Proposal for a Regulation of the European Parliament and of the Council establishing a European Securities and Markets Authority {COM(2009) 499 final} {COM(2009) 500 final} {COM(2009) 501 final} {COM(2009) 502 final} {SEC(2009) 1233} {SEC(2009) 1234} {SEC(2009) 1235}
Date: 2009-09-23
Institutions: European Commission
Subjects: EU office or agency, activity report, credit institution, drafting of EU law, economic recession, financial control, financial institution, financial market, operation of the Institutions

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 23.9.2009 
COM(2009) 503 final 

2009/0144 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

establishing a European Securities and Markets Authority 

{COM(2009) 499 final} 
{COM(2009) 500 final} 
{COM(2009) 501 final} 
{COM(2009) 502 final} 
{SEC(2009) 1233} 
{SEC(2009) 1234} 
{SEC(2009) 1235} 

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EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

Experience of the financial crisis has exposed important failures in financial supervision, both 
in  particular  cases  and  in  relation  to  the  financial  system  as  a  whole.  President  Barroso 
therefore  requested  a  group  of  high  level  experts,  chaired  by  Mr  Jacques  de  Larosière,  to 
make  proposals  to  strengthen  European  supervisory  arrangements,  with  the  objective  of 
establishing a more efficient, integrated and sustainable European system of supervision. The 
Group  presented  its  report  on  25  February  2009.  Building  on  its  recommendations,  the 
Commission  set  out  proposals  for  a  new  European  financial  supervisory  architecture  in  its 
Communication to the Spring European Council of March 2009. The Commission presented 
its ideas in more detail in its Communication of May 2009 which proposed:  

–  Establishing a European System of Financial Supervisors (ESFS), consisting of a network 
of  national  financial  supervisors  working  in  tandem  with  new  European  Supervisory 
Authorities  (ESAs),  created  by 
the  existing  European  supervisory 
committees1  into  a  European  Banking  Authority  (EBA),  a  European  Insurance  and 
Occupational  Pensions  Authority  (EIOPA),  and  a  European  Securities  and  Markets 
Authority  (ESMA),  thereby  combining  the  advantages  of  an  overarching  European 
framework  for  financial  supervision  with  the  expertise  of  local  micro-prudential 
supervisory bodies that are closest to the institutions operating in their jurisdictions; and 

transforming 

–  Establishing  a  European  Systemic  Risk  Board  (ESRB),  to  monitor  and  assess  potential 
threats  to  financial  stability  that  arise  from  macro-economic  developments  and  from 
developments within the financial system as a whole. To this end, the ESRB would provide 
an early warning of system-wide risks that may be building up and, where necessary, issue 
recommendations for action to deal with these risks.2  

2. 

CONSULTATION OF THE INTERESTED PARTIES 

Two  open  consultations  were  conducted  in  the  development  of  these  proposals.  Firstly, 
following  the  report  of  the  high-level  group  chaired  by  Mr  Jacques  de  Larosière  and  the 
publication of the 4 March 2009 Commission Communication, the Commission organised a 
consultation  from  10  March  to  10  April  2009  as  input  to  its  Communication  on  Financial 
Supervision  in  Europe  published  on  27  May  2009.  A  summary  of  the  public  submissions 
received can be found on: 

http://ec.europa.eu/internal_market/consultations/docs/2009/fin_supervision/summary_en.pdf 

Secondly,  from  27  May  to  15  July  2009,  the  Commission  organised  another  consultation 
round, inviting all interested parties to comment on the more detailed reforms presented in the 

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These  are  the  Committee  of  European  Banking  Supervisors  (CEBS),  the  Committee  of  European 
Insurance and Occupational Pensions Supervisors (CEIOPS) and the Committee of European Securities 
Regulators (CESR). 
It should be noted that this explanatory memorandum focuses on the proposals to establish the ESFS by 
transforming  the  existing  European  supervisory  committees  into  ESAs.  The  proposal  to  establish  the 
ESRB is being discussed in a separate memorandum. 

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May  Communication  on  Financial  Supervision  in  Europe.  The  responses  received  were  for 
the greater part supportive of the suggested reforms, with comments on detailed aspects of the 
proposed ESRB and ESFS. A summary of the public submissions received can be found on: 

http://ec.europa.eu/internal_market/consultations/docs/2009/fin_supervision_may/replies_su
mmary_en.pdf 

3. 

IMPACT ASSESSMENT 

The May Commission Communication on Financial Supervision in Europe was accompanied 
by  an  impact  assessment  analysing  the  main  policy  options  for  establishing  the  ESFS  and 
ESRB.  A  second  impact  assessment  accompanies  these  proposals,  examining  the  options  in 
more detail. The second impact assessment report is available on the Commission website. 

4. 

LEGAL ELEMENTS OF THE PROPOSAL 

The Court of Justice has acknowledged3 that Article 95 of the Treaty relating to the adoption 
of measures for the approximation of legislation for the establishment and functioning of the 
internal  market  provides  an  appropriate  legal  basis  for  setting  up  a  "Community  body 
responsible for contributing to the implementation of a process of harmonisation", when the 
tasks  conferred  on  such  a  body  are  closely  related  to  the  subject-matter  of  the  acts 
approximating the national legislations.  

The  financial  and  economic  crisis  has  created  real  and  serious  risks  to  the  stability  of  the 
internal  market.  Restoring  and  maintaining  a  stable  and  reliable  financial  system  is  an 
absolute  prerequisite  to  preserving  trust  and  coherence  in  the  internal  market,  and  hence  to 
preserve  and  improve  the  conditions  for  the  establishment  of  a  fully  integrated  and 
functioning  internal  market  in  the  field  of  financial  services.  Moreover,  deeper  and  more 
integrated  financial  markets  offer  better  opportunities  for  financing  and  risk  diversification, 
and thus help to improve the capacity of the economies to absorb shocks. Financial integration 
and  stability  are  therefore  mutually  reinforcing.  The  establishment  of  the  ESFS  will  be 
accompanied by the development of a single rule book which will ensure uniform application 
of rules in the EU and thus contribute to the functioning of the internal market. The task of the 
ESAs will be to assist the national authorities in the consistent interpretation and application 
of the Community rules.  

As the tasks to be conferred on the Authorities are closely linked to the measures put in place 
as  a  response  to  the  financial  crisis  and  to  those  announced  in  the  Commission 
Communications of 4 March and 27 May 2009, they can, in line with the Court's case law, be 
established on the basis of Article 95 of the Treaty. 

Community action can address the weaknesses highlighted by the crisis and provide a system 
that  is  in  line  with  the  objective  of  a  stable  and  single  EU  financial  market  for  financial 
services  –  linking  up  national  supervisors  into  a  strong  Community  network.  However,  the 
focal  point  for  day-to-day  supervision  will  remain  at  the  national  level,  with  national 
supervisors remaining responsible for the supervision of individual  entities. In this way, the 
provisions do not go beyond what is strictly necessary to achieve the objectives pursued. The 

3 

See CJCE, C-217/04, pt. 44.  

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proposals are therefore in accordance with the principles of subsidiarity and proportionality as 
set out in Article 5 of the Treaty. 

5. 

BUDGETARY IMPLICATIONS 

For the transformation of the existing European supervisory committees into effective ESAs, 
enhanced resources are needed - both personnel and budgetary. An overview of the budgetary 
implications  of  these  proposals  is  presented  in  the  impact  assessment  report  and 
accompanying legislative financial statements (attached to this proposal). 

6. 

DETAILED EXPLANATION OF THE PROPOSAL 

In  order  to  take  account  of  sectoral  specificities,  three  separate  Regulations  are  needed  to 
establish the Authorities for banking, insurance and occupational pensions, and securities. The 
broad  thrust  of  these  proposals  is  however  identical.  This  memorandum  therefore  first 
discusses  the  common  elements  and  briefly  touches  upon  the  differences  between  the  three 
Regulations.  

6.1. 

Establishment of the ESAs and their legal status 

The  objective  of  the  ESAs  shall  be  to  contribute  to:  (i)  improving  the  functioning  of  the 
internal market, including in particular a high, effective and consistent level of regulation and 
supervision,  (ii)  protecting  depositors,  investors,  policyholders  and  other  beneficiaries,  (iii) 
ensuring  the  integrity,  efficiency  and  orderly  functioning  of  financial  markets,  (iv) 
safeguarding  the  stability  of  the  financial  system,  and  (v)  strengthening  international 
supervisory  coordination.  For  this  purpose,  each  ESA  shall  contribute  to  ensuring  the 
coherent, efficient and effective application of the relevant Community law.  

The  ESAs  will  be  Community  bodies  with  a  legal  personality  and  a  key  element  of  the 
proposed  ESFS.  The  latter  shall  function  as  a  network  of  supervisors  and  comprise  the 
national  authorities  in  the  Member  States,  a  Joint  Committee  of  European  Supervisory 
Authorities,  to  cover  cross-sectoral  issues,  and  the  European  Commission.  While  the  ESAs 
should enjoy maximum independence to objectively fulfil their mission, the Commission has 
to be involved where institutional reasons and the responsibilities under the Treaty so require.  

The main decision-making body of each ESA will be its Board of Supervisors, consisting of 
the  heads  of  the  relevant  national  supervisors  as  well  as  the  Chairperson  of  the  respective 
Authority.  The  Chairperson  will  preside  over  meetings  of  the  Board  of  Supervisors  and  the 
Management Board, and act as the head and representative of the Authority. The day-to-day 
management  of  each  Authority  will  be  in  the  hands  of  an  Executive  Director.  As  for  the 
location  of  the  new  ESAs,  it  is  proposed  to  maintain  the  present  place  of  residence  of  the 
existing European committees of supervisors, as this allows for a fast and effective transition 
to the new regime. Section 6.3 discusses the internal organisation of the ESAs in more detail.  

6.2. 

Tasks and powers of the ESAs 

The ESAs will take on all the tasks of the existing European supervisory committees, but in 
addition  have  significantly  increased  responsibilities,  defined  legal  powers  and  greater 
authority, as set-out in the Commission Communication of 27 May 2009 and agreed upon by 
the European Council of 18-19 June 2009. 

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6.2.1.  Develop technical standards 

The European Council endorsed the Commission's proposal that a single EU rule book should 
be  established,  applicable  to  all  financial  institutions  in  the  Single  Market.  To  this  end, 
differences  in  the  national  transposition  of  Community  law  stemming  from  exceptions, 
derogations, additions or ambiguities must be identified and removed, so that one harmonised 
core set of standards can be defined and applied. To contribute to this, the Authorities will, in 
areas  specified  in  the  relevant  sectoral  legislation,  develop  draft  technical  standards.  These 
standards constitute an effective instrument to strengthen Level 3 of the Lamfalussy structure, 
which  currently  is  limited  to  the  adoption  of  non-binding  guidelines.  The  areas  where  the 
Authority may develop such draft standards concern issues of a highly technical nature where 
uniform conditions for the application of Community legislation are needed. These matters do 
not  involve  policy  decisions  and  their  content  is  tightly  framed  by  the  Community  acts 
adopted  at  Level  1  (see  the  accompanying  Commission  Staff  Working  Paper  for  a  detailed 
discussion on the necessary changes to the relevant Community legislation). Development of 
the standards by the ESAs ensures that they benefit in full from the specialised expertise of 
national supervisors.  

The  draft  technical  standards  will  be  adopted  by  the  Authority  on  the  basis  of  qualified 
majority of the members of the Boards of Supervisors, as defined in Article 205 of the Treaty. 
The  Community  legal  order  requires  the  Commission  to  subsequently  endorse  these  draft 
standards  in  the  form  of  regulations  or  decisions  so  as  to  give  those  direct  legal  effects.  In 
very  exceptional  cases,  and  only  for  reasons  of  Community  interest,  the  Commission  may 
decide  to  endorse  the  standards  in  part,  or  with  amendments,  or  not  at  all,  the  reasons  for 
which  it  has  to  make  available  to  the  Authority.  The  Commission's  proposal  is  without 
prejudice to discussions on future procedures in the context of the transition to a new Treaty. 

For the purpose of consultation with stakeholders, a Stakeholder Group will be established for 
each ESA, consisting of representatives of the industry, financial sector employees and users 
of financial services. The relative proportions of each should be balanced and no one group 
should  dominate  over  the  others.  In  those  areas  not  covered  by  the  technical  standards,  the 
ESAs shall, like the existing European supervisory committees, have the possibility to issue 
non binding guidelines and recommendations to national supervisory authorities and financial 
institutions and market participants. If in any specific case authorities choose not to comply 
with the guidelines and recommendations it should explain its decision to the Authority. 

6.2.2.  Powers to ensure the consistent application of Community rules 

Even with a single set of harmonised rules, the application of these rules may, in occasional 
cases,  lead  to  differences  of  opinion  on  the  application  of  Community  legislation.  Without 
prejudice  to  the  initiation  of  infringement  proceedings  by  the  Commission  against  Member 
States,  the  ESAs  should  therefore  have  a  general  power  to  contribute  to  ensuring  coherent 
application  of  Community  legislation.  To  this  end,  a  mechanism  should  be  put  in  place  to 
address  behaviour  by  national  supervisory  authorities  who  are  considered  to  be  diverging 
from  the  existing  Community  legislation  (including  the  technical  standards  discussed  in 
6.2.1). This mechanism consists of three different steps: 

First, the ESAs, on their own initiative or upon request from one or more national supervisors 
or  from  the  Commission,  would  investigate  these  cases  and,  where  necessary,  adopt  a 
recommendation for action addressed to the supervisory authority. Within the general duty of 

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compliance with Community legislation the supervisory authority would be called to comply 
with the recommendation within one month. 

Second,  if  the  recommendation  is  not  complied  with,  the  European  Commission  may,  after 
being  informed  by  the  ESA  or  on  its  own  initiative,  take  a  decision,  requiring  the  national 
supervisory  authority  to  either  take  specific  action  or  to  refrain  from  an  action.  The  latter 
shall, within ten working days of receipt of the decision, inform the Commission and the ESA 
of the steps it has taken or intends to take to implement this decision.  

Third,  in  the  exceptional  situation  that  the  supervisory  authority  does  not  comply  with  the 
latter,  the  ESAs  may  as  a  last  resort  adopt  a  decision  addressed  to  financial  institutions  in 
respect  to  Community  law  which  is  directly  applicable  to  them  (i.e.  Regulations).  This  is 
without prejudice to the Commission's powers to enforce its own decision. 

6.2.3.  Action in emergency situations 

The ESAs shall fulfil an active coordination role between national supervisory authorities, in 
particular  in  case  of  adverse  developments  which  potentially  jeopardise  the  orderly 
functioning  and  integrity  of  the  financial  system  in  the  EU.  However,  in  some  emergency 
situations,  coordination  may  not be  sufficient,  notably  when  national  supervisors  alone  lack 
the tools to respond rapidly to an emerging cross-border crisis. The ESAs should therefore, in 
such exceptional circumstances, have the power to require national supervisors to jointly take 
specific action. The determination of a cross-border emergency situation involves a degree of 
appreciation, and should therefore be left to the European Commission. This is subject to the 
safeguard  clause  (see  6.2.11).  In  parallel,  work  should  be  accelerated  to  build  a 
comprehensive  cross-border  framework  to  strengthen  the  European  Union's  financial  crisis 
management/resolution systems, including guarantee schemes and burden sharing. 

