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Book part
Publication date: 9 July 2018

Katica Tomic

Product intervention power is introduced under the markets in financial instruments regulation (MiFIR) and packaged retail and insurance-based investment products (PRIIPs…

Abstract

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.

Details

Governance and Regulations’ Contemporary Issues
Type: Book
ISBN: 978-1-78743-815-6

Keywords

Article
Publication date: 4 July 2016

Stephen Sims, Patrick Brandt and Greg Norman

To explain two papers published by the European Securities and Marketing Authority (ESMA) covering the application of the mar-keting “passport” under the Alternative Investment…

201

Abstract

Purpose

To explain two papers published by the European Securities and Marketing Authority (ESMA) covering the application of the mar-keting “passport” under the Alternative Investment Fund Managers Directive (AIFMD).

Design/methodology/approach

Explains ESMA’s first paper, containing an advice to the European Parliament, Council and Commission (collectively the Trilogue) on the potential application of the AIFMD passport to non-EU Alternative Investment Fund Managers (AIFMs) and Alternative in-vestment Funds (AIFs), and a second paper, containing ESMA’s opinion on the current functioning of the AIFMD (currently used by EU AIFMs marketing EU AIFs in the EU) and National Private Placement Regimes (NPPRs, used for marketing by non-EU AIFMs and non-EU AIFs).

Findings

The ESMA papers were disappointing because they gave far less guidance and encouragement than anticipated that AIFs located in major jurisdictions such as the US and the Cayman Islands will be any easier to market to EU professional investors in the near future.

Practical implications

AIFMs (both inside and outside the EU) who are already using, or intending to use, the NPPRs should take some comfort that it seems highly unlikely that these regimes will be removed in the near future.

Originality/value

Practical guidance from experienced financial services lawyers.

Article
Publication date: 28 October 2014

Hartmut T. Renz, Ingrid Kalisch, Sandra Pfister, Stuart Axford and George M. Williams, Jr.

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…

249

Abstract

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.

Article
Publication date: 23 February 2022

Randy Priem

This study aims to discuss the European Commission’s proposal for a pilot regime for market infrastructures to experiment with the distributed ledger technology (DLT). In this…

Abstract

Purpose

This study aims to discuss the European Commission’s proposal for a pilot regime for market infrastructures to experiment with the distributed ledger technology (DLT). In this respect, the study comments on the purpose, scope, requirements and attention points for market operators, investment firms and central securities depositories (CSDs) that are considering using this technology.

Design/methodology/approach

This paper focuses on the proposed rules surrounding the DLT pilot regime. The study is based on an analysis of the proposal, compares it with existing literature and presents the purpose and scope of the regime, followed by a detailed analysis of the proposed requirements.

Findings

The proposed requirements aim to provide legal certainty, ensure investor protection, support innovation and protect financial stability. The European Commission attempts to reach these goals by establishing uniform requirements for the DLT market infrastructures by means of a European sandbox approach. This study stresses that a level playing field between the various market participants using the technology should be warranted and provides arguments for why the proposal is incomplete in this respect.

Originality/value

To the best of the author’s knowledge, there are no other articles that provide a holistic overview of the proposed regulation and describe the choices that legislators have made so far. This paper will be of interest to all market operators, investment firms and CSDs that have interest in DLT. The study is also of value to their stakeholders, such as their regulators, market participants and their clients, as well as to other linked financial market infrastructures.

Details

Journal of Financial Regulation and Compliance, vol. 30 no. 3
Type: Research Article
ISSN: 1358-1988

Keywords

Article
Publication date: 6 November 2017

William Yonge and Simon Currie

To summarize and analyse four opinions issued in May and July 2017 by the European Securities and Markets Authority (“ESMA”) concerning regulatory and supervisory arbitrage risks…

104

Abstract

Purpose

To summarize and analyse four opinions issued in May and July 2017 by the European Securities and Markets Authority (“ESMA”) concerning regulatory and supervisory arbitrage risks that arise as a result of increased requests from financial market participants to relocate activities and functions in the EU27 following the UK’s decision to withdraw from the EU, and the expected regulatory response to those risks.

Design/methodology/approach

Discusses the possible relocation of financial firms, activities and functions following the UK’s decision to withdraw from EU; the resulting cross-sectoral regulatory and supervisory arbitrage risks that ESMA foresees; nine principles that ESMA enumerates to guide its regulatory response to those risks; some common themes that emerge from ESMA’s July Opinions; and the implications for UK firms and trading venues seeking to establish a presence in the EU 27.

