European Securities and Markets Authority

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European Securities and Markets Authority
Founded January 1, 2011
Headquarters Paris
Products Securities market regulation
Web site

The European Securities and Markets Authority (ESMA) is an independent European Union regulatory agency that oversees European securities trading across all of the EU member states. ESMA is a part of the European System of Financial Supervision, which consists of the European Systemic Risk Board (ESRB) and the three European Supervisory Authorities: ESMA based in Paris, the European Banking Authority (EBA) based in London and the European Insurance and Occupational Pensions Authority (EIOPA) based in Frankfurt. ESMA works closely with the EBA, the ESRB and the EIOPA in order to ensure unity among securities regulators and across various financial sectors.

ESMA was established on January 1, 2011 as part of a new regulatory framework adopted by the EU in the wake of the financial crisis and has replaced the Committee of European Securities Regulators (CESR). Steven Maijoor is the current chairman of ESMA. The executive director is Verena Ross and the vice president is Carlos Tavares.<ref>About ESMA. European Securities and Markets Authority. Retrieved on January 21, 2011.</ref>


ESMA has assisted in creating a single EU rulebook which ensures uniform conditions of competition for financial service providers and allows investors across the Union to be treated equally. In addition, ESMA serves as a standard setter with regard to securities legislation and contributes to the financial stability of the EU by identifying potential threats to the financial system through the ESRB and by providing advice to diminish these risks. ESMA is also responsible for adopting emergency measures when a Crisis situation arises and provides technical advice where authorized by the Commission.

ESMA is governed by two major decision making bodies: the Board of Supervisors (BoS) and the Management Board (MB). ESMA has a full time chairman and an executive director who serve a five year term, which can be extended once. In addition, ESMA has a board of supervisors which consists of the heads of 27 national authorities, with observers from the European Commission, EBA and EIOPA and the ESRB. The Board has decision making responsibility with regard to adoption of ESMA guidelines and recommendations as well as the the issuance of technical standards and advice to the EU institutions. ESMA also has a management board whose responsibility is "to focus on the management aspects of the Authority, such as the development of a multi-annual Work Programme, the budget and staff resources."

Working Methods[edit]

The Standing Committees established under CESR oversee the development of proposals for approval by the BoS and are chaired by a senior national representative who is typically a member of the BoS. These committees establish a consultative working group consisting of market participants in order to provide technical advice to the expert group during the drafting process. The market participants are experts brought together from across the European Member States. They are not meant to represent national or a specific firm's interest and therefore, do not replace the important process of full consultation with all market participants and other stakeholders. Nor are they meant to replace the specific role of the Securities and Markets Stakeholder Group as set out in the European Market Infrastructures Regulation (EMIR).

Following approval by the BoS, a document that is ready for public consultation is published on ESMA's website and a public hearing is organized. ESMA will then formally confer with the Securities and Markets Stakeholder Group and any further competent authorities.

How ESMA Works[edit]

In a February 15, 2001 report, The Committee of Wise Men, chaired by Baron Alexandre Lamfalussy, established a four level plan to address problems in the securities related legislative system. This procedure has evolved with the creation of ESMA and can be described below:

Level 1 – ESMA advises the European Commission while they establish regulations that set high level political objectives.
Level 2 – ESMA drafts subordinate acts (known as delegated acts and implementing acts) that focus on the substantive content of legislative requirements.
Level 3 – ESMA develops guidelines to establish practices within the European System of Financial Supervision and ensure the uniform application of EU law. Guidelines are not legally binding, but regulated authorities must make efforts to comply or provide an explanation for not complying.
Level 4 – ESMA can lead an inquiry and provide recommendations based on the findings of its investigation.

ESMA New working methods.png

Obligations and Powers[edit]

Although ESMA retains all of the functions that CESR was responsible for, ESMA has a number of new competencies and powers, including:

  • The ability to draft technical standards that are legally binding in EU member states
  • The ability to launch a fast track procedure to ensure consistent application of EU law
  • New powers in resolving disagreements between national authorities
  • Additional responsibilities for consumer protection (including the ability to prohibit financial products that threaten financial stability or the orderly functioning of financial markets for a pe-riod of three months)
  • Emergency powers; participating in Colleges of Supervisors and on-site inspections
  • Monitoring systemic risk of cross border financial institutions
  • A new supervisory role (in particular for credit rating agencies)
  • The ability to enter into administrative arrangements with supervisory authorities, international organizations and the administrations of third countries


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