6.2.4. 

Settlement of disagreements between national supervisory authorities 

A  mechanism  is  proposed  to  ensure  that  relevant  national  supervisory  authorities  take  due 
account of the interests of other Member States, including within colleges of supervisors. If a 
supervisory authority disagrees on the procedure or content of an action or inaction by another 
supervisory authority where the relevant legislation requires cooperation, coordination or joint 
decision  making,  the  Authority,  at  the  request  of  the  supervisory  authority  concerned,  may 
assist  the  authorities  in  reaching  a  common  approach  or  settle  the  matter.  This  mechanism 
consists of three possible steps:4 

First,  if  one  or  more  national  supervisory  authorities  request  the  ESA  to  assist  in  resolving 
such  disagreements,  it  may  first  set  a  phase  of conciliation between the authorities  to  try to 
reach agreement among themselves, with the involvement of the Authority as necessary in a 
mediatory capacity.  

Second, if, after a phase of conciliation, they have not been able to reach such an agreement, 
the  ESAs  may,  through  a  decision,  settle  the  matter.5  However,  this  would  clearly  be 

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See  the  accompanying  Staff  Working  Paper  for  additional  information  on  the  dispute  settlement 
mechanism. 
The  settlement  competence  is  without  prejudice  to  Article  9,  which  focuses  on  situations  of  non-
compliance with Community law by a competent national supervisory authority. 

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exceptional as in most cases the respective national authorities should be able to come to an 
agreement in the preceding conciliation procedure. 

Third,  in  case  of  non-compliance  by  a  supervisory  authority  with  the  previous  decision,  the 
Authority  may  also  decide  to  adopt  decisions  addressed  to  financial  institutions  specifying 
their  obligations  in  respect  of  Community  law  which  is  directly  applicable  to  financial 
institutions. 

It  should  be  stressed  that  the  dispute  settlement  mechanism  should  only  address  material 
issues, e.g. cases where action or inaction by a supervisory authority has a serious detrimental 
impact  on  the  ability  of  a  supervisory  authority  to  protect  the  interest  of  depositors,  policy 
holders, investors, or persons to whom services are provided in one or several other Member 
States, or on the financial stability of these Member States. The Authority reserves the right 
not to launch a settlement procedure or adopt any decision where such requirements are not 
fulfilled. These arrangements are subject to the safeguard clause (see 6.2.11). 

6.2.5.  Colleges of supervisors 

Colleges of supervisors are central to the EU supervisory system and play an important role in 
ensuring a balanced flow of information between home and host authorities. The ESAs will 
contribute to promoting the efficient and consistent functioning of colleges of supervisors and 
monitoring  the  coherence  of  the  implementation  of  Community  legislation  across  colleges. 
Against this background, the ESAs may participate as observers in colleges of supervisors and 
receive all relevant information shared between the members of the college. 

6.2.6.  Common  supervisory  culture,  delegation  of  tasks  and  responsibilities  and  peer 

reviews 

The ESAs shall play an active role in building a common European supervisory culture and 
ensuring uniform procedures and consistent supervisory practices throughout the Community. 
In  combination  with  the  mechanism  to  settle  disagreements  between  national  supervisory 
authorities, the common supervisory culture should help build trust and cooperation, and may 
increasingly create opportunities for supervisors to delegate certain tasks and responsibilities 
to one another. The ESAs shall facilitate this by identifying tasks and responsibilities which 
can be delegated or jointly exercised as well as by promoting best practices. In this respect, 
the Authority shall encourage and facilitate the set-up of joint supervisory teams. Moreover, 
the ESAs shall periodically conduct peer review analysis of national supervisory authorities. 

6.2.7.  Assessment of market developments 

One of the new tasks assigned to the existing European supervisory committees in the revised 
Commission Decisions adopted on 23 January 2009 is the monitoring, assessing and reporting 
on  trends,  potential  risks  and  vulnerabilities  in  the  banking,  insurance  and  securities  sector. 
Although  the  proposed  ESRB  will  be  responsible  for  macro-prudential  analysis  of  the  EU 
financial  sector,  the  ESAs  should  continue  the  work  of  the  existing  European  supervisory 
committees  in  this  area  as:  (i)  the  focus  of  their  analysis  is  different,  i.e.,  micro-prudential 
analysis  provides  a  bottom-up  analysis,  rather  than  macro-prudential  analysis  which  is  top-
down,  and  (ii)  their  analysis  may  serve  as  helpful  input  into  the  work  carried-out  by  the 
ESRB. 

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6.2.8. 

International and advisory role 

Through these  proposals  the Commission is  clearly responding to the weaknesses identified 
during the crisis as well as to the G20 call to take action to build a stronger, more  globally 
consistent, regulatory and supervisory system for financial services. The ESAs could serve as 
helpful  contact  points  for  supervisory  authorities  from  third  countries.  In  this  context,  they 
may,  without  prejudice  to  the  competences  of  the  European  Institutions,  enter  into 
administrative arrangements with international organisations and the administrations of third 
countries.  The  ESAs  may  also  assist  in  preparing  equivalence  decisions  pertaining  to 
supervisory  regimes  in  third  countries.  Moreover,  the  ESAs  may,  upon  request  or  on  their 
own initiative, provide advice to the European Parliament, the Council and the Commission or 
publish opinions, including with respect to the prudential assessments of cross-border mergers 
and  acquisitions.  The  latter  should  provide  for  additional  safeguards  to  ensure  a  sound  and 
objective assessment of future cross-border mergers or acquisitions. 

6.2.9.  Collection of information 

At  the  request  of  the  Authority,  supervisory  authorities  and  other  public  authorities  of  the 
Member States shall provide the Authority with all the necessary information to carry out the 
duties assigned to it by this Regulation. Moreover, the Authority shall, in collaboration with 
the  supervisors  operating  in  colleges  of  supervisors,  define  and  collect  as  appropriate  all 
relevant information from supervisory authorities, in order to facilitate the work of colleges of 
supervisors.  It  shall  establish  and  manage  a  central  system  to  make  such  information 
accessible  to  the  supervisory  authorities  in  colleges  of  supervisors.  In  principle,  all 
information should be transferred to the ESAs by the national supervisory authorities.  

6.2.10.  Relationship with the ESRB 

The proposed framework for EU supervision can only work if the ESRB and ESFS cooperate 
closely. Indeed, the objective of the reform is to ensure a smoother interaction of supervision 
at the macro-prudential and micro-prudential levels. In fulfilling its role as macro-prudential 
supervisor, the ESRB would need a timely flow of micro-prudential information, while micro-
prudential supervision by national authorities would benefit from the ESRB’s insights on the 
macro-prudential environment. The Regulations also specify the procedures to be followed by 
the  ESAs  to  act  upon  recommendations  by  the  ESRB  and  how  the  ESAs  should  use  their 
powers  to  ensure  timely  follow-up  to  recommendations  addressed  to  one  or  more  national 
supervisory authorities. 

6.2.11.  Safeguard 

In  line  with  the  Ecofin  and  European  Council  conclusions  of  June  2009,  which  stress  that, 
without  prejudice  to  the  application  of  Community  law  and  recognising  the  potential  or 
contingent liabilities that may be involved for Member States, decisions by the ESAs should 
not  impinge  on  the  fiscal  responsibilities  of  the  Member  States,  a  safeguard  clause  is 
introduced.  This  clause  ensures  that,  where  a  Member  State  considers  that  a  decision  taken 
under Article 10 (i.e. emergency decisions) or 11 (i.e. settlement of disagreements) of these 
Regulations  impinges  on  its  fiscal  responsibility,  it  may  notify  the  Authority  and  the 
Commission  that  the  national  supervisory  authority  does  not  intend  to  implement  the 
Authority's decision, clearly demonstrating how the decision by the Authority impinges on its 
fiscal responsibilities. Within a period of one month the Authority shall inform the Member 
State  as  to  whether  it  maintains  its  decision  or  whether  it  amends  or  revokes  it.  Where  the 

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Authority maintains its decision, the Member State  may  refer the  matter  to the Council and 
the  decision  of  the  Authority  is  suspended.  The  Council  shall,  within  two  months,  decide 
whether  the  decision  should  be  maintained  or  revoked,  acting  by  qualified  majority.  For 
Authority  decisions  adopted  under  Article  10,  an  expedited  procedure  applies  to  take  into 
account the need for rapid decisions in emergency circumstances. 

6.3. 

The internal organisation of the ESAs and the ESFS 

Each  ESA  shall  comprise:  (i)  a  Board  of  Supervisors;  (ii)  a  Management  Board;  (iii)  a 
Chairperson; and (iv) an Executive Director. Moreover, a single Board of Appeal should be 
established for all three ESAs. 

6.3.1.  Board of Supervisors 

The  Board  of  Supervisors  is  the  main  decision  making  body  of  the  ESAs  and  will  among 
other  things  be  responsible  for  the  adoption  of  the  draft  technical  standards,  opinions, 
recommendations,  and  decisions  described  in  section  6.2  of  this  explanatory  memorandum. 
The Board of Supervisors shall be composed of: 

–  the Chairperson of the respective ESA, who will chair the meetings of the Board, but shall 

be non-voting; 

–  the Head of the relevant national supervisory authority in each Member State;  

–  one representative of the Commission who shall be non-voting; 

–  one representative of the ESRB who shall be non-voting; 

–  one representative of each of the other two European Supervisory Authorities who shall be 

non-voting, and 

–  where relevant, the Board may decide to admit observers.  

As a rule, decisions by the Board will be taken by simple majority, except for those decisions 
pertaining the setting of draft technical standards and guidelines and decisions in relation to 
the  articles  on  financial  provisions,  for  which  qualified  majority  voting  will  be  used.  The 
Board may set up panels for dispute settlement. However, the final decision is adopted by the 
Board of Supervisors on proposal from this panel. 

6.3.2.  Management Board 

The Management Board shall ensure that the Authority carries out its mission and performs 
the  tasks  assigned  to  it.  In  particular,  it  should  be  responsible  for  preparing  the  Authority's 
work programme, adopting the rules of procedure, and play a central role in the adoption of 
its budget. It will be composed of the ESA's Chairperson, a representative of the Commission, 
and  four  members  elected  by  the  Board  of  Supervisors  among  its  members,  who  shall  act 
independently  and  objectively  in  the  Community  interest.  The  Executive  Director  may 
participate in meetings of the Management Board without the right to vote. 

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6.3.3.  Chairperson and Executive Director 

The  ESA  shall  be  represented  by  a  full-time  independent  Chairperson,  who  shall  be 
responsible for preparing the work of  the Board of Supervisors  as well as  chairing  both  the 
meetings of the Board of Supervisors and the Management Board. The day-to-day activities 
of  the  ESAs  shall  however  be  managed  by  an  Executive  Director,  who,  similarly  to  the 
Chairperson, shall be a full-time independent professional. He or she shall be responsible for 
the implementation of the annual work programme and take the necessary measures to ensure 
the functioning of the ESA. Both persons shall be selected by the Board of Supervisors on the 
basis of merit, skills, knowledge of financial institutions and markets, and experience relevant 
to financial supervision and regulation, following an open selection procedure. The candidate 
selected  by  the  Board  of  Supervisors  for  the  position  of  Chairperson  shall  be  subject  to 
confirmation  by  the  European  Parliament.  The  term  of  both  offices  shall  be  five  years  and 
may  be  extended  once.  Such  extension  would  depend  on  the  outcome  of  an  evaluation 
executed by the Board of Supervisors. 

6.3.4. 

Joint Committee of European Supervisory Authorities 

Within the proposed structure, cross-sectoral cooperation will be fundamental so as to reflect 
the  relevant  market  trends  and  realities.  A  Joint  Committee  of  European  Supervisory 
Authorities  will  ensure  mutual  understanding,  cooperation  and  consistent  supervisory 
approaches  between  the  three  new  ESAs.  A  Subcommittee  to  the  Joint  Committee  shall  be 
established  to  specifically  address  cross-sectoral  issues,  including  financial  conglomerates, 
and ensuring  a  level  playing  field.  While the actual  decisions  on,  for  example  the  Financial 
Conglomerates Directive, are being taken by the individual ESAs, the Joint Committee should 
ensure that common decisions are taken by the ESAs in parallel.  

6.3.5.  Board of Appeal 

An appeal system will ensure that any natural or legal person, including national supervisory 
authorities, may in first instance appeal to a Board of appeal against a decision by the ESAs to 
ensure  the  coherent  application  of  Community  rules  (Article  9),  action  in  emergency 
situations (Article 10), and the settlement of disagreements (Article 11). The Board of Appeal 
shall be a joint body of three ESAs, i.e., it will deal with issues related to banking, insurance 
and securities.  The  Board  of  Appeal  will have six members and  six  alternates with relevant 
knowledge and experience, excluding current staff of the  national supervisory authorities or 
other  national  or  Community  institutions  involved  in  the  activities  of  the  Authority.  Two 
members of the Board  of  Appeal  and two alternates shall be appointed by the Management 
Board of each ESA from a short-list proposed by the European Commission. 

6.4. 

Financial provisions  

These provisions deal with the budgetary aspects of the ESAs and stress that the revenues of 
the  Authorities  may  stem  from  different  sources,  e.g.  obligatory  contributions  from  the 
national supervisory authorities, a subsidy from the Community or fees paid by the industry to 
the 
the  Authority.  It  also  specifies 
implementation  and  control  of  the  budget.  The  Framework  Financial  Regulation  for  bodies 
established under Article 158 of the Financial Regulation shall apply. 

the  annual  establishment, 

the  procedures  for 

EN 

10 

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6.5. 

General and final provisions 

The  general  provisions  set  out  practical  issues  related  to  staffing,  liability  of  the  ESAs, 
professional  secrecy  obligations,  data  protection,  access 
language 
arrangements, headquarter agreements and participation of third countries. Within three years 
from the effective start of operations and every three years thereafter, the Commission shall 
publish  a  report  on  the  functioning  of  the  ESAs  and  the  procedures  laid  down  in  the 
Regulation.  This  report  will  also  evaluate  progress  achieved  towards  regulatory  and 
supervisory convergence in the fields of crisis management and resolution in the EU. 

to  documents, 

6.6. 