Findings

ESMA foresees regulatory and arbitrage risks in Brexit and a potential “race to the bottom” as certain national regulators jostle for and grab UK market share.

Practical implications

UK firms and trading venues seeking to establish a presence in the EU27 from which to operate will need to give detailed consideration and focus to the resources and operational substance which will need to be located in the jurisdiction in which that presence is established.

Originality/value

Practical guidance from experienced financial services, securities and fund management lawyers.

Details

Journal of Investment Compliance, vol. 18 no. 4
Type: Research Article
ISSN: 1528-5812

Keywords

Article
Publication date: 4 May 2012

Stan Cerulus

The purpose of this paper is to answer a specific research question: How have EU and US regulators translated the idea of central clearing into law?

Abstract

Purpose

The purpose of this paper is to answer a specific research question: How have EU and US regulators translated the idea of central clearing into law?

Design/methodology/approach

A meticulous legal research is carried out. First, the pre‐crisis regulatory regime for credit default swap (CDS) is reviewed, from a securities law angle as well as from a comparative Euro‐American perspective. Next, the regulatory processes leading to the adoption of the central clearing regulations are discussed. Thereafter, a material comparative analysis is made of the provisions related to central clearing in the EU and US regulatory initiatives. Finally, the paper is concluded with an evaluation of both legislations in the light of all previous analyses.

Findings

The research first shows that central clearing regulations rely on a series of presumptions, both concerning the gravity of counterparty risk threats and the necessity of central clearing. Additionally, the EU and US clearing regulations are similar with regard to the broad innovations they introduce, i.e. the mandatory central clearing of a variety of over‐the‐counter derivatives and counterparty risk management requirements for central clearing institutions and for non‐cleared swaps. However, the specific content of the provisions often differs. Furthermore, both legislations are limited to enouncing broad principles. This is also the case for the crucial provisions related to counterparty risk management. Therefore, these provisions in se do not guarantee the proper regulation of counterparty risk management practices. Consequently, much is to be expected from the implementing measures adopted by regulatory institutions.

Originality/value

The paper provides an overview of those provisions in the European and US regulations that specifically concern central clearing for CDS. It is one of the first papers which does this in a very well‐structured and clearly written manner. Also it is one of the first to provide a clear comparison between the provisions in the EU and the US regulations.

Details

Journal of Financial Regulation and Compliance, vol. 20 no. 2
Type: Research Article
ISSN: 1358-1988

Keywords

Article
Publication date: 9 July 2018

Randy Priem

This paper aims to discuss the European Commission’s proposal for a central counterparty (CCP) recovery and resolution regulation. In this respect, the paper comments the…

Abstract

Purpose

This paper aims to discuss the European Commission’s proposal for a central counterparty (CCP) recovery and resolution regulation. In this respect, the paper comments the consequences, risks and attention points for CCPs and their authorities.

Design/methodology/approach

This paper focuses on the proposed rules surrounding CCP recovery and resolution. The paper first familiarizes the reader with the risk management procedures currently obliged before discussing the resolution and recovery provisions foreseen in the proposal.

Findings

The proposed regulation commands significant requirements for CCPs and for their regulators. Not only will CCPs have to draft a recovery plan but also a resolution authority will need to be assigned. The latter will have the task, in consultation with a resolution college, to draft a resolution plan. When a resolution is inevitable, authorities will need to assure the continuation of the CCP’s critical functions, thereby warranting financial stability and investor protection.

Originality/value

To the best of the author’s knowledge, there are no other papers that provide a holistic overview of the newly proposed regulation and describe the choices to be made during a CCP’s resolution. This paper will be of interest to all CCPs and their stakeholders, such as their regulators, clearing members and their clients and other linked financial market infrastructures.

Details

Journal of Financial Regulation and Compliance, vol. 26 no. 3
Type: Research Article
ISSN: 1358-1988

Keywords

Article
Publication date: 6 November 2017

Dorothee Fischer-Appelt

To analyse the changes brought about by the new EU Prospectus Regulation, which replaced the EU Prospectus Directive, which has been the cornerstone of EU securities regulation…

407

Abstract

Purpose

To analyse the changes brought about by the new EU Prospectus Regulation, which replaced the EU Prospectus Directive, which has been the cornerstone of EU securities regulation for over a decade. The Regulation is part of the EU Commission’s plans for a Capital Markets Union launched in September 2015, which is intended to achieve a true single market for capital across the EU and allow companies to access the capital markets in a more cost efficient way.

