There are generally two methods available to people who wish to invest their money in shares and funds.

The first is 'advised' where you use a broker or adviser to look at your circumstances and attitude to risk then recommend which shares / investments you should purchase then do the deal for you, in the process earning a fee from you and / or commission from the provider.

The second is the 'non-advised' or 'execution only' trade where you analyse the market, decide what you want then instruct a broker to do the deal for you for a small fee.

With an advised sale the investor gets more protection albeit at a higher cost.

There are though some very high risk investments not available on an execution only basis as being too complex for private individuals. In these cases a 'suitability' or 'appropriateness' is used by the broker to assess whether the investor understands the investment so is in a position to buy it.

The European Commission however wants to offer the private of DIY investor more protection and in order to do this they have come up with two proposals.

One is to effectively ban execution only trading in investments and shares for the private individual. i.e. nanny investing, where every trade would require a minimum of a suitability test.

The second would not go so far and would just bring more of the riskier investments under the suitability test umbrella. This is likely to include all exchange traded funds (ETFs) and investment funds.

There are many providers of execution only trades such as Hargreaves Lansdowne as well as many people who have been happily investing for many years who are unhappy about these proposals.

Peter Hargreaves, the executive chairman of Hargreaves Lansdowne (whose share price dropped on the news of the EC proposals) pointed out in that every quick execution only trade instruction could then potentially become a lengthy transaction.

There may also be cost implications to the client from increased broker overheads as well as indemnity insurance requirements.

The deadline for a response to the commission's proposals is Wednesday 2nd Feb 2011 via

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