Key differences between the three Regulations 

The  main  differences  between  the  three  proposed  Regulations  concern  the objectives  of  the 
Authorities, the scope of action, and the definitions, which are adapted to the specificities of 
the  relevant  sector  and  existing  Community  legislation.  Moreover,  the  European  Council 
concluded  that  the  ESAs  should  also  have  supervisory  powers  for  credit  rating  agencies. 
ESMA  would  be  responsible  to  register  credit  rating  agencies.  ESMA  would  also  be 
empowered to take supervisory measures such as withdrawing the registration or suspending 
the use for regulatory purposes of credit ratings. Supervisory powers could include the power 
to  request 
inspections.  The 
responsibilities and powers of ESMA with regard to credit rating agencies will be defined in 
an amendment to the Regulation on Credit Rating Agencies. 

investigations  or  on-site 

information  and 

to  conduct 

EN 

11 

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2009/0144 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

establishing a European Securities and Markets Authority 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, and in particular Article 
95 thereof, 

Having regard to the proposal from the Commission6, 

Having regard to the opinion of the European Economic and Social Committee7, 

Having regard to the opinion of the Committee of the Regions8, 

Having regard to the opinion of the European Central Bank, 

Acting in accordance with the procedure laid down in Article 251 of the Treaty9, 

Whereas: 

(1) 

(2) 

The  financial  crisis  in  2007/2008  exposed  important  shortcomings  in  financial 
supervision, both in particular cases and in relation to the financial system as a whole. 
Nationally-based  supervisory  models  have 
integrated  and 
interconnected  reality  of  European  financial  markets,  in  which  many  financial  firms 
operate  across  borders.  The  crisis  exposed  shortcomings  in  the  area  of  cooperation, 
coordination,  consistent  application  of  Community  law  and  trust  between  national 
supervisors.  

lagged  behind 

the 

A report published on 25 February 2009 by a high-level group of experts chaired by J. 
de Larosière, requested by the Commission, concluded that the supervisory framework 
needed to be strengthened to reduce the risk and severity of future financial crises and 
recommended  far-reaching  reforms  to  the  structure  of  supervision  of  the  financial 
sector  in  the  Community.  That  group  of  experts  also  concluded  that  a  European 
System  of  Financial  Supervisors  should  be  created,  comprising  three  European 
Supervisory  Authorities,  one  for  the  securities  sector  one  for  the  insurance  and 
occupational  pensions  sector  and  one  for  the  banking  sector,  and  the  creation  of  a 
European Systemic Risk Council. 

6 
7 
8 
9 

OJ C , , p. . 
OJ C , , p. . 
OJ C , , p. . 
OJ C , , p. . 

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12 

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(3) 

(4) 

(5) 

(6) 

The Commission in its Communication of 4 March 2009 entitled "Driving European 
Recovery"10 proposed to bring forward draft legislation creating a European System of 
Financial Supervisors and a European Systemic Risk Board, and in its Communication 
of  27  May  2009  entitled  "European  Financial  Supervision"11  provided  more  detail 
about the possible architecture of such a new supervisory framework. 

The  European  Council,  in  its  conclusions  of  19  June  2009,  recommended  that  a 
European  System  of  Financial  Supervisors,  comprising 
three  new  European 
Supervisory Authorities, be established. The system should be aimed at upgrading the 
quality  and  consistency  of  national  supervision,  strengthening  oversight  of  cross 
border groups and establishing a European single rule book applicable to all financial 
market participants in the Single Market. It emphasised that the European Supervisory 
Authorities should also have supervisory powers for credit rating agencies and invited 
the  Commission  to  prepare  concrete  proposals  on  how  the  European  System  of 
Financial Supervisors could play a strong role in crisis situations, while stressing that 
decisions  taken  by  the  European  Supervisory  Authorities  should  not  impinge  on  the 
fiscal responsibilities of Member States. 

The financial and economic crisis has created real and serious risks to the stability of 
the internal market. Restoring and maintaining a stable and reliable financial system is 
an absolute prerequisite to preserving trust and coherence in the internal market, hence 
to preserve and improve the conditions for the establishment of a fully integrated and 
functioning  internal  market  in  the  field  of  financial  services.  Moreover,  deeper  and 
more  integrated  financial  markets  offer  better  opportunities  for  financing  and  risk 
diversification,  and  thus  help  to  improve  the  capacity  of  the  economies  to  absorb 
shocks.  

The Community has reached the limits of what can be done with the present status of 
the  Committees  of  European  Supervisors,  which  remain  advisory  bodies  to  the 
Commission.  The  Community  cannot  remain  in  a  situation  where  there  is  no 
mechanism to ensure that national supervisors arrive at the best possible supervisory 
decisions  for  cross-border  institutions;  where  there  is  insufficient  cooperation  and 
information exchange between national supervisory authorities; where joint action by 
national  authorities  requires  complicated  arrangements  to  take  account  of  the 
patchwork  of  regulatory  and  supervisory  requirements;  where  national  solutions  are 
most  often  the  only  feasible  option  in  responding  to  European  problems,  where 
different  interpretations  of  the  same  legal  text  exist.  The  European  System  of 
Supervisors should be designed to overcome these deficiencies and provide a system 
that is in line with the objective of a stable and single Community financial market for 
financial services, linking national supervisors into a strong Community network. 

(7) 

The  European  System  of  Financial  Supervisors  should  be  a  network  of  national  and 
Community  supervisory  authorities,  leaving  day-to-day  supervision  of  financial 
market participant at the national level, and according a central role in the supervision 
of  cross-border  groups  to  colleges  of  supervisors.,  Greater  harmonisation  and  the 
coherent application of rules for financial market participants and markets across the 
Community  should  also  be  achieved.  A  European  Securities  and  Markets  Authority 

10 
11 

COM(2009) 114. 
COM(2009) 252. 

EN 

13 

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(8) 

(9) 

should  be  established,  along  with  a  European  Insurance  and  Occupational  Pensions 
Authority and a European Banking Authority (the European Supervisory Authorities).  

The  European  Supervisory  Authorities  should  replace  the  Committee  of  European 
Banking  Supervisors  established  by  Commission  Decision  2009/78/EC12, 
the 
Committee of European Insurance and Occupational Pensions Supervisors established 
by  Commission  Decision  2009/79/EC13  and  the  Committee  of  European  Securities 
Regulators established by Commission Decision 2009/77/EC14 , and assume all of the 
tasks  and  competences  of  those  committees.  The  scope  of  each  Authority's  action 
should be clearly defined so that national supervisory authorities and financial market 
participants  can  identify  the  authority  competent  in  their  field  of  activity.  Where 
institutional  reasons  and  the  responsibilities  assigned  in  the  Treaty  so  require  the 
Commission should also be part of the network of supervisory activities. 

The  European  Securities  and  Markets  Authority  ("the  Authority")  should  act  with  a 
view  to  improving  the  functioning  of  the  internal  market,  including  in  particular  by 
ensuring  a  high,  effective  and  consistent  level  of  regulation  and  supervision  taking 
account  of  the  varying  interests  of  all  Member  States,  to  protect  investors,  to  ensure 
the integrity, efficiency and orderly functioning of financial markets, to safeguard the 
stability  of  the  financial  system,  and  to  strengthen  international  supervisory 
coordination,  for  the  benefit  of  the  economy  at  large,  including  financial  market 
participants  and  other  stakeholders,  consumers  and  employees.  Its  tasks  also  include 
promoting  supervisory  convergence  and  providing  advice  to  the  EU  institutions  in 
areas of securities and markets regulation and supervision, as well as related corporate 
governance and financial reporting issues. In order to be able to fulfil its objectives, it 
is necessary and appropriate that the Authority should be a Community body having 
legal personality and that it should have legal, administrative and financial autonomy. 

(10)  The Court of Justice of the European communities in its judgement of 2 May 2006 in 
(United  Kingdom/European  Parliament  and  Council)15  has 
Case  C-217/04 
acknowledged that Article 95 of the Treaty relating to the adoption of measures for the 
approximation  of  legislation  for  the  establishment  and  functioning  of  the  internal 
market  provides  an  appropriate  legal  basis  for  setting  up  a  "Community  body 
responsible  for  contributing  to  the  implementation  of  a  process  of  harmonisation", 
when the tasks conferred on such a body are closely related to the subject-matter of the 
acts approximating the national legislations. The purpose and tasks of the Authority - 
assisting competent national supervisory authorities in the consistent interpretation and 
application  of  Community  rules  and  contributing  to  financial  stability  necessary  for 
financial  integration  -  are  closely  linked  to  the  objectives  of  the  Community  acquis 
concerning the internal market for financial services. The Authority should therefore 
be established on the basis of Article 95 of the Treaty. 

(11)  The legal acts which lay down the tasks for competent authorities of Member States, 
including  cooperating  with  each  other  and  with  the  Commission,  are  the  following: 
Directive 97/9/EC of the European Parliament and of the Council of 3 March 1997 on 

12 
13 
14 
15 

OJ L 24, 29.1.2009, p.23. 
OJ L 25, 29.1.2009, p.28. 
OJ L 25, 29.1.2009, p.18. 
pt. 44 –not yet published.  

EN 

14 

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investor-compensation schemes16, Directive 98/26/EC of the European Parliament and 
of  the  Council  of  19  May  1998  on  settlement  finality  in  payment  and  securities 
settlement  systems,17  Directive  2001/34/EC  of  the  European  Parliament  and  of  the 
Council  of  28  May  2001  on  the  admission  of  securities  to  official  stock  exchange 
listing and on information to be published on those securities18, Directive 2002/47/EC 
of the European Parliament and of the Council of 6 June 2002 on financial collateral 
arrangements19, Directive 2002/87/EC of the European Parliament and of the Council 
of  16  December  2002  on  the  supplementary  supervision  of  credit  institutions, 
insurance undertakings and investment firms in a financial conglomerate20, Directive 
2003/6/EC  of  the  European  Parliament  and  of  the  Council  of  28  January  2003  on 
insider  dealing  and  market  manipulation  (market  abuse)21,  Directive  2003/71/EC  of 
the European Parliament and of the Council of 4 November 2003 on the prospectus to 
be  published  when  securities  are  offered  to  the  public  or  admitted  to  trading  and 
amending Directive 2001/34/EC22, Directive 2004/25/EC of the European Parliament 
and of the Council of 21 April 2004 on takeover bids23, Directive 2004/39/EC of the 
European  Parliament  and  of  the  Council  of  21  April  2004  on  markets  in  financial 
instruments24, Directive 2004/109/EC of the European Parliament and of the Council 
of 15 December 2004 on the harmonisation of transparency requirements in relation to 
information  about  issuers  whose  securities  are  admitted  to  trading  on  a  regulated 
market  and  amending  Directive25,  Directive  2005/60/EC  of  the  European  Parliament 
and  of  the  Council  of  26  October  2005  on  the  prevention  of  the  use  of  the  financial 
system  for  the  purpose  of  money  laundering  and  terrorist  financing26,  Directive 
2002/65/EC  of  the  European  Parliament  and  of  the  Council  of  23  September  2002 
concerning  the  distance  marketing  of  consumer  financial  services27,  Directive 
2006/49/EC  of  the  European  Parliament  and  the  Council  of  14  June  2006  on  the 
capital adequacy of investment firms and credit institutions (recast), without prejudice 
to  the  competence  of  the  European  Banking  Authority  in  terms  of  prudential 
supervision28, Directive 2009/65/EC of the European Parliament and of the Council of 
13  July  2009  concerning  Undertakings  for  Collective  Investment  in  Transferable 
Securities29,  Directive  …  (future  AIFM  Directive),  and  Regulation  …  (future  CRA 
Regulation), including all Commission directives, regulations and decisions based on 
these acts, and of any further Community act which confers tasks on the Authority. 

(12)  The term financial market participant should cover a diverse range of participants who 
are  subject  to  Community  legislation  in  this  area.  It  may  include  both  legal  persons 
and  individuals.  It  can  include  for  example  investment  firms,  UCITS  and  their 
management  companies,  alternative  investment  fund  managers,  market  operators, 

16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
29 

OJ L 84, 26.3.1997, p. 22. 
OJ L 166, 11.6.1998, p. 45. 
OJ L 184, 6.7.2001, p. 1. 
OJ L 168, 27.6.2002, p. 43. 
OJ L 35, 11.2.2003, p. 1. 
OJ L 96, 12.4.2003, p. 16. 
OJ L 345, 31.12.2003, p. 64. 
OJ L 142, 30.4.2004, p. 12. 
OJ L 145, 30.4.2004, p. 1. 
OJ L 390, 31.12.2004, p. 38. 
OJ L 309, 25.11.2005, p. 15 
OJ L L 271, 9.10.2002, p. 16 
OJ L 177, 30.6.2006, p. 201. 
[Reference not yet available.] 

EN 

15 

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clearing houses, settlement systems, credit rating agencies, issuers, offerors, investors, 
persons  who  control  or  have  an  interest  in  participants,  persons  involved  in  the 
management of participants as well as other persons in relation to whom a requirement 
in  the  legislation  applies.  It  should  also  include  financial  institutions  such  as  credit 
institutions  and  insurance  companies  when  engaging  in  activities  covered  by 
Community  legislation  in  this  area.  Competent  authorities  in  the  EU  and  of  third 
countries as well as the Commission do not fall within this definition. 

(13) 

It is desirable that the Authority promote a consistent approach in the area of investor 
compensation  schemes  to  ensure  a  level  playing  field  and  the  equitable  treatment  of 
investors  across  the  Community.  As  investor  compensation  schemes  are  subject  to 
oversight  in  their  Member  States  rather  than  regulatory  supervision,  it  is  appropriate 
that  the  Authority  should  be  able  to  exercise  its  powers  under  this  Regulation  in 
relation  to  the  investor  compensation  schemes  itself  and  its  operator  who  can  be 
considered as being the equivalent of a supervisory authority in this area. 

(14)  There is a need to introduce an effective instrument to establish harmonised technical 
standards  in  financial  services  to  ensure,  also  through  a  single  rulebook,  a  level 
playing field and an adequate protection investors and consumers across Europe. As a 
body  with  highly  specialised  expertise,  it  is  efficient  and  appropriate  to  entrust  the 
Authority, in areas defined by Community law, with the elaboration of draft technical 
standards, which do not involve policy choices. The Commission should endorse those 
draft  technical  standards  in  accordance  with  Community  law  in  order  to  give  them 
binding  legal  effect.  The  draft  technical  standards  have  to  be  adopted  by  the 
Commission. They would be subject to amendment if, for example, the draft technical 
standards were incompatible with Community Law, would not respect the principle of 
proportionality  or  would  run  counter  to  the  fundamental  principles  of  the  internal 
market  for  financial  services  as  reflected  in  the  acquis  of  Community  financial 
services  legislation.  To  ensure  a  smooth  and  expedited  adoption  process  for  those 
standards,  the  Commission  should  be  subject  to  a  time  limit  for  its  decision  on  the 
endorsement.  

(15)  The  process  for  the  development  of  technical  standards  in  this  regulation  is  without 
prejudice  to  the  Commission's  powers  to  adopt  on  its  own  initiative  implementing 
measures  under  comitology procedures at level 2 of the Lamfalussy structure as laid 
out  in  the  relevant  Community  legislation.  The  matters  concerned  by  the  technical 
standards  do  not  involve  policy  decisions,  and  their  content  is  framed  by  the 
Community  acts  adopted  at  Level  1.  Development  of  the  draft  standards  by  the 
Authority  ensures  that  they  fully  benefit  from  the  specialised  expertise  of  national 
supervisory authorities.  

(16) 

In  areas  not  covered  by  technical  standards,  the  Authority  should  have  the  power  to 
issue non-binding guidelines and recommendations on the application of Community 
legislation.  In  order  to  ensure  transparency  and  strengthen  compliance  by  national 
supervisory  authorities  with 
those  guidelines  and  recommendations,  national 
authorities  should  be  obliged  to  state  their  reasons  where  they  do  not  comply  with 
those guidelines and recommendations. 

(17)  Ensuring the correct and full application of Community law is a core prerequisite for 
the  integrity,  efficiency  and  orderly  functioning  of  financial  markets,  the  stability  of 
the  financial  system,  and  for  neutral  conditions  of  competition  for  financial  market 

EN 

16 

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participants in the Community. A mechanism should therefore be established whereby 
the  Authority  addresses  instances  of  incorrect  or  insufficient  application  of 
Community law. This mechanism should apply in areas where Community legislation 
defines clear and unconditional obligations. 