Design/methodology/approach

This article discusses the key changes to the European prospectus regime included in the new EU Prospectus Regulation and highlights the changes compared to the old prospectus regime.

Findings

The new Prospectus Regulation will change current prospectus rules and practice for both equity and debt issuances in several areas and will contribute to a more uniform European prospectus regime. For EU Member States, the format of a regulation (rather than directive) that the new Prospectus Regulation has taken means that there will be much less room for divergence of prospectus rules across its member states. The Regulation’s success in making EU capital markets more uniform will depend to a great extent on whether the application of the new rules by member states’ regulators will be more consistent.

Originality/value

Key EU securities law changes are explained by an experienced EU and US securities lawyer practising in London.

Details

Journal of Investment Compliance, vol. 18 no. 4
Type: Research Article
ISSN: 1528-5812

Keywords

Open Access
Article
Publication date: 10 August 2023

Adrienne Heritier

This paper aims to conceptualize and empirically illustrate the challenges that financial market regulation presents to politicians and the organization tasked with specifying…

Abstract

Purpose

This paper aims to conceptualize and empirically illustrate the challenges that financial market regulation presents to politicians and the organization tasked with specifying regulations and supervising their implementation in the interest of users and consumers of financial instruments. It analyses the problem from the viewpoint of the governor's dilemma and the control/competence conflict, the linked problem of the rent-seeking of agents/intermediators and consumers of financial instruments. Political accountability problems are enhanced by the materiality of the technologies used, i.e. algo trading.

Design/methodology/approach

The paper theoretically conceptualizes and empirically illustrates the argument.

Findings

The paper finds that regulators of digitalized financial markets are faced with considerable problems and depend on private agents when regulating financial transactions. However, the new technological instruments also offer new possibilities for securing compliance.

Research limitations/implications

Further research should focus more in-depth on the cooperation between public and private actors in the specification and implementation of regulatory details. It should further investigate the conditions which allow regulators to use RegTech in the surveillance of financial firms.

Practical implications

Since financial market transactions are opaque for most users, the creation of more transparency is crucial to hold regulators accountable in their activity of surveillance of financial firms. New algorithm-based technologies may lend important support in doing so.

Originality/value

By linking the different analytical perspectives, i.e. the governor's dilemma vis-à-vis the intermediator or agent and the possible rent-seeking of intermediators, under the condition of a highly developed technology of financial transactions as well as the market structure, the paper offers new insights into the limits as well as new opportunities of regulating financial markets allowing for political accountability of regulators and financial firms.

Details

International Trade, Politics and Development, vol. 7 no. 3
Type: Research Article
ISSN: 2586-3932

Keywords

Article
Publication date: 7 May 2020

Christopher Buttigieg, Joseph Agius and Sandra Saliba

This paper aims to examine the rationale for the establishment of a depositary passport as the next logical step in building an internal market for investment funds in the European

Abstract

Purpose

This paper aims to examine the rationale for the establishment of a depositary passport as the next logical step in building an internal market for investment funds in the European Union (EU). It makes the point that the de facto prohibition of depositary passporting poses risks to financial stability and has an adverse impact on investor protection in EU member states, which do not have a fully developed funds industry.

Design/methodology/approach

This paper analyses both the arguments in favour and against the adoption of a depositary passport. Moreover, it examines this proposal in the context of different approaches to fostering the internal market such as mutual recognition, harmonisation of regulation, reflexive governance of financial supervision and centralised supervision.

Findings

Based on the review of the current EU legal framework, this paper, subsequently, puts forward possible solutions for the establishment of an internal market for depositary business, which solutions have been discussed with various experts in the field to assess their feasibility in practice.

Originality/value

The paper contributes to the debate on the EU internal market in the field of asset management, which is topical in view of the upcoming review of the EU’s Alternative Investment Fund Managers Directive.

Details

Journal of Financial Regulation and Compliance, vol. 28 no. 4
Type: Research Article
ISSN: 1358-1988

Keywords

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