ESMA - POWERS AND EVOLUTION
Why Was ESMA Brought Into Force
In accordance with Regulation (EU) No 1095/2010 of the European Parliament (the "Regulation"), the financial crisis of 2007 and 2008 exposed "shortcomings in financial supervision, both in particular cases and in relation to the financial system as a whole". In particular, the financial crisis highlighted that national supervision of a cross border industry offered a piecemeal regulatory solution with too many opportunities to fall through the cracks.
In response to the highlighted issue, the European Commission sought to impose a new regime of financial supervision encouraging "cooperation, coordination, consistent application of Union law and trust between national supervisors1". This new supervision regime was to ensure a level playing field between EU Member States, and for all market participants acting within the European Union ("EU").
Emergence of ESMA
In response to the issues raised by the financial crisis, the European Commission mandated a group to make recommendations on how to strengthen existing European supervisory arrangements, which group presented the "de Laroisere Report" (the "Report") recommending reforms to the structure of supervision of the financial sector in the European Union.
The Report recommended the creation of a European System of Financial Supervisors, comprising three European Supervisory Authorities, one for the banking sector, one for the securities sector, and one for the insurance and occupational pensions sector. Following its review of the Report, the European Commission accepted that three new European supervisory authorities should be established, and that the European Securities and Markets Authority ("ESMA"), be created in respect of the securities sector, with appropriate powers of investigation and enforcement, as well as the possibility of charging fees. ESMA would replace the Committee of European Securities Regulators2 (known as "CESR") and would be accountable to the European Parliament and the European Council.
ESMA, the "European Securities Markets Association" came into force on 1st January 20113 as an independent EU Authority charged with safeguarding the stability of the EU's financial system and with a mandate to improve the "functioning of the internal market, in particular by ensuring a high, effective and consistent level of regulation and supervision..." ESMA is also charged with preventing regulatory arbitrage...