(18)  To  allow  for  a  proportionate  response  to  instances  of  incorrect  or  insufficient 
application of Community law, a three-step mechanism should apply. At a first level, 
the  Authority  should  be  empowered  to  investigate  alleged  incorrect  or  insufficient 
application of Community law obligations by national authorities in their supervisory 
practice, concluded by a non-binding recommendation.  

(19)  Where  the  national  authority  does  not  comply  with  the  recommendation,  the 
Commission  should be  empowered  to address a Decision to the national supervisory 
authority  concerned  in  order  to  ensure  compliance  with  Community  law,  creating 
direct  legal  effects  which  can  be  invoked  before  national  courts  and  authorities  and 
enforced under Article 226 of the Treaty.  

(20)  To overcome exceptional situations of persistent inaction by the competent authority 
concerned,  the  Authority  should  be  empowered,  as  a  last  resort,  to  adopt  decisions 
addressed  to  individual  financial  institutions.  This  power  should  be  limited  to 
exceptional  circumstances  in  which  a  competent  authority  does  not  comply  with  the 
decisions  addressed  to  it  and  in  which  Community  law  is  directly  applicable  to 
financial institutions by virtue of existing30 or future EU Regulations. 

(21)  Serious  threats  to  the  orderly  functioning  and  integrity  of  financial  markets  or  the 
stability  of  the  financial  system  in  the  Community  require  a  swift  and  concerted 
response  at  Community  level.  The  Authority  should  therefore  be  able  to  require 
national  supervisory  authorities  to  take  specific  actions  to  remedy  an  emergency 
situation. As the determination of an emergency situation involves a significant degree 
of  discretion,  this  power  should  be  conferred  on  the  Commission.  To  ensure  an 
effective  response  to  the  emergency  situation,  in  the  event  of  inaction  by  the 
competent  national  supervisory  authorities,  the  Authority  should  be  empowered  to 
adopt, as a last resort, decisions directly addressed to financial market participants in 
areas of Community law directly applicable to them aimed at mitigating the effects of 
the crisis and restoring confidence in the markets. 

30 

The  following  are  existing  Regulations  within  the  scope  of  activities  of  the  Authority:  Commission 
Regulation  (EC)  No  1287/2006  of  10  August  2006  implementing  Directive  2004/39/EC  of  the 
European  Parliament  and  of  the  Council  as  regards  record-keeping  obligations  for  investment  firms, 
transaction  reporting,  market  transparency,  admission  of  financial  instruments  to  trading,  and  defined 
terms  for  the  purposes  of  that  Directive,  OJ  L  241,  2.9.2006,  p.  1;  Commission  Regulation  (EC)  No 
809/2004 of 29 April 2004 implementing Directive 2003/71/EC of the European Parliament and of the 
Council  as  regards  information  contained  in  prospectuses  as  well  as  the  format,  incorporation  by 
reference  and  publication  of  such  prospectuses  and  dissemination  of  advertisements,  OJ  L  149, 
30.4.2004,  p.  1;  Commission  Regulation  (EC)  No  2273/2003  of  22  December  2003  implementing 
Directive 2003/6/EC of the European Parliament and of the Council as regards exemptions for buy-back 
programmes  and  stabilisation  of  financial  instruments,  OJ  L  336,  23.12.2003,  p.  33;  Commission 
Regulation (EC) No 1569/2007 of 21 December 2007 establishing a mechanism for the determination 
of  equivalence  of  accounting  standards  applied  by  third  country  issuers  of  securities  pursuant  to 
Directives  2003/71/EC  and  2004/109/EC  of  the  European  Parliament  and  of  the  Council,  OJ  L  340, 
22.12.2007, p. 66. 

EN 

17 

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(22) 

In order to ensure efficient and effective supervision and a balanced consideration of 
the  positions  of  the  competent  authorities  in  different  Member  States,  the  Authority 
should  be  able  to  settle  disagreements  between  those  competent  authorities  with 
binding  effect,  including  within  colleges  of  supervisors.  A  conciliation  phase  should 
be provided for, during which the competent authorities may reach an agreement. The 
Authority's  competence  should  cover  disagreements  on  procedural  obligations  in  the 
cooperation process as well as on the interpretation and application of Community law 
in  supervisory  decisions.  Existing  conciliation  mechanisms  provided  for  in  sectoral 
legislation  have  to  be  respected.  In  the  event  of  inaction  by  the  national  supervisory 
authorities  concerned,  the  Authority  should  be  empowered  to  adopt,  as  a  last  resort, 
decisions  directly  addressed  to  financial  market  participants  in  areas  of  Community 
law directly applicable to them.  

(23)  Colleges of supervisors play an important role in the efficient, effective and consistent 
supervision  of  financial  market  participants  operating  across  borders.  The  Authority 
should  have  full  participation  rights  in  colleges  of  supervisors  with  a  view  to 
streamlining the functioning of and the information exchange process in colleges and 
to foster convergence and consistency across colleges in the application of Community 
law.  

(24)  The  delegation  of  tasks  and  responsibilities  can  be  a  useful  instrument  in  the 
functioning  of  the  network  of  supervisors  in  order  to  reduce  the  duplication  of 
supervisory tasks, foster cooperation and thereby streamline the supervisory process as 
well  as  reduce  the  burden  imposed  on  financial  institutions.  The  Regulation  should 
therefore  provide  a  clear  legal  basis  for  such  delegation.  Delegation  of  tasks  means 
that  tasks  are  carried  out  by  another  supervisory  authority  instead  of  the  responsible 
authority,  while  the  responsibility  for  supervisory  decisions  remains  with  the 
delegating  authority.  By  delegation  of  responsibilities  one  national  supervisory 
authority, the delegatee, shall be able to decide upon a certain supervisory matter in its 
name  in  lieu  of  another  national  supervisory  authority.  Delegations  should  be 
governed by the principle of allocating supervisory competence to a supervisor which 
is well placed to take action in the subject matter. A reallocation of responsibilities can 
be appropriate for example for reasons of economies of scale or scope, of coherence in 
group  supervision,  and  of  optimal  use  of  technical  expertise  among  national 
supervisory  authorities.  Relevant  Community  legislation  may  further  specify  the 
principles  for  reallocation  of  responsibilities  upon  agreement.  The  Authority  should 
facilitate  delegation  agreements  between  national  supervisory  authorities  by  all 
appropriate  means.  It  should  be  informed  in  advance  of  intended  delegation 
agreements to be able to express an opinion where appropriate. It should centralise the 
publication  of  such  agreements  to  ensure  timely,  transparent  and  easily  accessible 
information about agreements for all parties concerned. 

(25)  The Authority should actively foster supervisory convergence across the Community 

with the aim of establishing a common supervisory culture.  

(26)  Peer  reviews  are  an  efficient  and  effective  tool  for  fostering  consistency  within  the 
network  of  financial  supervisors.  The  Authority  should  therefore  develop  the 
methodological  framework  for  such  reviews  and  conduct  them  on  a  regular  basis. 
Reviews should focus not only on convergence of supervisory practices but also on the 
capacity  of  supervisors  to  achieve  high  quality  supervisory  outcomes  as  well  as  the 
independence of competent authorities. 

EN 

18 

   EN 

(27)  The  Authority  should  actively  promote  a  coordinated  Community  supervisory 
response,  in  particular  where  adverse  developments  could  potentially  jeopardise  the 
orderly functioning and integrity of financial markets or the stability of the financial 
system in the Community. In addition to its powers for action in emergency situations, 
it  should  therefore  be  entrusted  with  a  general  coordination  function  within  the 
European  System  of  Financial  Supervisors.  The  smooth  flow  of  all  relevant 
information  between  competent  authorities  should  be  a  particular  focus  of  the 
Authority's actions. 

(28) 

In  order  to  safeguard  financial  stability  it  is  necessary  to  identify,  at  an  early  stage, 
trends,  potential  risks  and  vulnerabilities  stemming  from  the  micro-prudential  level, 
across  borders  and  across  sectors.  The  Authority  should  monitor  and  assess  such 
developments in the area of its competence and, where necessary, inform the European 
Parliament, the Council, the Commission, the other European Supervisory Authorities 
and the European Systemic Risk Board on a regular and, as necessary, ad hoc basis. 
The  Authority  should  also  coordinate  Community-wide  stress  tests  to  assess  the 
resilience  of  financial  market  participants  to  adverse  market  developments,  ensuring 
an as consistent as possible methodology is applied at the national level to such tests. 

(29)  Given  the  globalisation  of  financial  services  and  the  increased  importance  of 
international standards, the Authority should foster the dialogue and cooperation with 
supervisors  outside  the  Community.  It  shall  fully  respect  the  existing  roles  and 
competences  of  the  European  Institutions  in  relations  with  authorities  outside  the 
Community and in international forums. 

(30)  The  Authority  should  serve  as  an  independent  advisory  body  to  the  European 
Parliament, the Council, and the Commission in the area of its competence. It should 
be able to provide its opinion on the prudential assessment of mergers and acquisitions 
under Directive 2004/39/EC, amended by 2007/44/EC31. 

(31) 

In  order  to  effectively  carry  out  its  duties,  the  Authority  should  have  the  right  to 
request  all  necessary  information.  To  avoid  duplication  of  reporting  obligations  for 
financial  market  participants,  that  information  should  normally  be  provided  by  the 
national  supervisory  authorities  who  are  closest  to  financial  markets  and  market 
participants.  However,  the  Authority  should  have  the  power  to  request  information 
directly  from  financial  market  participants  and  other  parties  where  a  national 
competent authority does not or cannot provide such information in a timely fashion. 
Member States' authorities should be obliged to assist the Authority in enforcing such 
direct requests. 

(32)  Close  cooperation  between  the  Authority  and  the  European  Systemic  Risk  Board  is 
essential  to  give  full  effectiveness  to  the  functioning  of  the  European  Systemic  Risk 
Board and the follow-up to its warnings and recommendations. The Authority should 
share any relevant information with the European Systemic Risk Board. Data related 
to  individual  undertakings  should  be  provided  only  upon  reasoned  request.  Upon 
receipt  of  warnings  or  recommendations  addressed  by  the  European  Systemic  Risk 
Board to the Authority or a national supervisory authority, the Authority should take 
immediate action and ensure follow-up. 

31 

OJ L 247, 21.9.2007, p.1. 

EN 

19 

   EN 

                                                 
(33)  Where  appropriate,  the  Authority  should  consult  interested  parties  on  technical 
standards,  guidelines  and  recommendations  and  provide  them  with  a  reasonable 
opportunity to comment on proposed measures. For reasons of efficiency, a Securities 
and Markets Stakeholder Group should be established for that purpose, representing in 
balanced  proportions  Community  financial  market  participants  (including  as 
appropriate  institutional  investors  and  other  financial  institutions  which  themselves 
use  financial  services),  their  employees,  and  consumers  and  other  retail  users  of 
financial  services,  including  SMEs.  The  Securities  and  Markets  Stakeholder  Group 
should  actively  work  as  an  interface  with  other  user  groups  in  the  financial  services 
area established by the Commission or Community legislation. 

(34)  Member  States  have  a  core  responsibility  in  preserving  financial  stability  in  crisis 
management,  in  particular  with  regard  to  stabilising  and  resolving  individual  ailing 
financial  market  participants.  Measures  by  the  Authority  in  emergency  or  settlement 
situations  affecting  the  stability  of  a  financial  market  participant  should  not  impinge 
on  the  fiscal  responsibilities  of  Member  States.  A  mechanism  should  be  established 
whereby  Member  States  may  invoke  this  safeguard  and  ultimately  bring  the  matter 
before the Council for decision. It is appropriate to confer on the Council a role in this 
matter given the particular responsibilities of the Member States in this respect. 

(35) 

In its decision-making procedures, the Authority should be bound by Community rules 
and general principles on due process and transparency. The right to be heard of the 
addressees of the Authority's decisions should be fully respected. The Authority's acts 
form an integral part of Community law. 

(36)  A Board of Supervisors composed of the heads of the relevant competent authority in 
each  Member  State,  and  chaired  by  the  Chairperson  of  the  Authority,  should  be  the 
principal decision-making organ of the Authority. Representatives of the Commission, 
the  European  Systemic  Risk  Board  and  the  other  two  European  Supervisory 
Authorities  should  participate  as  observers.  Members  of  the  Board  of  Supervisors 
should act independently and only in the Community's interest. For acts of a general 
nature,  including  those  related  to  the  adoption  of  technical  standards,  guidelines  and 
recommendations as well as budgetary matters, it is appropriate to apply the rules on 
qualified  majority  as  laid  down  in  the  Treaty,  whereas  for  all  other  decisions  simple 
majority of members should apply. Cases concerning the settlement of disagreements 
between national supervisory authorities should be examined by a restricted panel. 

(37)  A Management Board composed of the Chairperson of the Authority, representatives 
of  national  supervisory  authorities  and  the  Commission  should  ensure  that  the 
Authority  carries  out  its  mission  and  performs  the  tasks  assigned  to  it.  The 
Management  Board  should  be  entrusted  with  the  necessary  powers  to,  inter  alia, 
propose  the  annual  and  multi-annual  work  programme,  exercise  certain  budgetary 
powers, adopt the Authorities staff policy plan, adopt special provisions on the right to 
access to documents and adopt the annual report.  

(38)  A  full  time  Chairperson,  selected  by  the  Board  of  Supervisors  through  an  open 
competition, should represent the Authority. The management of the Authority should 
be  entrusted  to  an  Executive  Director,  who  should  have  the  right  to  participate  in 
meetings of the Board of Supervisors and the Management Board without the right to 
vote. 

EN 

20 

   EN 

(39) 

(40) 

In  order  to  ensure  cross-sectoral  consistency  in  the  activities  of  the  European 
Supervisory  Authorities,  those  authorities  should  coordinate  closely  in  a  Joint 
Committee  of  European  Supervisory  Authorities  and  reach  common  positions  where 
appropriate. The Joint Committee of European Supervisory Authorities should assume 
all  of  the  functions  of  the  Joint  Committee  on  Financial  Conglomerates.  Where 
relevant, acts also falling within the area of competence of the European Insurance and 
Occupational  Pensions  Authority  or  the  European  Banking  Authority  should  be 
adopted in parallel by the European Supervisory Authorities concerned. 

It is necessary to ensure that the parties affected by decisions adopted by the Authority 
may  exercise  the  necessary  remedies.  To  effectively  protect  the  rights  of  parties  and 
for reasons of procedural economy, where the Authority has decision-making powers, 
parties  should  be  granted  a  right  of  appeal  to  a  Board  of  Appeal.  For  reasons  of 
efficiency  and  consistency,  the  Board  of  Appeal  should  be  a  joint  body  of  the  three 
European  Supervisory  Authorities,  independent  from  their  administrative  and 
regulatory structures. The decision of the Board of Appeal should be subject to appeal 
before  the  Court  of  First  Instance  and  the  Court  of  Justice  of  the  European 
Communities. 

