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The EU Committee of Wise Men chaired by Alexandre Lamfalussy has issued its final report on the regulation of European securities markets.

The committee identified a number of priority areas of the Financial Services Action Plan to be adopted and brought into effect by the end of 2003 at the latest, including:

  • a single prospectus for issuers;
  • the modernization of admission to listing;
  • home country control for wholesale markets with a clear definition of professional investor;
  • modernization and expansion of investment rules for UCITS and pension funds;
  • the adoption of International Accounting Standards; and
  • a single passport for recognized stock markets.

The committee's conclusion is that the EU legislative process needs to be changed if the Financial Services Action Plan is to be implemented within the time frame envisaged.

To this end, the committee has proposed a four-level approach to the legislation and regulation of European Securities Markets.

Under Level 1, the framework for new legislation would be established by the EU Council and Parliament, in conjunction with the European Commission.

In Level 2, the implementing details of the new legislation would be decided. The committee has proposed the formation of two new committees, the European Securities Committee (ESC) and the European Securities Regulators Committee (ESRC). The ESC would comprise state representatives and the ESRC would be based on the Forum of European Securities Commissions. The European Commission would consult with the ESC and then request advice from the ESRC. The ESC would then vote on the final proposal and, if approved, the European Commission would adopt the proposal. The European Parliament would have the opportunity to examine the final proposal and, if it considered it exceeded the implementing powers defined in Level 1, the European Commission would re-examine the proposal.

The ESRC would, in Level 3, be involved in improving the consistency and uniformity of implementation of the new legislation at a national level.

In Level 4, the committee advocates that the European Commission must enforce EU law more rigorously.

At its meeting at the end of March, the European Council resolved to accept the Lamfalussy recommendations for the new four-level approach to legislation. It went on to say that the new regulatory structure should be operational as of the start of 2002 at the latest. The council also welcomed the proposal that the ESC be established immediately, subject to the approval of the EU Parliament.

Richard Thompson

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