New European regulator takes first steps

The European Securities and Markets Authority has become operational, following the first meeting of its board of supervisors, on 11 January 2011 in Paris.
By None

The European Securities and Markets Authority (ESMA) has become operational, following the first meeting of its board of supervisors (BoS), on 11 January 2011 in Paris.

At the meeting, the first set of internal rules and procedures were adopted that define how ESMA will function, for example terms of reference for both the BoS and the managing board, the decision making process for the adoption of technical standards and guidelines, as well as a human resources package including a code of conduct and a financial set of rules.

Carlos Tavares, the chairman of the Portuguese securities market regulator Comissão do Mercado de Valores Mobiliários, who already chaired CESR from July to December 2010 and served as vice-chairman since February 2009, was elected vice chairman and will be acting as chair of ESMA until the elected chair takes office.

Members of ESMA's BoS also set up the management board of ESMA by selecting its first six members from among national regulators: Karl-Burkhard Caspari of BaFin, Germany; Jean Guill of the Commission de Surveillance du Secteur Financier, Luxembourg; Alexander Justham of the Financial Services Authority, UK; Raul Malmstein of Finantsinspektsioon Estonia; Kurt Pribil from Finanzmarktaufsicht, Austria and Fernando Restoy of the Comision Nacional del Mercado de Valores, Spain.

Established on 1 January 2011, ESMA replaces the Committee of European Securities Regulators (CESR), an advisory body mandated to harmonise regulation across the EU. ESMA has expanded this remit, with powers to enforce compliance with regulatory standards, responsibility for the development and application of technical standards and the ability to intervene in disputes between national regulators. It will also be able to impose rules on national markets as if it were a national regulator in times of crisis.

MiFID II, which is expected to be proposed by the European Commission (EC) in Q2 2011, will add to ESMA's powers, if the EC follows the technical advice provided to it by CESR as part of its MiFID review. The proposed powers would give ESMA responsibility for overseeing the development of the European consolidated tape, development of technical standards for trading venues and the oversight for waivers, with power to ensure they are issued in accordance with EU rules. The EC is running a consultation on MiFID which will determine the detail of these proposals.

“Much has been achieved to ensure a successful transformation of CESR to ESMA, nevertheless ESMA has significant new responsibilities which we will need to exercise mindfully and gradually over the coming years,” said Tavares. “The national competent authorities will be active partners in ensuring the success of ESMA and in the framework of the European System of Financial Supervision.”

ESMA confirmed that all existing Level 3 measures issued by CESR, which ensure use of common interpretative guidance and standards agreed amongst regulators, remain valid under ESMA in their original status.

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