OPINION OF THE EUROPEAN MONETARY INSTITUTE
at the request of the Italian Ministry of the Treasury under Article 109f (6) of the Treaty
establishing the European Community (the “Treaty”), Article 5.3 of the Statute of the EMI
and Council Decision 93/717/EC of 22 November 1993, concerning a draft bill “Codified Law
on Finance” (the “Draft Bill”)
(CON/98/3)
1. On 19 January 1998, the EMI received a request for an opinion on the Draft Bill from the
General Director of the Italian Treasury. This opinion is based on an unofficial English translation
of the Italian draft submitted to the EMI by the consulting authority.
2. The EMI’s competence to deliver an opinion is based on Article 1.1, second, fourth and fifth
indents, of the Council Decision (93/717/EC) of 22 November 1993 on the consultation of the
EMI by the authorities of the Member States on draft legislative provisions, as the Draft
Legislative Decree contains  (a) provisions dealing with the status and powers of the national
central bank, (b) provisions concerning clearing and payment systems and (c) provisions which
affect the stability of financial institutions and markets.
3. Concerning the first part  (“Disciplina degli intermediari” - Articles 1 - 82), the EMI understands
that it aims at replacing current provisions which are spread over several pieces of legislation
with a view to obtaining a consistent and comprehensive legislative framework covering the
whole range of intermediaries operating in securities markets. At the same time, it is recognised
that the draft bill also introduces some innovations with particular regard to the undertakings for
collective investment (UCIs), whereas with respect to investment firms it mainly confirms the
current provisions which transpose Directive 93/22/EEC on investment services in the securities
field. In this respect, the EMI notes that one of the main objectives is to reduce the differences
between the regulatory and supervisory frameworks for UCIs and investment firms. The EMI
welcomes in general this approach which reduces the scope for segmentation of the markets and
acknowledges that residual differences are inevitable in relation to the different operational
features of the two categories of institutions. In this context, it is noted that the share of
supervisory competences between Banca d’Italia and the supervisory authority responsible for
securities markets (Commissione Nazionale per le Società e la Borsa - “CONSOB”), according
to which the former is responsible for the reduction of risks and the stability of intermediaries
- 2 -
and the latter for transparency and correctness of their behaviour, is now applied in a uniform
way to both categories of institutions. The EMI hopes that this share of competences between
the two authorities will be conducive, from an overall perspective, to effective supervision
without imposing an excessive burden on the supervised entities.
4. The EMI takes note of the main innovations related to the field of UCIs. The first (Article 34)
covers the introduction of a new category of management company (“Società di gestione del
risparmio”) which will be allowed to undertake, in addition to the management of UCIs and
pension funds, also portfolio management on behalf of individual customers (which currently can
be carried out only by credit institutions, investment firms and fiduciary companies). The new
intermediary will be therefore able to offer a whole range of closely related services in the area
of investment management. The EMI welcomes this provision which reduces possible
segmentation in the field of asset management and enables operators to develop professionalism
and to achieve economies of scale. The second (Article 38) refers to the new regulatory
approach applying to the different categories of UCIs. Whereas, according to the current
legislation, each category of fund (open-ended, closed-ended, real estate, etc.) is codified in a
specific legislation, the draft bill leaves to the secondary legislation and, thus, to the administrative
authorities the specification of the type of fund. The EMI takes note that this approach allows
for a certain degree of flexibility by the public authorities in devising the regulatory framework
for new forms of UCIs.
5. Professional secrecy and exchange of information between Banca d’Ita lia and the CONSOB on
the one hand and the competent authorities of the European Union on the other are dealt with in
Article 17, second paragraph, of the Draft Bill. It should be ensured that the notion of EU
competent authorities as used in the Italian legislation covers also the European Central Bank,
which might need information on these intermediaries as counterparties for monetary policy or as
participants in payment and securities settlement systems. Similarly, “EU competent authorities”
in Article 231 should include the ECB.
6. The EMI also welcomes the rule laid down in Article 22 of the Draft Bill on separation of assets
for the provision of investment services. In particular, such a rule is clearly beneficial from the
perspective of securities settlement systems.
7. The second part  (“Disciplina dei mercati e della gestione accentrata di strumenti finanziari”)
deals with the organisation and supervision of financial markets as well as with central securities
depositories. Although several provisions of this piece of legislation had already been introduced
with the Legislative Decree 415/96 (which inter alia implemented the Investment Services
Directive), this part contains nevertheless important innovations.
- 3 -
8. The first innovation contained in t he second part of the draft bill is the clear assignment to the
Banca d’Italia of the oversight function over the “mercato telematico dei titoli di Stato”
(Article  98) and over interbank fund transactions (Article 112). The EMI welcomes the
attribution of this function to Banca d’Italia, given to the importance of these segments of the
financial market for monetary policy purposes.
9. In the second place, the EMI takes note of the introduction of a framework, dealt with by the
combination of Articles 87, 90 and 91 of the Draft Bill, replacing the previous fragmented rules,
which has the objective of guaranteeing the successful outcome of transactions.
10. A very important provision which is introduced by the draft bill is the one contained in Article 93,
providing for the finality of the clearance and settlement of derivative and non-derivative
financial instruments transactions. This provision eliminates from the Italian securities settlement
systems the zero-hour rule and transposes in the Italian legal system, ahead of time, the rule
contained in the soon-to-be-adopted EC settlement and finality directive. The EMI warmly
welcomes the introduction of this provision which ensures legal certainty and the compliance
with Standard 1 of the report on “Standards for the use of EU securities settlements systems in
ESCB credit operations”, published in January 1998.
11. The new provision introduced at Article 100 makes clear that Article 76 of the Italian
Bankruptcy Law applies to certain financial instruments, with the consequence that exposures
are calculated at their value on the day on which bankruptcy is declared and eventually set off
due to the application of Article 56 of the bankruptcy law. The EMI warmly welcomes this
provision, which enhances legal certainty in respect of important monetary policy instruments,
such as repo and swaps, and avoids “cherry picking”.
12. The EMI warmly welcomes Articles 103 to 105 and 107 which ensure the compliance of the
Italian Central Securities Depository with Standard 4 of the report on “Standards for the use of
EU securities settlements systems in ESCB credit operations”. The EMI notices, however, that
in these articles the distinction of the roles of the Banca d’Italia and the CONSOB is not always
clear-cut. Also, the EMI takes note of the liberalisation in the field of central securities
depositories. Whereas the activity of central depository for securities other than government
bonds is at present carried out exclusively by one firm (MONTETITOLI), this will no longer be
the case.
13. The third part  (“Disciplina delle società quotate”) contains several provisions which range from
the solicitation of public savings to company law. The provisions concerning soliciting savings
(Articles 113-121), notably any public offer aiming at the sale or underwriting of financial
products, are intended to protect unsophisticated investors by requiring to the issuer the
- 4 -
disclosure of relevant information through a prospectus. The EMI would like to stress that the
protection of investors through disclosure of information is important in promoting trust in the
financial system. Also, the EMI notes  that the financial instruments issued by the ECB and
NCBs are excluded by Article 120 e ) from the applicability of the prospectus.
14. The EMI also welcomes the new provisions on insider trading (Articles 192-207), which
substantially improve the effectiveness of existing law. The EMI wishes to underline the positive
value that an effective regulation of the insider trading has on the smooth functioning of financial
markets.
The EMI confirms that it has no objection to this opinion being made public by the competent Italian
authorities at their discretion.
26 February 1998