23/2/2010
By Sophie Baker
A report that hopes to restore investor confidence in the European capital markets has been released by the European Investors' Working Group (EIWG), and outlines six objectives for EU regulatory reform.
Restoring Investors' Confidence in European Capital Markets provides a framework of the recommendations for the EU regulatory and supervisory agenda from an investor's perspective: Investors Protection; Better Transparency; Market Integrity; Market Efficiency; Quality of Supervision; and Competitiveness of EU Markets.
Forty-six recommendations are made in total, from fiduciary duty in the sale of financial products to independence for the new pan-European supervisory authorities, and the EIWG seeks to offer missing investor representation to EU institutions. Flaws, the EIWG said, have been exposed in professional behaviour in some sectors of the financial market by the crisis, and in response market participants should practice the ethical principles of responsibility, accountability and transparency.
The consolidation of investor protection through the harmonisation of rules across the EU, improvements in business conduct standards, better enforcement of best execution, and a tougher regulation of sales and financial products.
Better transparency through making material information more easily accessible to investors and disclosure of regulatory information are recommended, and the restoring trust in market integrity through the adoption of ethical practices is also outlined in the report.
For market efficiency, improvements in market fragmentation and extending MiFID to non-equity markets (where relevant) are options. For quality of supervision, the report highlights the new supervisory architecture enhancements necessary through increasing the level of investor representation within market participants committees; and for competitiveness of EU markets, and report recommends the avoidance of regulatory and supervisory arbitrage in the areas of compensation, implementing EU standards, and the creation of a more competitive framework.
The EIWG, a non-political group organised by the European Capital Markets Institute (ECMI) in partnership with the CFA Institute Centre for Financial Market Integrity, is chaired by Fabrice Demarigny, global head of capital markets activities, Mazars - former secretary general of CESR, and is made up of members from the pan-European retail and institutional investment community.
Demarigny said: "Investors have been badly knocked by the financial crisis, therefore much needs to be done to restore their confidence in the system. The regulatory and supervisory bodies need to work together effectively to recreate a trustful environments. With the new structures, we have a unique window to build more efficient and effective European capital markets. This report sets out requirements needed to restore trust."
