Product Intervention Measures in the European System of Financial Supervision

Abstract

The European System of Financial Supervision (ESFS) sets a framework of financial supervision in the European Union. Its main objective is to ensure that the rules applicable to the financial sector are properly implemented in all the Member States to preserve the financial stability of the financial sector, promote trust and guarantee consumer protection. The new powers refer to investment-related products, offered by both financial institutions and insurance undertakings. Each European supervisory authority is endowed with the power to apply supervisory measures, including the product intervention, which means the power to issue a decision binding in the European Union to temporarily prohibit the provision of certain financial products, conducting some activities or practices which threaten the proper operation and integrity of financial markets or the stability of the financial system in the European Union. In 2018 the product intervention measures were adopted by ESMA for the first time in two decisions, namely on the prohibition of the provision, distribution and sale of binary options to retail clients and on the restriction of the provision, distribution or sale of contracts for differences (CFDs) to retail clients. These precedent decisions will set the new directions for the EU supervision of financial institutions, mainly because of the issuing authority, which is not national, but European, and whose decisions are automatically applied in the territories of the Member States.