MiCA and the flawed premise of centralised supervision: operational burden vs. supervisory consistency

The creation of the European Securities and Markets Authority (ESMA) has marked a major step towards more integrated rulemaking and supervision in the European financial market sector. ESMA’s organisation and operations are strongly influenced by the position of this new Authority within the EU institutional framework. The European Court of Justice (in Case C-270/12) confirmed the legitimacy of the legal basis of ESMA itself and of its powers. While ESMA’s governance still displays some features of a network among national supervisors, its quasi-regulatory functions and supervisory tasks are constrained by limitations directly or indirectly dictated by the Treaties. This paper highlights how the traditional concepts of independence and accountability towards EU institutions and stakeholders apply to ESMA. ESMA’s relationships with national competent authorities, which retain direct supervisory powers with limited exceptions, and the EU institutions, which are competent for the adoption of legislative and non-legislative regulatory measures, are also considered. The analysis shows that tasks conferred on ESMA fall short to match its relatively high accountability, which is aligned with international best practices. The European Commission announced a possible revision of the European Supervisory Authorities (including ESMA) framework for 2014; we therefore suggest some reform proposals that could help streamline regulatory and supervisory functions at EU level, thus allowing ESMA to better exploit its potential while avoiding the risk of excessive centralisation of supervisory powers.

This chapter lays down the duties for competent authorities to cooperate with ESMA in Article 24. Article 24(1) obliges the competent authorities of the Member States to cooperate with European Securities and Markets Authority (ESMA). The cooperation with ESMA has to comply with the ESMA Regulation (1095/2010/EU) and guarantee effective and uniform compliance with the Market Abuse Regulation. Article 24(2) stipulates that the national competent authorities are to provide ESMA all information necessary to fulfil its duties in accordance with Article 35 ESMA Regulation (1095/2010/EU). Furthermore, this Article seeks to ensure uniform conditions of its application. To this end, ESMA is obliged to develop implementing technical standards (ITS) and power is conferred on the Commission to adopt the ITS.

This chapter considers the exchange of information with the European Securities and Markets Authority (ESMA). With a view to increasing transparency and enhancing ESMA’s oversight of the national sanctioning practices, Article 33 contains annual and immediate reporting obligations for national competent authorities with regard to sanctions, measures, and investigations imposed in accordance with Articles 30 to 32. First, the national competent authorities must annually provide ESMA with aggregated information regarding administrative and (if applicable) criminal investigations, sanctions, penalties, and other measures. Secondly, national competent authorities must notify ESMA whenever they publish administrative or criminal sanctions or other administrative measures. Finally, Article 33 mandates ESMA to draft implementing technical standards (ITS) to determine the procedures and forms for the exchange of information regarding administrative and criminal investigations, sanctions, penalties, and other measures.

The initial evidence indicates that EU financial market governance has performed well in its response to the Covid-19 crisis. In the European Union (EU), the need for coordination and cooperation over this crisis has been a particular concern given that national competent authorities (NCAs) operate under the single rulebook and supervisory action must, accordingly, be consistent. The European Securities and Markets Authority (ESMA) has, however, shown itself to be nimble, responsive, and speedy in deploying its supervisory powers, including those additional powers it has recently been granted under the 2019 ESA Reform Regulation. This has particularly been the case as regards the application by NCAs of ‘supervisory forbearance’ and as regards the application of market disclosures rules, notably the financial reporting standard IFRS 9. ESMA has also been successful in coordinating the few NCAs which decided to impose restrictions on short selling. ESMA’s actions during the Covid-19 crisis underline the de facto power it wields through its soft supervisory convergence powers and the entrepreneurial but effective approach it deploys in their use.See generally, Niamh Moloney, the Age of ESMA. Governing EU Financial Markets (Hart Publishing, 2018), chapter 4.