(41) 

In  order  to  guarantee  its  full  autonomy  and  independence,  the  Authority  should  be 
granted  an  autonomous  budget  with  revenues  mainly  from  obligatory  contributions 
from  national  supervisory  authorities  and  from  the  General  Budget  of  the  European 
Union.  The  Community  budgetary  procedure  should  be  applicable  as  far  as  the 
Community contribution is concerned. The auditing of accounts should be undertaken 
by the Court of Auditors. 

(42)  Regulation (EC) No 1073/1999 of the European Parliament and of the Council of 25 
May  1999  concerning  investigations  conducted  by  the  European  Anti-Fraud  Office 
(OLAF)32  should  apply  to  the  Authority.  The  Authority  should  also  accede  to  the 
Inter-institutional  Agreement  of  25  May 1999  between  the  European  Parliament,  the 
Council  of  the  European  Union  and  the  Commission  of  the  European  Communities 
concerning internal investigations by the European Anti-Fraud Office (OLAF)33. 

(43) 

In order to ensure open and transparent employment conditions and equal treatment of 
staff,  the  Staff  Regulations  of  Officials  of  the  European  Communities  and  the 
Conditions of Employment of Other Servants of the European Communities34 should 
apply to the staff of the Authority. 

(44) 

It  is  essential  that  business  secrets  and  other  confidential  information  are  protected. 
The  confidentiality  of  information  exchanged  in  the  network  should  likewise  be 
safeguarded. 

(45)  The  protection  of  individuals  with  regard  to  the  processing  of  personal  data  is 
governed by Directive 95/46/EC of the European Parliament and of the Council of 24 
October  1995  on  the  protection  of  individuals  with  regard  to  the  processing  of 
personal  data  and  on  the  free  movement  of  such  data35 and  by  Regulation  (EC)  No 

32 
33 
34 
35 

OJ L 136, 31.5.1999, p. 1. 
OJ L 136, 31.5.1999, p. 15. 
O.J. L 56, 04.03.1968, p.1 
OJ L 281, 23.11.1995, p. 31. 

EN 

21 

   EN 

                                                 
45/2001 of the European Parliament and of the Council of 18 December 2000 on the 
protection  of  individuals  with  regard  to  the  processing  of  personal  data  by  the 
Community  institutions  and  bodies  and  on  the  free  movement  of  such  data36, 
which are  fully  applicable  to  the  processing  of  personal  data  for  the  purposes  of 
this Regulation. 

(46) 

In  order  to  ensure  the  transparent  operation  of  the  Authority,  Regulation  (EC)  No 
1049/2001 of the European Parliament and of the Council of 30 May 2001 regarding 
public  access  to  European  Parliament,  Council  and  Commission  documents37  should 
apply to the Authority. 

(47)  Countries  which  are  not  members  of  the  European  Union  should  be  allowed  to 
participate in the work of the Authority in accordance with appropriate agreements to 
be concluded by the Community. 

(48)  Since  the  objectives  of  this  Regulation,  namely  improving  the  functioning  of  the 
internal  market  by  means  of  ensuring  a  high,  effective  and  consistent  level  of 
prudential  regulation  and  supervision,  protecting  depositors  and  investors,  protecting 
the integrity, efficiency and orderly functioning of financial markets, maintaining the 
stability  of  the  financial  system,  and  strengthening  international  supervisory 
coordination, cannot be sufficiently achieved by the Member States and can, therefore, 
by  reason  of  scale  of  the  action,  be  better  achieved  at  Community  level,  the 
Community  may  adopt  measures,  in  accordance  with  the  principle  of  subsidiarity  as 
set out in Article 5 of the Treaty. In accordance with the principle of proportionality, 
as set out in that Article, this Regulation does not go beyond what is necessary in order 
to achieve those objectives.  

(49)  The  Authority  assumes  all  current  tasks  and  powers  of  the  Committee  of  European 
Securities  Regulators.  Commission  Decision  2009/77/EC  of  23  January  2009 
establishing  the  Committee  of  European  Securities  Regulators  should  therefore  be 
repealed,  and  Decision  …/…/EC  of  the  European  Parliament  and  of  the  Council 
establishing  a  Community  programme  to  support  specific  activities  in  the  field  of 
financial services, financial reporting and auditing, should be amended accordingly. 

(50) 

It  is  appropriate  to  set  a  time  limit  for  the  application  of  this  Regulation  in  order  to 
ensure  that  the  Authority  is  adequately  prepared  to  begin  operations  and  to  ensure  a 
smooth transition from the Committee of European Securities Regulators. 

36 

37 

OJ L 8, 12.1.2001, p. 1. 
OJ L 145, 31/5/2001, p. 43. 

EN 

22 

   EN 

                                                 
HAVE ADOPTED THIS REGULATION: 

CHAPTER I 
ESTABLISHMENT AND LEGAL STATUS 

Article 1 
Establishment and Scope of action 

1. 

2. 

3. 

4. 

5. 

6. 

This  Regulation  establishes  a  European  Securities  and  Markets  Authority  ("the 
Authority"). 

The Authority shall act within the scope of Directive 97/9/EC, Directive 98/26/EC, 
Directive  2001/34/EC,  Directive  2002/47/EC,  Directive 2002/87/EC,  Directive 
2003/6/EC,  Directive  2003/71/EC,  Directive  2004/25/EC,  Directive  2004/39/EC, 
Directive  2004/109/EC,  Directive  2005/60/EC,  Directive  2009/65/EC,  Directive 
2002/65/EC,  Directive  2006/49/EC  (without  prejudice  to  the  competence  of  the 
European Banking Authority in terms of prudential supervision), Directive … [future 
AIFM  Directive],  and  Regulation  …  [future  CRA  Regulation],  including  all 
directives,  regulations,  and  decisions  based  on  these  acts,  and  of  any  further 
Community act which confers tasks on the Authority. 

The  provisions  of  this  Regulation  are  without  prejudice  to  the  powers  of  the 
Commission, in particular under Article 226 of the Treaty to ensure compliance with 
Community law. 

The objective of the Authority shall be to contribute to: (i) improving the functioning 
of the internal market, including in particular a high, effective and consistent level of 
regulation  and  supervision,  (ii)  protecting  protect  investors,  (iii)  ensuring  the 
integrity,  efficiency  and  orderly  functioning  of  financial  markets,  (iv)  safeguarding 
the stability of the financial system, and (v) strengthening international supervisory 
coordination.  For  this  purpose,  the  Authority  shall  contribute  to  ensuring  the 
consistent,  efficient  and  effective  application  of  the  Community  law  referred  to  in 
Article 1(2) above, fostering supervisory convergence and providing opinions to the 
European Parliament, the Council, and the Commission. 

The  Authority  shall  form  part  of  a  European  System  of  Financial  Supervisors, 
hereinafter referred to as 'ESFS', which shall function as a network of supervisors, as 
further specified in Article 39. 

The European Securities and Markets Authority shall co-operate with the European 
Systemic Risk Board, hereinafter referred to as 'ESRB' as laid down in Article 21 of 
this Regulation. 

EN 

23 

   EN 

For the purposes of this Regulation the following definitions apply: 

Article 2 
Definitions 

(1) 

(2) 

(3) 

'financial  market  participant'  means  any  person  in  relation  to  whom  a 
requirement  in  the  legislation  referred  to  in  Article  1(2)  or  a  national  law 
implementing such legislation applies. 

'key  financial  market  participant'  means  a  financial  market  participant,  whose 
regular activity or financial viability has or is likely to have a significant effect 
on  the  stability,  integrity,  or  efficiency  of  the  financial  markets  in  the 
Community. 

'competent  authorities'  means  competent  authorities  and/or  supervisory 
authorities as defined in the legislation referred to in Article 1(2). Bodies which 
administer national compensation schemes pursuant to Directive 97/9/EC shall 
also be considered as competent authorities. 

Article 3 
Legal status 

1. 

2. 

The Authority shall be a Community body with legal personality. 

In  each  Member  State,  the  Authority  shall  enjoy  the  most  extensive  legal  capacity 
accorded to legal persons under national law. It may, in particular, acquire or dispose 
of movable and immovable property and be a party to legal proceedings. 

3. 

The Authority shall be represented by its Chairperson. 

The Authority shall comprise the following: 

Article 4 
Composition 

(1) 

a Board of Supervisors, which shall exercise the tasks set out in Article 28; 

(2) 

a Management Board, which shall exercise the tasks set out in Article 32; 

(3) 

a Chairperson, who shall exercise the tasks set out in Article 33; 

(4) 

an Executive Director, who shall exercise the tasks set out in Article 38; 

(5) 

a Board of Appeal, as referred to in Article 44,which shall exercise the tasks set 
out in Article 46. 

EN 

24 

   EN 

The Authority shall have its seat in Paris.  

Article 5 
Seat 

CHAPTER II 
TASKS AND POWERS OF THE AUTHORITY 

Article 6 
Tasks and Powers of the Authority 

1. 

The Authority shall have the following tasks: 

(a) 

(b) 

(c) 

(d) 

contribute  to  the  establishment  of  high  quality  common  regulatory  and 
supervisory standards and practices, in particular by providing opinions to the 
Community  institutions  and  by  developing  guidelines,  recommendations,  and 
draft technical standards which shall be based on the legislation referred to in 
Article 1(2); 

contribute to a consistent application of Community legislation, in particular by 
contributing  to  a  common  supervisory  culture,  ensuring  consistent,  efficient 
and  effective  application  of  the  legislation  referred  to  in  Article  1(2), 
preventing regulatory arbitrage, mediating and settling disagreements between 
competent  authorities,  promoting  a  coherent  functioning  of  colleges  of 
supervisors and taking actions in emergency situations; 

facilitate  the  delegation  of  tasks  and  responsibilities  between  competent 
authorities; 

cooperate closely with the ESRB, in particular by providing the ESRB with the 
necessary information for the achievement of its tasks and by ensuring a proper 
follow up to the warnings and recommendations of the ESRB; 

(e) 

conduct  peer  review  analysis  of  competent  authorities, 
consistency in supervisory outcomes; 

to  strengthen 

(f)  monitor and assess market developments in the area of its competence; 

(g) 

fulfil  any  other  specific  tasks  set  out  in  this  Regulation  or  in  the  Community 
legislation referred to in Article 1(2). 

2. 

To achieve the tasks set out in paragraph 1, the Authority shall have the powers set 
out in this Regulation, in particular the power to: 

(a) 

develop draft technical standards in the specific cases referred to in Article 7; 

(b) 

issue guidelines and recommendations, as laid down in Article 8; 

(c) 

issue recommendations in specific cases, as referred to in Article 9(3);  

EN 

25 

   EN 

(d) 

(e) 

(f) 

take  individual  decisions  addressed  to  competent  authorities  in  the  specific 
cases referred to in Article 10 and 11; 

take  individual  decisions  addressed  to  financial  market  participants,  in  the 
specific cases referred to in Article 9(6), Article 10(3), and Article 11(4); 

issue opinions to the European Parliament, the Council, or the Commission as 
provided in Article 19; 

3. 

The  Authority  shall  execute  any  exclusive  supervisory  powers  over  entities  with 
Community-wide reach or economic activities with Community-wide reach entrusted 
to it in the legislation referred to in Article 1(2).  

For  that  purpose,  the  Authority  shall  have  appropriate  powers  of  investigation  and 
enforcement  as  specified  in  the  relevant  legislation,  as  well  as  the  possibility  of 
charging fees.  

Article 7 
Technical standards 

1. 

The Authority may develop technical standards in the areas specifically set out in the 
legislation referred to in Article 1(2). The Authority shall submit its draft standards 
to the Commission for endorsement.  

Before submitting them to the Commission, the Authority shall, where appropriate, 
conduct  open  public  consultations  on  technical  standards  and  analyse  the  potential 
related costs and benefits.  

Within  three  months  of  receipt  of  the  draft  standards,  the  Commission  shall  decide 
whether to endorse the draft standards. The Commission may extend that period by 
one  month.  The  Commission  may  endorse  the  draft  standards  only  in  part  or  with 
amendments where the Community interest so requires.  

Where  the  Commission  does  not  endorse  the  standards  or  endorses  them  in  part  or 
with amendments, it shall inform the Authority of its reasons.  

2. 

The  standards  shall  be  adopted  by  the  Commission  by  means  of  Regulations  or 
Decisions and published in the Official Journal of the European Union. 

Article 8  
Guidelines and recommendations 

The Authority shall, with a view to establishing consistent, efficient and effective supervisory 
practices within the ESFS, and to ensuring the common, uniform and consistent application of 
Community  legislation,  issue  guidelines  and  recommendations  addressed  to  competent 
authorities or financial market participants.  

The  competent  authorities  shall  make  every  effort  to  comply  with  those  guidelines  and 
recommendations.  

EN 

26 

   EN 

Where the competent  authority does  not apply those guidelines or recommendations  it  shall 
inform the Authority of its reasons. 

1. 

2. 

3. 

4. 

5. 

6. 

Article 9 
Consistent application of Community rules  

Where a competent authority has not correctly applied the legislation referred to in 
Article  1(2),  in  particular  by  failing  to  ensure  that  a  financial  market  participant 
satisfies the requirements laid down in that legislation, the Authority shall have the 
powers set out in paragraphs 2, 3 and 6 of this Article.  

Upon request from one or more competent authorities, from the Commission or on 
its own initiative and after having informed the competent authority concerned, the 
Authority may investigate the alleged incorrect application of Community law. 

Without  prejudice  to  the  powers  laid  down  in  Article  20,  the  competent  authority 
shall  provide  the  Authority  with  all  information  which  the  Authority  considers 
necessary for its investigation without delay. 

The Authority may, at the latest within two months from initiating its investigation, 
address  to  the  competent  authority  concerned  a  recommendation  setting  out  the 
action necessary to comply with Community law. 

The  competent  authority  shall,  within  ten  working  days  of  the  receipt  of  the 
recommendation, inform the Authority of the steps it has taken or intends to take to 
ensure compliance with Community law.  

Where  the  competent  authority  has  not  complied  with  Community  law  within  one 
month  from receipt of  the Authority's recommendation, the Commission may, after 
having  been  informed  by  the  Authority  or  on  its  own  initiative,  take  a  decision 
requiring  the  competent  authority  to  take  the  action  necessary  to  comply  with 
Community law. 

The  Commission  shall  take  such  a  decision  no  later  than  three  months  from  the 
adoption  of  the  recommendation.  The  Commission  may  extend  this  period  by  one 
month. 

The  Commission  shall  ensure  that  the  right  to  be  heard  of  the  addressees  of  the 
decision is respected. 

The Authority and the competent authorities shall provide the Commission with all 
necessary information.  

The  competent  authority  shall,  within  ten  working  days  of  receipt  of  the  decision 
referred to in paragraph 4, inform the Commission and the Authority of the steps it 
has taken or intends to take to implement the Commission's decision. 

Without prejudice to the powers of the Commission under Article 226 of the Treaty, 
where  a  competent  authority  does  not  comply  with  the  decision  referred  to  in 
paragraph 4 of this Article within the period of time specified therein, and where it is 
necessary  to  remedy  in  a  timely  manner  the  non  compliance  by  the  competent 

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authority  in  order  to  maintain  or  restore  neutral  conditions  of  competition  in  the 
market  or  ensure  the  orderly  functioning  and  integrity  of  the  financial  system,  the 
Authority  may,  where  the  relevant  requirements  of  the  legislation  referred  to  in 
Article  1(2)  are  directly  applicable  to  financial  market  participants,  adopt  an 
individual  decision  addressed  to  a  financial  market  participant  requiring  the 
necessary action to comply with its obligations under Community law including the 
cessation of any practice. 

