Legal Aspects of Finance
Slide Set 4
The Single European Financial Market
Free Movements and Basics of Regulation
The Supervisory Bodies
Matti Rudanko
ESMA – European Securities and
Markets Authority
• On January 1, 2011, the Committee of European
Securities Regulators (CESR) officially became the
European Securities and Markets Authority (ESMA).
Today, ESMA released an FAQ as a guide to
understanding the new entity. Please find a copy of the
FAQ available via the following hyperlink:
http://www.esma.europa.eu/popup2.php?id=7366
• Additionally, the CESR website has officially transitioned
over to an ESMA domain. All sub-domains and
databases now end with esma.europa.eu rather than
cesr.eu.
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ESC (and CESR)
• the European Securities Committee
– to advise the Commission on policy issues as well as
on draft legislative proposals
– composed of high level representatives of Member
States and chaired by a representative of the
Commission
• the Committee of European Securities
Regulators CESR (now replaced with ESMA)
– Its role was to advise the Commission, in particular for the
preparation of draft implementing measures in the field of
securities. It was a pivotal regulatory body
– It was composed of high-level representatives from the national
public authorities
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ESMA, EBA and EIOPA
• ESMA is an independent EU Authority that contributes
to safeguarding the stability of the European Union‟s
financial system by ensuring the integrity, transparency,
efficiency and orderly functioning of securities markets,
as well as enhancing investor protection.
• In particular, ESMA fosters supervisory convergence
both amongst securities regulators, and across financial
sectors by working closely with the other European
Supervisory Authorities competent in the field of banking
(EBA), and insurance and occupational pensions
(EIOPA).
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Why was ESMA created? Why have a
pan-European body?
• Despite the fact that financial institutions operate across
borders using the single market, supervision had
remained mostly at national level, uneven and often
uncoordinated. They concluded that a stronger financial
sector in the EU would require in the future for there to
be even greater convergence between Member States
on technical rules, and the establishment of a
mechanism for ensuring agreement and co-ordination
between supervisors of the same cross-border
institution or in colleges of supervisors.
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The new competences and powers of
ESMA
• Although ESMA will continue the work of the CESR, ESMA will
have new competencies and powers, which include i.a.:
– the ability to draft technical standards that are legally binding in EU
Member States;
– additional responsibilities for consumer protection (including the ability
to prohibit financial products that threaten financial stability or the
orderly functioning of financial markets for a pe-riod of three months);
– emergency powers;
– monitoring systemic risk of cross border financial institutions;
– a new supervisory role (in particular for credit rating agencies);
– the ability to enter into administrative arrangements with supervisory
authorities, international organisations and the administrations of third
countries.
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IOSCO
• The International Organization of Securities
Commissions (Finnish member: FSA)
• to cooperate together to promote high standards of
regulation in order to maintain just, efficient and sound
markets;
• to exchange information on their respective experiences
in order to promote the development of domestic
markets;
• to unite their efforts to establish standards and an
effective surveillance of international securities
transactions;
• to provide mutual assistance to promote the integrity of
the markets by a rigorous application of the standards
and by effective enforcement against offenses.
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Internal Market view
• EU Directives under the responsibility of the Internal Market DG
ensure the development of a single securities market for both new
issues and trading of securities.
• They regulate the initial and on-going conditions for service
providers (investment firms), establish requirements for the
issuance of securities (both as regards public offers of securities
and requirements for securities to be listed on a stock exchange)
and co-ordinate the conditions applicable to investment funds. The
conditions for the setting-up of investment firms and their on-going
business are similar to those for banks, and provide for a level
playing field between non-bank investment firms and banks
providing investment services. The legislation on issuance of
securities lays down minimum requirements for the information that
must be disclosed to the public and facilitates cross-border
issuance of securities. The legislation on investment funds (UCITS)
facilitates the distribution of units of such funds across the
Community.
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European internal market
Financial services : EU-Japan High Level
Meeting on Financial Issues (MEMO/06/14)
Industrial Property : Consultation on future
patent policy in Europe (IP/06/38)
Motor insurance : Commission report on motor
insurance issues (IP/06/24)
Financial services : Third meeting of the Interinstitutional Monitoring Group (IP/06/25)
Financial services : 2005 was a year of
achievement, says Commission report
(IP/06/13)
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Free movement of capital
• Free movement of capital is at the heart of the Single
Market and is one of its 'four freedoms'. It enables
integrated, open, competitive and efficient European
financial markets and services - which bring many
advantages to us all.
• For citizens it means the ability to do many
operations abroad, as diverse as opening bank
accounts, buying shares in non-domestic
companies, investing where the best return is, and
purchasing real estate. For companies it principally
means being able to invest in and own other
European companies and take an active part in their
management. See list for a comprehensive overview
of all operations considered as capital movements.
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Freedom to provide services /
Freedom
of
establishment
• The freedom of establishment, set out in Article 43 of the
Treaty and the freedom to provide cross border
services, set out in Article 49, are two of the
“fundamental freedoms” which are central to the
effective functioning of the EU Internal Market.
• The principle of freedom of establishment enables an
economic operator (whether a person or a company) to
carry on an economic activity in a stable and continuous
way in one or more Member States. The principle of the
freedom to provide services enables an economic
operator providing services in one Member State to offer
services on a temporary basis in another Member State,
without having to be established.
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Company Law & Corporate
Governance
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European Corporate Governance Forum
Cross-border mergers
Directors' remuneration
Responsibility of board members
Independent directors
Shareholders' rights
Companies’ capital
Transparency obligations of traded companies
European Company "Societas Europaea"
Takeover Bids
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Core regulation and framework
• Investment services and
regulated markets
(MiFID)
• Market abuse
• Prospectus Directive
• Risk capital
• Transparency
obligations of traded
companies
• Asset Management
• Investment funds
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Financial Analysts
Rating Agencies
ESC and CESR
Clearing and settlement
Settlement Finality
Collateral
Hague Convention 2006
– Law applicable to
securities held with an
intermediary