The creation of the European Securities and Markets Authority (ESMA) has marked a major step towards more integrated rulemaking and supervision in the European financial market sector. ESMA organization and operations are strongly influenced by the position of the new Authority within the EU institutional framework. While ESMA governance still displays some features of a network among national supervisors, its quasi-regulatory functions and supervisory tasks are constrained by limitations directly or indirectly dictated by the Treaties. The paper highlights how the traditional concepts of independence and accountability towards EU Institutions and stakeholders apply to ESMA; its relationships with national competent authorities, which retain direct supervisory powers with limited exceptions, and the EU Institutions, which are competent for the adoption of legislative and non-legislative regulatory measures, are also considered. The analysis shows that tasks conferred to ESMA fall short to match its relatively high accountability, which is on the contrary aligned with international best practices. The EU Commission announced a possible revision for the European Supervisory Authorities (including ESMA) framework for 2014: we suggest therefore some reform proposals that could help streamline regulatory and supervisory functions at EU level, thus allowing ESMA to better exploit its potential while avoiding the risk of excessive centralization of supervisory powers.

The European Securities and Markets Authority (ESMA) has played a pivotal role in shaping the operation of the European supervisory structure since its establishment in January 2011. The overall objective of the European Supervisory Authorities (ESAs) is to safeguard the stability and orderly functioning of the European financial system. ESMA shall achieve this objective in the realm of European capital markets (securities trading). Against the backdrop of ESMA’s operation so far, this chapter will revisit from a scholarly perspective the organisational and operational design, tasks, powers and governance of ESMA. Focus is on ESMA’s regulatory role, not its supervisory mission. ESMA’s regulatory tasks are likely to keep it on top of the watch-list of the European Commission (Commission). In context with the Commission’s work on establishing a Capital Markets Union (CMU) the Commission has emphasized particularly the importance of well-regulated capital markets. Main areas for action in this context are linked to ESMA’s remit. Have ESMA’s design and powers allowed it to contribute adequately to the development of a high-quality single rulebook as an essential element of an enhanced regulatory harmonisation and coherence? Has ESMA’s institutional profile fostered or hindered it to become an efficient and effective ‘rule-maker’? What features of ESMA’s current design have proved themselves to be appropriate? Which of ESMA’s institutional characteristics remain areas of improvement with a view to ESMA’s regulatory mission?

This chapter discusses Article 4, which contains the rules on notifications as well as guidelines on updating a list of financial instruments. Although the Market Abuse Regulation is directly applicable in all Member States, the European Securities and Markets Authority (ESMA) is the central administrative agency for its enforcement. Here, national (competent) authorities (NCAs) play a key role in its application. In addition, the Market Abuse Regulation also assigns several tasks to the market operators. To ensure a sufficient exchange of information between the market operators, the NCAs and ESMA, Article 4 sets out numerous notification requirements establishing a system for the centralization of all necessary information at ESMA.

Since its establishment in 2011, the European Securities and Markets Authority (ESMA) has considerably shaped the regulation and supervision of European capital markets. Being part of the European System of Financial Supervision (ESFS ), the three European Supervisory Authorities (ESA s) – ESMA, the European Banking Authority (EBA ) and the European Insurance and Occupational Pensions Authority (EIOPA) – share its main objective: safeguarding the stability of the European financial system. ESMA however is outstanding with respect to its role as direct supervisor particularly of credit rating agencies (CRA s) in the European Union (Union). Whereas many analyses of the regulatory and supervisory regime for CRA s in the Union mainly focus on its design and effects on CRA s and the credit rating market the present paper aims to focus on ESMA as direct supervisor in this sector. The paper is organised as follows. It starts with some methodological preliminaries and remarks on the role of legal academia in the realm of financial markets regulation and supervision thereby aiming to put the paper in the broader context of the relevant legal literature. Against the backdrop of some fundamentals on rating-directed regulation and supervision it discusses the fitness of ESMA’s institutional set-up for its role as direct supervisor of CRA s in the Union. The paper then explores and assesses the performance of ESMA as direct supervisor of the CRA s in the Union since 2011. This is complemented by some observations as to ESMA’s regulatory powers and performance in the European sector of CRA s. The paper then concludes with an outlook arguing in particular that ESMA in its role as direct supervisor of CRA s in the Union might well be considered a tried and tested example of a legitimate agencification at Union level paving the way towards the concept of a single capital markets supervisor.

