2.6 Concluding remarks

The Prospectus Directive 2003 is one of the basic pillars onder the single financial market in Europe. The objective of this Directive is dualistic: a European passport for the issuer and a high level of protection for investors. The information requirements in the prospectus are enforced by a public mechanism, i.e. mandatory approval of the prospectus, and a private mechanism, i.e. damage claims, by investors. Given that the prospectus liability rules are not harmonised, there is a potential divergence between the jurisdictions of public and private enforcement. Even though the public law prospectus rules are maximally harmonised, a consistent application by all national competent authorities has to be ensured by a European financial supervision structure.

The current structure of European financial supervision is based on the recommendations of the Lamfalussy Committee. The level 3 Committees, however, do Jack the power to ensure compliance by national supervisors with the European financial supervision legislation. The 2008 financial crisis exposed that failure. The de Larosière High Level Committee recommended in its February 2009 report to provide these committees with additional power so as to meet the primary objective of financial supervision: ensure that the financial rules are adequately applied in order preserve financial stability and confidence in the financial system.

Three new European Supervisory Committees with enhanced powers were created as part of a European System of Financial Supervisors. In this subsection, the focus is on the powers for the European Securities and Markets Authority to ensure compliance with the European legislation on prospectuses and financial reporting. The national financial supervisors remain primarily responsible for ensuring compliance within the European System of Financial Supervisors. In cases of emergency and continued disagreement between national supervisors, the European Securities and Markets Authority can adopt binding decisions vis-à-vis these supervisors. Furthermore, the European Securities and Markets Authority has the power to adopt binding decisions addressed to financial institutions operating in the European Union in case of emergency or non-compliance of national supervisors.

The amendments proposed by the European Parliament attempted to ensure that the abovementioned powers of the European Securities and Markets Authority have a proper legai basis in accordance with the European Treaties. These amendments have been accepted by the Council of Ministers. Unfortunately, these amendments do not address the problem of which (administrative or procedural) law applies to the (enforcement) proceedings between ESMA and the financial market participants when ESMA makes a binding decision vis-à-vis an individual firrn. The proposed regulation does not provide for judicial safeguards except for the right to appeal and the right to address the European Court of Justice.

Furthermore, even though the regulation stipulates that ESMA decisions prevail in the case of conflicting decisions by the home national supervisor and ESMA, the uncertainty created for financial market participants is not resolved adequately. National courts may render ESMA's decision ineffective by reason of an infringement of the applicable national administrative standards. For that reason, it is important that the Council and the European Parliament address this problem.

In conclusion, the aim of the European System of Financial Supervisors to ensure uniform application of the EU financial regulations by national competent authorities through a European Supervisory Authority may not be achieved on the basis of the current regulations. The aforementioned observations need to been taken into account in order to improve the effectiveness of the European Supervisory Structure.