The decision of the Authority shall be in conformity with the decision adopted by the 
Commission pursuant to paragraph 4.  

7. 

Decisions  adopted  under  paragraph  6  shall  prevail  over  any  previous  decision 
adopted by the competent authorities on the same matter. 

Any  action  by  the  competent  authorities  in  relation  to  facts  which  are  subject  to  a 
decision pursuant to paragraph 4 or 6 shall be compatible with those decisions. 

Article 10 
Action in emergency situations 

1. 

2. 

3. 

In  the  case  of  adverse  developments  which  may  seriously  jeopardise  the  orderly 
functioning and integrity of financial markets or the stability of the whole or part of 
the financial system in the Community, the Commission, upon its own initiative or 
following a request by the Authority, the Council, or the ESRB, may adopt a decision 
addressed to the Authority, determining the existence of an emergency situation for 
the purposes of this regulation. 

Where  the  Commission  has  adopted  a  decision  pursuant  to  paragraph  1,  the 
Authority may adopt individual decisions requiring competent authorities to take the 
necessary  action  in  accordance  with  the  legislation  referred  to  in  Article  1(2)  to 
address  any  risks  that  may  jeopardise  the  orderly  functioning  and  integrity  of 
financial  markets  or  the  stability  of  the  whole  or  part  of  the  financial  system  by 
ensuring  that  financial  market  participants  and  competent  authorities  satisfy  the 
requirements laid down in that legislation. 

Without prejudice to the powers of the Commission under Article 226 of the Treaty, 
where  a  competent  authority  does  not  comply  with  the  decision  of  the  Authority 
referred  to  in  paragraph  2  within  the  period  laid  down  therein,  the  Authority  may, 
where  the  relevant  requirements  laid  down  in  the  legislation  referred  to  in  Article 
1(2)  are  directly  applicable  to  financial  market  participants,  adopt  an  individual 
decision addressed to a financial market participant requiring the necessary action to 
comply  with  its  obligations  under  that  legislation,  including  the  cessation  of  any 
practice. 

4. 

Decisions  adopted  under  paragraph  3  shall  prevail  over  any  previous  decision 
adopted by the competent authorities on the same matter. 

Any  action  by  the  competent  authorities  in  relation  to  facts  which  are  subject  to  a 
decision pursuant to paragraph 2 or 3 shall be compatible with those decisions. 

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1. 

2. 

3. 

4. 

1. 

2. 

3. 

Article 11 
Settlement of disagreements between competent authorities 

Without prejudice to the powers laid down in Article 9, where a competent authority 
disagrees on the procedure or content of an action or inaction by another competent 
authority  in  areas  where  the  legislation  referred  to  in  Article  1(2)  requires 
cooperation,  coordination  or  joint  decision  making  by  competent  authorities  from 
more  than  one  Member  State,  the  Authority,  at  the  request  of  one  or  more  of  the 
competent authorities concerned, may assist the authorities in reaching an agreement 
in accordance with the procedure set out in paragraph 2. 

The  Authority  shall  set  a  time  limit  for  conciliation  between  the  competent 
authorities taking into account any relevant time periods specified in the legislation 
referred to in Article 1(2) and the complexity and urgency of the matter.  

If,  at  the  end  of  the  conciliation  phase,  the  competent  authorities  concerned  have 
failed  to  reach  an  agreement,  the  Authority  may  take  a  decision  requiring  them  to 
take  specific  action  or  to  refrain  from  action  in  order  to  settle  the  matter,  in 
compliance with Community law.  

Without prejudice to the powers of the Commission under Article 226 of the Treaty, 
where a competent authority does not comply with the decision of the Authority, and 
thereby fails to ensure that a financial market participant complies with requirements 
directly  applicable  to  it  by  virtue  of  the  legislation  referred  to  in  Article  1(2),  the 
Authority  may  adopt  an  individual  decision  addressed  to  a  financial  market 
participant  requiring  the  necessary  action  to  comply  with  its  obligations  under 
Community law, including the cessation of any practice.  

Article 12 
Colleges of supervisors 

The Authority shall contribute to promote the efficient and consistent functioning of 
colleges  of  supervisors  and  foster  the  coherence  of  the  application  of  Community 
legislation across colleges. 

The Authority shall participate as an observer in colleges of supervisors as it deems 
appropriate. For the purpose of that participation, it shall be considered a 'competent 
authority'  within  the  meaning  of  the  relevant  legislation  and,  at  its  request,  shall 
receive all relevant information shared with any member of the college.  

The  Authority  shall,  in  cooperation  with  the  supervisors  operating  in  colleges  of 
supervisors,  determine  and  collect  as  appropriate  all  relevant  information  from 
competent authorities, in order to facilitate the work of those colleges. 

It shall establish and manage a central system to make such information accessible to 
the competent authorities in colleges of supervisors.  

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Article 13 
Delegation of tasks and responsibilities 

1. 

2. 

3. 

Competent  authorities  may,  by  bilateral  agreement,  delegate 
responsibilities to other competent authorities supervisory.  

tasks  and 

The  Authority  shall  facilitate  the  delegation  of  tasks  and  responsibilities  between 
competent  authorities  by  identifying  those  tasks  and  responsibilities  that  can  be 
delegated or jointly exercised and by promoting best practices.  

Competent  authorities  shall  inform  the  Authority  of  delegation  agreements  they 
intend  to  enter  into.  They  shall  put  the  agreements  into  effect  at  the  earliest  one 
month after informing the Authority.  

The Authority may give an opinion on the intended agreement within one month of 
being informed.  

The Authority shall publish any delegation agreement as concluded by the competent 
authorities  by  appropriate  means,  in  order  to  ensure  that  all  parties  concerned  are 
informed appropriately.  

Article 14 
Common supervisory culture 

1. 

The Authority shall play an active role in building a common European supervisory 
culture  and  consistent  supervisory  practices,  and  ensuring  uniform  procedures  and 
consistent approaches throughout the Community and shall carry out, at a minimum, 
the following activities: 

(a) 

provide opinions to competent authorities; 

(b)  promote  an  effective  bilateral  and  multilateral  exchange  of  information 
between  competent  authorities,  with 
the  applicable 
confidentiality  and  data  protection  provisions  provided  for  in  the  relevant 
Community legislation; 

respect  of 

full 

(c) 

(d) 

(e) 

contribute  to  developing  high  quality  and  uniform  supervisory  standards, 
including reporting standards; 

review  the  application  of  the  relevant  technical  standards  adopted  by  the 
Commission,  guidelines  and  recommendations  issued  by  the  Authority  and 
propose amendments where appropriate; 

establish  sectoral  and  cross-sectoral  training  programmes,  facilitate  personnel 
exchanges  and  encourage  competent  authorities  to  intensify  the  use  of 
secondment schemes and other tools.  

2. 

The  Authority  may,  as  appropriate,  develop  new  practical  instruments  and 
convergence tools to promote common supervisory approaches and practices.  

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Article 15 
Peer review of competent authorities 

1. 

The Authority shall periodically conduct peer review analyses of some or all of the 
activities  of  competent  authorities,  to  further  enhance  consistency  in  supervisory 
outcomes.  To  this  end,  the  Authority  shall  develop  methods  to  allow  for  objective 
assessment and comparison between the authorities reviewed. 

2. 

The peer review shall include an assessment of, but not be limited to: 

(a) 

(b) 

the adequacy of institutional arrangements, resourcing and staff expertise of the 
competent  authority,  with  particular  regard  to  the  effective  application  of  the 
legislation referred to in Article 1(2) and to the capacity to respond to market 
developments; 

the degree of convergence reached in the application of Community law and in 
and 
supervisory  practice, 
recommendations adopted under Articles 7 and 8, and the extent to which the 
supervisory practice achieves the objectives set out in Community law; 

standards,  guidelines 

including 

technical 

(c) 

good  practices  developed  by  some  competent  authorities  which  might  be  of 
benefit for other competent authorities to adopt. 

3. 

On  the  basis  of  the  peer  review  the  Authority  may  issue  recommendations  to  the 
competent authorities concerned. 

Article 16 
Coordination function  

The  Authority  shall  fulfil  a  general  coordination  role  between  competent  authorities, 
including  where  adverse  developments  could  potentially  jeopardise  the  orderly  functioning 
and integrity of financial markets or the stability of the financial system in the Community. 

The Authority shall promote a coordinated Community response, inter alia by: 

(1) 

facilitating the exchange of information between the competent authorities; 

(2)  determining  the  scope  and  verifying  the  reliability  of  information  that  should 

be made available to all competent authorities concerned;  

(3)  without prejudice to Article 11, acting as mediator on the request of competent 

authorities or on its own initiative; 

(4)  notifying the ESRB of any potential emergency situations without delay. 

Article 17 
Assessment of market developments 

1. 

The  Authority  shall  monitor  and  assess  market  developments  in  the  area  of  its 
competence and, where necessary, inform the European Insurance and Occupational 
Pensions  Authority,  the  European  Banking  Authority,  the  ESRB  and  the  European 

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Parliament,  the  Council  and  the  Commission  about  the  relevant  micro-prudential 
trends, potential risks and vulnerabilities. 

In  particular,  the  Authority  shall,  in  cooperation  with  the  ESRB,  initiate  and 
coordinate  Community-wide  assessments  of  the  resilience  of  key  financial  market 
participants  to  adverse  market  developments  To  that  end,  it  shall  develop  the 
following, for application by the competent authorities: 

(a) 

(b) 

common methodologies for assessing the effect of economic scenarios on a key 
financial market participant's financial positions;  

common approaches to communication on the outcomes of these assessments 
of the resilience of key financial market participants. 

2. 

3. 

Without  prejudice  to  the  tasks  of  the  ESRB  set  out  in  Regulation  (EC)  No  …/… 
[ESRB], the Authority shall, at least once a year, and more frequently as necessary, 
provide  assessments  to  the  European  Parliament,  the  Council,  the  Commission  and 
the ESRB of trends, potential risks and vulnerabilities in the area of its competence. 

The  Authority  shall  include  a  classification  of  the  main  risks  and  vulnerabilities  in 
these  assessments  and,  where  necessary,  recommend  preventative  or  remedial 
actions.  

The  Authority  shall  ensure  an  adequate  coverage  of  cross-sectoral  developments, 
risks  and  vulnerabilities  by  closely  cooperating  with  the  European  Insurance  and 
Occupational Pensions Authority and the European Banking Authority. 

Article 18 
International relations 

Without  prejudice  to  the  competences  of  the  Community  Institutions,  the  Authority  may 
develop  contacts  with  supervisory  authorities  from  third  countries.  It  may  enter  into 
administrative arrangements with international organisations and the administrations of third 
countries. 

The  Authority  shall  assist  in  preparing  equivalence  decisions  pertaining  to  supervisory 
regimes in third countries in accordance with the legislation referred to in Article 1(2). 

Article 19 
Other tasks 

1. 

2. 

The Authority may, upon a request from the European Parliament, the Council, the 
Commission or on its own initiative provide opinions to the European Parliament, the 
Council and the Commission on all issues related to its area of competence. 

With regard to prudential assessments of mergers and acquisitions falling under the 
terms  of  Directive  2007/44/EC,  the  Authority  may,  on  its  own  initiative  or  on 
application of any competent authorities, issue and publish an opinion on a prudential 
assessment  to  be  carried  out  by  any  authority  of  a  Member  State.  Article  20  shall 
apply.  

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1. 

2. 

3. 

1. 

2 

3. 

4. 

Article 20 
Collection of information  

At the request of the Authority, competent authorities and other public authorities of 
the Member States shall provide the Authority with all the necessary information to 
carry out the duties assigned to it by this Regulation. 

The Authority may also request information to be provided at recurring intervals. 

Where information is not available or is not made available in a timely fashion by the 
competent  authorities  and  other  public  authorities  of  the  Member  States,  the 
Authority  may  address  a  reasoned  request  directly  to  relevant  financial  market 
participants  and  other  parties.  It  shall  inform  the  relevant  competent  authorities  of 
such requests. 

At the request of the Authority, the competent authorities and other public authorities 
of the Member States shall assist the Authority in collecting such information. 

The Authority may use confidential information received from competent authorities 
and  other  public  authorities  or  from  financial  market  participants  and  other  parties 
only for the purposes of carrying out the duties assigned to it by this Regulation.  

Article 21 
Relationship with the ESRB 

The European Securities and Markets Authority shall co-operate with the ESRB. 

The Authority shall cooperate closely with the ESRB. It shall provide the ESRB with 
regular  and  up-to-date  information  necessary  for  the  achievement  of  its  tasks.  Any 
data necessary for the achievement of its tasks that are not in summary or collective 
form  shall  be  provided  without  delay  to  the  ESRB  upon  a  reasoned  request,  as 
specified in Article [15] of Regulation (EC) No …./… [ESRB]. 

The Authority shall, in accordance with paragraphs 4 and 5, ensure a proper follow-
up to ESRB warnings and recommendations referred to in Article [16] of Regulation 
(EC) No …/… [ESRB].  

On  receipt  of  a  warning  or  recommendation  from  the  ESRB  addressed  to  the 
Authority, it shall convene a meeting of the Board of Supervisors without delay and 
assess the implications of such a warning or recommendation for the fulfilment of its 
tasks.  

It shall decide, by the relevant decision-making procedure, on the actions to be taken 
in  accordance  with  the  powers  conferred  upon  it  by  this  Regulation  for  addressing 
the issues identified in the warnings and recommendations. 

If  the  Authority  does  not  act  further  to  a  recommendation,  it  shall  explain  to  the 
ESRB its reasons for not doing so. 

5. 

On  receipt  of  a  warning  or  recommendation  from  the  ESRB  addressed  to  a 
competent national supervisory authority, the Authority shall, where relevant, use the 
powers conferred upon it by this Regulation to ensure a timely follow-up.  

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Where the addressee intends not to follow the recommendation of the ESRB, it shall 
inform and discuss with the Board of Supervisors its reasons for not acting.  

The  competent  authority  shall  take  due  account  of  the  views  of  the  Board  of 
Supervisors when informing the ESRB in accordance with Article [17] of Regulation 
(EC) no …/…[ESRB]. 

In discharging its tasks set out in this regulation, the Authority shall take the utmost 
account of the warnings and recommendations of the ESRB. 

Article 22 
Securities and Markets Stakeholder Group  

For the purpose of consultation with stakeholders in areas relevant to the tasks of the 
Authority, a Securities and Markets Stakeholder Group shall be established. 

The  Securities  and  Markets  Stakeholder  Group  shall  be  composed  of  30  members, 
representing in balanced proportions Community financial market participants, their 
employees as well as consumers, investors and users of financial services. 

The Securities and Markets Stakeholder Group shall meet at least twice a year. 

The members of the Securities and Markets Stakeholder Group shall be appointed by 
the  Board  of  Supervisors  of  the  Authority,  following  proposals  from  the  relevant 
stakeholders. 

In making its decision, the Board of Supervisors shall, to the extent possible, ensure 
an  appropriate  geographical  balance  and  representation  of  stakeholders  across  the 
Community. 

