European regulators attain broad power equivalency

CESR report claims minor divergence between national supervisors

The level of supervisory equivalence between financial regulators in different European states under the Prospectus and Market Abuse Directives is high although some discrepancies remain, a new report claims.

The paper, An evaluation of equivalence of supervisory powers in the EU under the Market Abuse Directive and the Prospectus Directive, from the Committee of European Securities Regulators (CESR) found that the general degree of equivalency between the powers given to competent authorities in member states was high – on average 93%.

Specifically, the overall picture is more satisfactory for the Prospectus Directive, which sets out the disclosure obligations for issuers of securities that are offered to the public in the EU, than for the Market Abuse Directive (MAD), which defines what behaviour is considered market abuse, such as insider dealing and market manipulation.

CESR’s findings were mixed on supervisors’ ability to issue practical rules, with less than 85% equivalence. Several authorities were found to lack the ability to issue practical rules to properly apply the Directives.

The cross-border supervisory co-operation powers have been significantly harmonised although again, some areas of improvement remain, particularly over the capacity to open an investigation solely on a request by a foreign authority.

Under the Prospectus Directive, weak points remain in supervisors’ capacity to disclose supervisory information to the public regarding registering qualified investors and the publication of summaries of prospectuses.

Similarly, under the MAD, with regard to the disclosure of measures or sanctions, authorities are generally well-equipped with supervisory, investigative and sanctioning powers to be imposed due to infringements.

The paper is the result of a mapping exercise CESR launched last year to assess the supervisory powers that had been given to CESR members following the entry into force of the Market Abuse and the Prospectus Directives. The purpose of the study was to assess whether the competent authorities benefit from equivalent supervisory powers.

The findings of these reports have been submitted by CESR to the Financial Services Committee. Similar exercises will be conducted by the Review Panel in relation to the Transparency Directive and the Markets in Financial Instruments Directive.