Focus on supervision, enforcement rather than new regulation: Efama
EU rules cannot and should not be amended continuously, said fund body association Efama, responding to European Commission’s consultation on supervisory convergence and Single Rule Book. Efama pointed out that the EU securities regulator, European Securities and Markets Authority (Esma), should be granted more time to effectively make use of its new convergence powers (under amended Esma Foundation Regulation has only been effect since January 2020).
For Esma to have greater credibility among EU capital market players, better synchronisation of the legislative process between the European Commission (Level 1) and Esma (Level 2 and 3) is critical, stated Efama. The asset management association stressed upon the need for longer timelines and avoiding hard dates at Level 1 of the process. Efama added, “Esma should be allowed to exercise regulatory forbearance powers in the form of “no-action letters” by allowing national competition authorities (NCAs) and firms to temporarily waive (Level 1) requirements that are incomplete in the absence of implementing acts or guidelines, which has been a successful practice in the United States,” added the consultation.
Efama said that Esma is not given enough time to consult both its own members and external stakeholders on very technical matters to a sufficient degree, with the process of adopting new legislation. Therefore, Esma’s outputs (especially Level 3) are not always thorough, nor clear, leading to divergent interpretations between NCAs and market participants. “Accompanying this is the excessive granularity of some Level 1 requirements - to the extent that ESMA cannot define critical technical details,” stated Efama. The association added that the current framework with the new convergence powers should be sufficient for Esma to create a Single Rule Book and achieve consistent EU-wide supervision for the European asset management industry.