The  Authority  shall  ensure  adequate  secretarial  support  for  the  Securities  and 
Markets Stakeholder Group. 

Members of the Securities and Markets Stakeholder Group shall serve for a period of 
two and a half years, following which a new selection procedure shall take place. 

The members may serve two successive terms.  

The  Securities  and  Markets  Stakeholder  Group  may  submit  opinions  and  advice  to 
the Authority on any issue related to the tasks of the Authority specified in Articles 7 
and 8. 

The Securities and Markets Stakeholder Group shall adopt its rules of procedure. 

The  Authority  shall  make  public  the  opinions  and  advice  of  the  Securities  and 
Markets Stakeholder Group and the results of its consultations.  

6. 

1. 

2. 

3. 

4. 

5. 

6. 

7. 

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Article 23 
Safeguards 

1. 

2. 

The Authority shall ensure that no decision adopted under Articles 10 or 11 impinges 
in any way on the fiscal responsibilities of Member States.  

Where a Member State considers that a decision taken under Article 11 impinges on 
its fiscal responsibilities, it may notify the Authority and the Commission within one 
month  after  notification  of  the  Authority's  decision  to  the  competent  authority  that 
the decision will not be implemented by the competent authority. 

In its notification, the Member State shall justify why and clearly demonstrate how 
the decision impinges on its fiscal responsibilities. 

In that case, the decision of the Authority shall be suspended. 

Within  a  period  of  one  month  from  the  notification  by  the  Member  State,  the 
Authority  shall  inform  the  Member  State  as  to  whether  it  maintains  its  decision  or 
whether it amends or revokes it.  

Where the Authority maintains its decision, the Council, acting by qualified majority 
as defined in Article 205 of the Treaty, shall, within two months, decide whether the 
Authority's decision is maintained or revoked. 

Where the Council decides to maintain the Authority's decision, or where it does not 
take  a  decision  within  two  months,  the  suspension  of  that  decision  shall  be 
immediately terminated.  

3. 

Where a Member State considers that a decision taken under Article 10(2) impinges 
on  its  fiscal  responsibilities,  it  may  notify  the  Authority,  the  Commission  and  the 
Council within three working days after notification of the Authority's decision to the 
competent  authority  that  the  decision  will  not  be  implemented  by  the  competent 
authority. 

In its notification, the Member State shall justify why and clearly demonstrate how 
the decision impinges on its fiscal responsibilities. 

The  Council,  acting  by  qualified  majority  as  defined  in  Article  205  of  the  Treaty, 
shall, within ten working days, decide whether the Authority's decision is maintained 
or revoked. 

Where the Council does not take a decision within ten working days, the Authority's 
decision shall be deemed to be maintained. 

Article 24 
Decision-making procedures 

1. 

Before  taking  the  decisions  provided  for  in  Article  9(6),  Article  10(2)  and(3)  and 
Article  11(3)  and  (4),  the  Authority  shall  inform  the  addressee  of  its  intention  to 
adopt  the  decision,  setting  a  time  limit  within  which  the  addressee  may  express  its 
views on the matter, taking full account of the urgency of the matter.  

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2. 

3. 

4. 

5. 

The decisions of the Authority shall state the reasons on which they are based. 

The addressees of decisions of the Authority shall be informed of the legal remedies 
available under this Regulation. 

Where  the  Authority  has  taken  a  decision  pursuant  to  Article  10(2)  or  (3),  it  shall 
review that decision at appropriate intervals.  

The  decisions  which  the  Authority  takes  pursuant  to  Articles  9,  10  and  11  shall  be 
made  public  and  shall  state  the  identity  of  the  competent  authority  or  financial 
market participant concerned and the main content of the decision, having regard to 
the  legitimate  interest  of  financial  market  participants  in  the  protection  of  their 
business secrets.  

CHAPTER III 
ORGANISATION 

SECTION 1 
BOARD OF SUPERVISORS  

Article 25 
Composition 

1. 

The Board of Supervisors shall be composed of: 

(a) 

the Chairperson, who shall be non-voting; 

(b) 

the  Head  of  the  competent  authority  in  each  Member  State.  If  there  is  more 
than one competent authority in a Member State, the authorities shall agree on 
one of the Heads to be the representative on the Board of Supervisors;  

(c) 

one representative of the Commission who shall be non-voting; 

(d)  one representative of the ESRB who shall be non-voting; 

(f) 

one representative of each of the other two European Supervisory Authorities 
who shall be non-voting. 

2. 

3. 

Each competent authority, and if there is more than one competent authority, those 
authorities together,  shall be responsible for  nominating a  high-level  alternate  from 
the  authority  or  authorities,  who  may  replace  the  member  of  the  Board  of 
Supervisors  referred  to  in  paragraph  1(b),  in  case  this  person  is  prevented  from 
attending. 

For the purpose of acting within the scope of Directive 97/9/EC the member of the 
Board  of  Supervisors  referred  to  in  paragraph  1(b)  may,  where  appropriate,  be 
accompanied by a representative from the relevant bodies which administers investor 
compensation schemes in each Member State, who shall be non-voting.  

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4. 

The Board of Supervisors may decide to admit observers. 

The  Executive  Director  may  participate  in  meetings  of  the  Board  of  Supervisors 
without the right to vote. 

Article 26 
Internal committees and Panels 

1. 

2. 

3. 

The  Board  of  Supervisors  may  establish  internal  committees  or  panels  for  specific 
tasks  attributed  to the Board of Supervisors,  and  may  provide  for  the  delegation  of 
certain  clearly  defined  tasks  and  decisions  to  internal  committees  or  panels,  to  the 
Management Board or to the Chairperson. 

For  the  purposes  of  Article  11,  the  Board  of  Supervisors  shall  convoke  a  panel  to 
facilitate the settlement of the disagreement, consisting of the Chairperson and two of 
its  members,  who  are  not  representatives  of  the  competent  authorities  which  are 
parties to the disagreement. 

A Decision pursuant to Article 11 shall be adopted by the Board of Supervisors on 
proposal from the panel. 

Article 27 
Independence 

When  carrying  out  the  tasks  conferred  upon  it  by  this  Regulation,  the  Chairperson  and  the 
voting  members  of  the  Board  of  Supervisors  shall  act  independently  and  objectively  in  the 
Community interest and shall neither seek nor take instructions from Community institutions 
or bodies, from a Government of a Member State or from any other public or private body. 

Article 28 
Tasks  

1. 

2. 

3. 

4. 

The Board of Supervisors shall give guidance to the work of the Authority and shall 
be in charge of taking the decisions referred to in Chapter II. 

The Board of Supervisors shall adopt the opinions, recommendations, and decisions, 
and issue the advice referred to in Chapter II. 

The Board of Supervisors shall appoint the Chairperson. 

The Board of Supervisors shall adopt, before 30 September each year, on the basis of 
a proposal by the Management Board, the work programme of the Authority for the 
coming  year,  and  shall  transmit  it  for  information  to  the  European  Parliament,  the 
Council and the Commission. 

The  work  programme  shall  be  adopted  without  prejudice  to  the  annual  budgetary 
procedure and shall be made public. 

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5. 

6. 

7. 

1. 

2. 

3. 

4. 

The  Board  of  Supervisors  shall  adopt  the  multi-annual  work  programme  of  the 
Authority,  and  shall  transmit  it  for  information  to  the  European  Parliament,  the 
Council and the Commission. 

The multi-annual work programme shall be adopted without prejudice to the annual 
budgetary procedure and shall be made public. 

The Board of Supervisors shall approve the draft budget in accordance with Article 
49 . 

The Board of Supervisors shall exercise disciplinary authority over the Chairperson 
and  the  Executive  Director  and  may  remove  them  from  office  in  accordance  with 
Article 33(5) or Article 36(5) respectively. 

Article 29 
Decision making 

The Board of Supervisors shall act on the basis of qualified majority of its members, 
as  defined  in  Article  205  of  the  Treaty,  for  acts  specified  in  Articles  7,  8  and  all 
measures and decisions adopted under Chapter VI. 

All other decisions of the Board of Supervisors shall be taken by simple majority of 
members.  

Meetings of the Board of Supervisors shall be convened by the Chairperson at his or 
her own initiative or at the request of one third of its members, and shall be chaired 
by the Chairperson. 

The Board of Supervisors shall adopt and make public its rules of procedure. 

The  rules  of  procedure  shall  set  out  in  detail  the  arrangements  governing  voting, 
including, where appropriate, the rules governing quorums. The non-voting members 
and the observers, with the exception of the Chairperson and the Executive Director, 
shall  not  attend  any  discussions  within  the  Board  of  Supervisors  relating  to 
individual financial market participants, unless otherwise provided for in Article 61 
or in the legislation referred to in Article 1(2). 

SECTION 2 
MANAGEMENT BOARD 

Article 30 
Composition  

1. 

The  Management  Board  shall  be  composed  of  the  Chairperson,  a  representative  of 
the Commission, and four members elected by the Board of Supervisors from among 
its members.  

Each  member  other  than  the  Chairperson  shall  have  an  alternate,  who  may  replace 
the member of the Management Board if that person is prevented from attending.  

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The term of office of the members elected by the Board of Supervisors shall be two 
and a half years. It may be extended once.  

2. 

Decisions by the Management Board shall be adopted on the basis of a majority of 
the members present. Each member shall have one vote.  

The  Executive  Director  shall  participate  in  meetings  of  the  Management  Board 
without the right to vote. 

The Management Board shall adopt and make public its rules of procedure.  

Meetings of the Management Board shall be convened by the Chairperson on its own 
initiative  or  at  the  request  of  at  least  a  third  of  its  members,  and  chaired  by  the 
Chairperson. 

It shall meet at least bi-annually in ordinary session. 

The  members  of  the  Management  Board  may,  subject  to the rules of procedure, be 
assisted by advisers or experts.  

3. 

4. 

Article 31 
Independence 

The  members  of  the  Management  Board  shall  act  independently  and  objectively  in  the 
Community interest, without seeking or taking any instructions from Community institutions 
or bodies, from any government of a Member State or from any other public or private body. 

Article 32 
Tasks  

1. 

2. 

3. 

4. 

5. 

6. 

The  Management  Board  shall  ensure  that  the  Authority  carries  out  its  mission  and 
performs the tasks assigned to it in accordance with this Regulation. 

The Management Board shall propose, for adoption by the Board of Supervisors, an 
annual and multi-annual work programme. 

The  Management  Board  shall  exercise  its  budgetary  powers  in  accordance  with 
Articles 49 and 50. 

The Management Board shall adopt the Authority's staff policy plan and, pursuant to 
Article  54(2),  the  necessary  implementing  measures  of  the  Staff  Regulations  of 
Officials of the European Communities (hereinafter ‘the Staff Regulations'). 

The Management Board shall adopt the special provisions on right of access to the 
documents of the Authority, in accordance with Article 58. 

The  Management  Board  shall,  after  consulting  the  Board  of  Supervisors,  adopt  the 
annual  report  on  the  activities  of  the  Authority  on  the  basis  of  the  draft  report 
referred to in Article 38(7) and shall transmit that report to the European Parliament, 
the  Council,  the  Commission,  the  Court  of  Auditors,  the  European  Economic  and 
Social Committee by 15 June. The report shall be made public. 

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7. 

8. 

The Management Board shall adopt and make public its rules of procedure. 

The  Management  Board  shall  appoint  and  remove  the  members  of  the  Board  of 
Appeal in accordance with Article 44(3) and 44(5). 

SECTION 3 
CHAIRPERSON 

Article 33 
Appointment and tasks 

1. 

The  Authority  shall  be  represented  by  a  Chairperson,  who  shall  be  a  full-time 
independent professional.  

2. 

3. 

4. 

The  Chairperson  shall  be  responsible  for  preparing  the  work  of  the  Board  of 
Supervisors  and  shall  chair  the  meetings  of  the  Board  of  Supervisors  and  the 
Management Board.  

The  Chairperson  shall  be  appointed  by  the  Board  of  Supervisors  on  the  basis  of 
merit, skills, knowledge of financial market participants and markets, and experience 
relevant  to  financial  supervision  and  regulation,  following  an  open  selection 
procedure. 

Before  appointment,  the  candidate  selected  by  the  Board  of  Supervisors  shall  be 
subject to confirmation by the European Parliament. 

The Board of Supervisors shall also elect from among its members an alternate who 
shall carry out the functions of the Chairperson in his absence. 

The Chairperson's term of office shall be five years and may be extended once. 

In the course of the nine months preceding the end of the five-year term of office of 
the Chairperson, the Board of Supervisors shall evaluate: 

(a) 

the results achieved in the first term of Office and the way they were achieved; 

(b) 

the Authority’s duties and requirement in the coming years. 

The Board of Supervisors taking into account the evaluation may extend the term of 
office of the Chairperson once subject to confirmation by the European Parliament. 

5. 

The  Chairperson  may  be  removed  from  office  only  upon  Decision  of  the  Board  of 
Supervisors subject to confirmation by the European Parliament. 

The Chairperson may not prevent the Board of Supervisors from discussing matters 
relating to the Chairman, in particular the need for his or her removal and shall not be 
involved in deliberations concerning such a matter. 

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Article 34 
Independence 

Without  prejudice  to  the  role  of  the  Board  of  Supervisors  in  relation  to  the  tasks  of  the 
Chairperson,  the  Chairperson  shall  neither  seek  nor  take  instructions  from  Community 
institutions or bodies, from  any government of a Member State or from any other public or 
private body.   

1. 

2. 

1. 

2. 

3. 

4. 

Article 35 
Report 

The  European  Parliament  may  invite  the  Chairperson  or  his  or  her  alternate,  while 
fully  respecting  his  or  her  independence,  to  make  a  statement  regularly  before  its 
competent committee and answer questions put by members of that committee. 

The European Parliament may also call upon the Chairperson to submit a report on 
the performance of his duties.  

SECTION 4 
EXECUTIVE DIRECTOR 

Article 36 
Appointment 

The Authority shall be managed by the Executive Director, who shall be a full-time 
independent professional.  

The Executive Director shall be appointed by the Board of Supervisors on the basis 
of  merit,  skills,  knowledge  of  financial  market  participants  and  markets,  and 
experience  relevant  to  financial  supervision  and  regulation  and  managerial 
experience, following an open selection procedure. 

The  Executive  Director's  term  of  office  shall  be  five  years  and  may  be  extended 
once. 

In the course of the nine months preceding the end of the five-year term of office of 
the Executive Director, the Board of Supervisors shall undertake an evaluation. 

In that evaluation, the Board of Supervisors shall assess in particular: 

(a) 

the results achieved in the first term of Office and the way they were achieved; 

(b) 

the Authority’s duties and requirement in the coming years. 

The Board of Supervisors taking into account the evaluation may extend the term of 
office of the Executive Director once. 

5. 

The  Executive  Director  may  be  removed  from  office  only  upon  Decision  of  the 
Board of Supervisors. 

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Article 37 
Independence 

Without  prejudice  to  the  respective  roles  of  the  Management  Board  and  the  Board  of 
Supervisors  in  relation  to  the  tasks  of  the  Executive  Director,  the  Executive  Director  shall 
neither  seek  nor  take  instructions  from  any  government,  authority,  organisation  or  person 
outside the Authority. 

