union.
The Financial Services Authority states that when it comes into effect on November 1 st 2007, it will extend current coverage of ISD as well as introduce more extensive requirements for business and internal organisation.
Under MiFID, firms will be required to increase their minimum indemnity limit by 50 per cent, or alternatively raise the level of their capital adequacy.
The European Commission has now said that there is not enough evidence to remove PII requirements in a report it presented to the European Parliament.
IFAonline.co.uk reports that EC-led analysis of information given by member states and stakeholders suggests that policy reasons for PII requirements remain valid and there are insufficient reasons to remove them.
Charlie McCreevy, internal market and services commissioner, commented: "On the available evidence we should keep the existing indemnity insurance requirements, but since it is too soon for a full assessment we will continue to monitor the situation."
However, the commission states that a comprehensive assessment will not be available until next year.
PII requirements in MiFID have so far proved controversial, with some bodies raising concerns about their presence.
The Association of Independent Financial Advisors (Aifa) warned that IFAs (independent financial advisors) may find it harder to purchase indemnity cover following the implementation of MiFID.
Chris Cummings, director general of Aifa, told New Model Adviser that UK IFAs may be regarded as high risk.
He said that if there are any problems in supplying PI insurance, intermediaries: "will suffer and it will be seen that we have to have a trade-off or they will be unable to trade".
However, the Financial Services Authority has attempted to make the transition as smooth as possible by producing a paper outlining the way companies can satisfy MiFID.
Hector Sants, the FSA's managing director of wholesale business, commented: "This consultation paper is an important step towards introducing MiFID ¦ and follows extensive informal consultation with the industry on the key areas of change."
"We believe we have stuck to our commitment to minimise the burden on firms by adopting a proportionate approach to implementation."
MiFID is one of the major tenets of the European Commission's Financial Services Action Plan, which consists of 42 separate measures.