On-Site ESMA Inspections: Chancery Division Gives Procedural Guidance

The European Securities and Markets Authority: Accountability Towards EU Institutions and Stakeholders

Purpose – To explain the practices that ESMA (European Securities and Markets Authority) recommends for investment firms and national competent authorities to implement when it comes to structured retail products (SRPs), in order to ensure sound product governance arrangements and the consistency of supervisory practices needed for adequate investor protection across the European Union. Design/methodology/approach – Lists the ESMA guidelines for the general organization of product governance arrangements, breaks down the aspects manufacturers should consider in the making of their SRPs, highlights the need to understand the target market, explains the appropriate structure of the distributor’s and manufacturer’s distribution strategy, details how manufacturers establish a SRP’s value, recommends how investment firms deal with SRPs on the secondary market, and explains how manufacturers review the performance of their SRPs. Findings – The competent authorities are still focusing on improving and enforcing investor protection. This ESMA opinion is just one example of how product governance structures and arrangements should be developed and implemented by everyone involved. It will be important to attend carefully to what MiFID 2 (Markets in Financial Instruments Directive 2) product governance requirements bring regarding investor protection in addition to the described ESMA opinion, which is based on MiFID 1. Originality/value – Practical guidance from experienced finance lawyers.

Legal Implications of the Establishment of the European Securities and Markets Authority

The European Securities and Markets Authority (ESMA) was established in 2011 in the wake of the financial crisis. As one of the European Supervisory Authorities (ESA), it is part of the new European System of Financial Supervision. In order to carry out its tasks, ESMA was allocated an impressive range of powers which it exercises in relation to national competent authorities or market actors, including Credit Rating Agencies. The aim of this article is to examine ESMA's powers and the questions that they raise. As an EU body, ESMA was delegated certain powers. This fact raises some important issues - notably with respect to the Meroni doctrine - which this article investigates. In particular, it argues that EU actors have mostly been tight-lipped over the precise constitutional limitations of a delegation of powers when vesting powers in ESMA. The main message of this article is that the lack of clarity characterizing the current state of affairs is unsatisfactory and should be addressed. PERLIO -

On the Path to an European Single Electronic Format ESMA Consultation for the IFRS Taxonomy of Structured Electronic Reporting

Product intervention power is introduced under the markets in financial instruments regulation (MiFIR) and packaged retail and insurance-based investment products (PRIIPs) Regulation for all EU Member States and gives National Competent Authorities (NCAs), European Securities and Markets Authority (ESMA), and European Banking Authority (EBA) powers to monitor financial products (and services) under their supervision and to “temporarily” prohibit or restrict the marketing, distribution, or sale of certain financial instruments, or to intervene in relation to certain financial activities or practice. This extends the supervisory measures defined in MiFID II to any PRIIPs (including insurance-based investment products “IBI products”) that would not otherwise fall under the scope of MiFID II. Product intervention power is given to the NCAs, and in order to use power, it requires to take the specifics of the individual case into account and a series of conditions, criteria, and factors to fulfill. Moreover, ESMA and the EBA have a type of control function and ability to override national regulators on product. The aim of product intervention powers is to ensure strengthening of investor protection, but given the potential significant impact of this power, calls into question of possibility to delay innovation and slow down product developments on the capital market. This paper provided an overview of supervisory measures on product intervention, that is, scope of the product intervention power, criteria, factors, and risks which have to be taken into consideration when using this regulator’s tool.