Article 38 
Tasks  

1. 

2. 

3. 

4. 

5. 

6. 

7. 

8. 

The Executive Director shall be in charge  of  the  management  of  the  Authority  and 
shall prepare the work of the Management Board. 

The  Executive  Director  shall  be  responsible  for  implementing  the  annual  work 
programme  of  the  Authority  under  the  guidance  of  the  Board  of  Supervisors  and 
under the control of the Management Board. 

The  Executive  Director  shall  take  the  necessary  measures,  notably  the  adoption  of 
internal  administrative  instructions  and  the  publication  of  notices,  to  ensure  the 
functioning of the Authority, in accordance with this Regulation. 

The Executive Director shall prepare a multi-annual work programme, as referred to 
in Article 32(2). 

Each year by 30 June, the Executive Director shall prepare a work programme for the 
following year, as referred to in Article 32(2).  

The  Executive  Director  shall  draw  up  a  preliminary  draft  budget  of  the  Authority 
pursuant  to  Article 49  and  shall  implement  the  budget  of the  Authority  pursuant  to 
Article 50. 

Each year the Executive Director shall prepare a draft annual report with a section on 
the regulatory and supervisory activities of the Authority and a section on financial 
and administrative matters. 

The  Executive  Director  shall  exercise  in respect  to  the  Authority's  staff  the  powers 
laid down in Article 54 and manage staff matters. 

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CHAPTER IV 
EUROPEAN SYSTEM OF FINANCIAL SUPERVISORS 

SECTION 1 
GENERAL PROVISIONS 

Article 39 
Composition 

1. 

2. 

3. 

The  Authority  shall  form  part  of  the  ESFS,  which  shall  function  as  a  network  of 
supervisors. 

The ESFS shall comprise the following: 

(a) 

the  authorities  in  the  Member  States  as  specified  in  Article  1(2)  of  this 
Regulation, Article 1(2) of Regulation (EC) No …/2009 [EIOPA] and Article 
1(2) of Regulation (EC) No …/… [EBA],  

(b) 

the Authority,  

(c) 

(d) 

(e) 

(f) 

the  European  Insurance  and  Occupational  Pensions  Authority  set  up  under 
Article 1 of Regulation (EC) No …/…[EIOPA],  

the European Banking Authority set up under Article 1 of Regulation (EC) No 
…/… [EBA], 

the  Joint  Committee  of  European  Supervisory  Authorities  provided  for  in 
Article 40,  

the  Commission  for  the  purposes  of  carrying  out  the  tasks  referred  to  in 
Articles 7, 9 and 10. 

The  Authority  shall  cooperate  regularly  and  closely,  ensure  cross-sectoral 
consistency  of  work  and  arrive  at  joint  positions  in  the  area  of  supervision  of 
financial  conglomerates  and  on  other  cross-sectoral  issues  with  the  European 
Insurance and Occupational Pensions Authority and the European Banking Authority 
through  the  Joint  Committee  of  European  Supervisory  Authorities  set  up  in  Article 
40. 

SECTION 2 
JOINT COMMITTEE OF EUROPEAN SUPERVISORY AUTHORITIES 

Article 40 
Establishment 

1. 

A Joint Committee of the European Supervisory Authorities is hereby established. 

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43 

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2. 

3. 

1. 

2. 

3. 

4. 

The Joint Committee shall serve as a forum in which the Authority shall cooperate 
regularly  and  closely  and  ensure  cross-sectoral  consistency  with  the  European 
Insurance and Occupational Pensions Authority and the Banking Authority.  

The Authority shall contribute adequate resources to the administrative support of the 
includes  staff, 
Joint  Committee  of  European  Supervisory  Authorities.  This 
administrative, infrastructure, and operational expenses. 

Article 41 
 Composition 

The Joint Committee shall be composed of the Chairperson and the Chairpersons of 
the  European  Insurance  and  Occupational  Pensions  Authority  and  the  European 
BankingAuthority,  and,  where  applicable,  the  Chairperson  of  a  Sub-Committee 
established under Article 43.  

The  Executive  Director,  the  Commission  and  the  ESRB  shall  be  invited  to  the 
meetings of the Joint Committee of European Supervisory Authorities as well as the 
Sub-Committees mentioned in Article 43 as observers. 

The  chair  of  the  Joint  Committee  of  European  Supervisory  Authorities  shall  be 
appointed  on  an  annual  rotational  basis  from  among  the  Chairpersons  of  the 
European  Banking  Authority,  the  European  Insurance  and  Occupational  Pensions 
Authority and the European Securities and Markets Authority. 

The Joint Committee of European Supervisory Authorities shall adopt and publish its 
own rules of procedure. The rules may specify further participants of the meetings of 
the Joint Committee. 

The  Joint  Committee  of  European  Supervisory  Authorities  shall  meet  at  least  once 
every two months. 

Article 42 
Joint positions and common acts  

Within the scope of its tasks in Chapter II, and notably with respect to the implementation of 
Directive  2002/87/EC,  where  relevant,  the  Authority  shall  reach  joint  positions  with  the 
European  Insurance  and  Occupational  Pensions  Authority  and  with  the  European  Banking 
Authority as appropriate.  

Acts under Articles 7, 9, 10, or 11 of this Regulation in relation to the application of Directive 
2002/87/EC and of any other legislation referred  to in Article 1(2) that also falls within the 
area  of  competence  of  the  European  Insurance  and  Occupational  Pensions  Authority  or  the 
European Banking Authority shall be adopted by the Authority, the European Insurance and 
Occupational  Pensions  Authority,  and  the  European  Banking  Authority,  as  appropriate,  in 
parallel. 

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Article 43 
Sub-committees 

For  the  purposes  of  Article  42,  a  Sub-Committee  on  Financial  Conglomerates  to  the  Joint 
Committee of European Supervisory Authorities shall be established. 

That  Sub-Committee  shall  be  composed  of  the  individuals  mentioned  in  Article  41(1),  and 
one high-level representative from the current staff of the relevant competent authority from 
each Member State. 

The Sub-Committee shall elect a Chairperson from amongst its members, who shall also be a 
member of the Joint Committee of European Supervisory Authorities. 

The Joint Committee may establish further Sub Committees. 

SECTION 3 
BOARD OF APPEAL 

Article 44 
Composition 

1. 

2. 

3. 

4. 

5. 

The Board of Appeal shall be a joint body of the European Banking Authority, the 
European  Insurance  and  Occupational  Pensions  Authority,  and  the  European 
Securities and Markets Authority. 

The Board of Appeal shall be composed of six members and six alternates, who shall 
be individuals with relevant knowledge and experience, excluding current staff of the 
competent  authorities  or  other  national  or  Community  institutions  involved  in  the 
activities of the Authority. 

The Board of Appeal designates its President. 

The decisions of the Board of Appeal shall be adopted on the basis of a majority of at 
least four of its six members. 

The Board of Appeal shall be convened by its President when necessary. 

Two members of the Board of Appeal and two alternates shall be appointed by the 
Management Board of the Authority from a short-list proposed by the Commission, 
following a public call for expression of interest published in the Official Journal of 
the European Union, and after consultation of the Board of Supervisors.  

The other Members shall be appointed in accordance with Regulation (EC) No …/… 
[EIOPA] and Regulation (EC) No …/… [EBA].  

The term of office of the members of the Board of Appeal shall be five years. This 
term may be extended once. 

A member of the Board of Appeal, who was appointed by the Management Board of 
the  Authority,  may  not  be  removed  during  his  term  of  office,  unless  he  has  been 

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45 

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6. 

1. 

2. 

3. 

4. 

found guilty of serious misconduct, and the Management Board takes a decision to 
that effect after consulting the Board of Supervisors. 

The  Authority,  the  European  Banking  Authority,  and  the  European  Insurance  and 
Occupational  Pensions  Authority  shall  ensure  adequate  operational  and  secretarial 
support for the Board of Appeal. 

Article 45 
Independence and impartiality 

The members of the Board of Appeal shall be independent in making their decisions. 
They shall not be bound by any instructions. They may not perform any other duties 
in the Authority, in its Management Board or in its Board of Supervisors.  

Members of the Board of Appeal may not take part in any appeal proceedings if they 
have  any  personal  interest  therein,  or  if  they  have  previously  been  involved  as 
representatives of one of the parties to the proceedings, or if they have participated in 
the decision under appeal. 

If, for one of the reasons referred to in paragraph 1 and 2 or for any other reason, a 
member of a Board of Appeal considers that a fellow member should not take part in 
any appeal proceedings, the member shall inform the Board of Appeal accordingly. 

Any party to the appeal proceedings may object to the participation of a member of 
the  Board  of  Appeal  on  any  of  the  grounds  referred  to  in  paragraph  1  and  2,  or  if 
suspected of bias.  

An  objection  may  not  be  based  on  the  nationality  of  members  nor  shall  it  be 
admissible  if,  while  being  aware  of  a  reason  for  objecting,  the  party  to  the  appeal 
proceedings  has  nonetheless  taken  a  procedural  step  other  than  objecting  to  the 
composition of the Board of Appeal. 

5. 

The Board of Appeal shall decide on the action to be taken in the cases specified in 
paragraphs 1 and 2 without the participation of the member concerned.  

For the purpose of taking that decision, the member concerned shall be replaced on 
the Board of Appeal by his alternate, unless the alternate finds himself in a similar 
situation. Should this be the case, the Chairperson shall designate a replacement from 
among the available alternates. 

6. 

The members of the Board of Appeal shall undertake to act independently and in the 
public interest. 

For that purpose, they shall make a declaration of commitments and a declaration of 
interests  indicating  either  the  absence  of  any  interest  which  may  be  considered 
prejudicial  to  their  independence  or  any  direct  or  indirect  interest  which  might  be 
considered prejudicial to their independence.  

Those declarations shall be made public, annually and in writing. 

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CHAPTER V 
REMEDIES 

Article 46 
Appeals 

1. 

2. 

Any  natural  or  legal  person,  including  competent  authorities,  may  appeal  against  a 
decision of the Authority referred to in Articles 9, 10 and 11 and any other decision 
taken by the Authority according to legislation as referred to in Article 1(2) which is 
addressed  to  that  person,  or  against  a  decision  which,  although  in  the  form  of  a 
decision  addressed  to  another  person,  is  of  direct  and  individual  concern  to  that 
person. 

The appeal, together with the statement of grounds thereof, shall be filed in writing at 
the  Authority  within  two  months  of  the  day  of  notification  of  the  decision  to  the 
person concerned, or, in the absence thereof, of the day on which the Authority has 
published its decision.  

The Board of Appeal shall decide upon the appeal within two months after the appeal 
has been lodged. 

3. 

An appeal lodged pursuant to paragraph 1 shall not have suspensive effect. 

4. 

5. 

6. 

7. 

1. 

The  Board  of  Appeal  may,  however,  if  it  considers  that  circumstances  so  require, 
suspend the application of the contested decision. 

If  the  appeal  is  admissible,  the  Board  of  Appeal  shall  examine  whether  it  is  well-
founded. It shall as often as necessary invite the parties to the appeal proceedings to 
file  observations  on  notifications  issued  by  itself  or  on  communications  from  the 
other  parties  to  the  appeal  proceedings,  within  specified  time  limits.  Parties  to  the 
appeal proceedings shall be entitled to make an oral presentation. 

The Board of Appeal may, within the provisions of this Article, exercise any power 
which  lies  within  the  competence  of  the  Authority,  or  it  may  remit  the  case  to  the 
competent  body  of  the  Authority.  That  body  shall  be  bound  by  the  decision  of  the 
Board of Appeal. 

The Board of Appeal shall adopt and make public its rules of procedure. 

The  decisions  taken  by  the  Board  of  Appeal  shall  be  reasoned  and  made  public  by 
the Authority. 

Article 47 
Actions before the Court of First Instance and the Court of Justice 

An action may be brought before the Court of First Instance or the Court of Justice, 
in  accordance  with  Article  230  of  the  Treaty,  contesting  a  decision  taken  by  the 
Board  of  Appeal  or,  in  cases  where  there  is no right of  appeal before the Board of 
Appeal, by the Authority. 

EN 

47 

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2. 

3. 

In the event that the Authority has an obligation to act and fails to take a decision, 
proceedings for failure to act may be brought before the Court of First Instance or the 
Court of Justice in accordance with Article 232 of the Treaty. 

The  Authority  shall  be  required  to  take  the  necessary  measures  to  comply  with  the 
judgment of the Court of First Instance or the Court of Justice. 

CHAPTER VI 
FINANCIAL PROVISIONS 

Article 48 
Budget of the Authority 

1. 

The revenues of the Authority shall consist, in particular, of: 

2. 

3. 

4. 

1. 

(a) 

(b) 

(c) 

obligatory  contributions  from  the  competent  national  supervisory  authority  or 
authorities;  

a subsidy from the Community, entered in the General Budget of the European 
Union (Commission Section); 

any fees paid to the Authority in the cases specified in the relevant instruments 
of Community law. 

The  expenditure  of  the  Authority  shall  include,  at  least,  staff,  remuneration, 
administrative, infrastructure, and operational expenses.  

Revenue and expenditure shall be in balance. 

Estimates  of  all  Authority  revenue  and  expenditure  shall  be  prepared  for  each 
financial  year,  corresponding  to  the  calendar  year,  and  shall  be  presented  in  the 
budget of the Authority. 

Article 49 
Establishment of the budget 

By 15 February each year, the Executive Director shall draw up a draft statement of 
estimates  of  revenue  and  expenditure  for  the  following  financial  year,  and  shall 
forward  this  preliminary  draft  budget  to  the  Management  Board,  together  with  the 
establishment  plan.  Each  year,  the  Management  Board  shall,  on  the  basis  of  the 
preliminary  draft  drawn  up  by  the  Executive  Director,  produce  a  statement  of 
estimates  of  revenue  and  expenditure  of  the  Authority  for  the  following  financial 
year.  That  statement  of  estimates,  including  a  draft  establishment  plan,  shall  be 
transmitted  by  the  Management  Board  to  the  Commission  by  31  March.  Prior  to 
adoption of the statement of estimates, the draft prepared by the Executive Director 
shall be approved by the Board of Supervisors. 

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48 

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2. 

3. 

4. 

5. 

6. 

1. 

2. 

The statement of estimates shall be transmitted by the Commission to the European 
Parliament  and  to  the  Council  (hereinafter  referred  to  as  the  'budgetary  authority'), 
together with the preliminary draft General Budget of the European Union.  

On  the  basis  of  the  statement  of  estimates,  the  Commission  shall  enter  in  the 
preliminary  draft  General  Budget  of  the  European  Union  the  estimates  it  deems 
necessary  in  respect  of  the  establishment  plan  and  the  amount  of  the  subsidy  to  be 
charged to the general budget of the European Union in accordance with Article 272 
of the Treaty. 

The  budgetary  authority  shall  adopt  the  establishment  plan  for  the  Authority.  The 
budgetary  authority  shall  authorise  the  appropriations  for  the  subsidy  to  the 
Authority.  

The  budget  of  the  Authority  shall  be  adopted  by  the  Management  Board.  It  shall 
become  final  after  the  final  adoption  of the general budget of the European Union. 
Where necessary, it shall be adjusted accordingly. 

The  Management  Board  shall,  without  delay,  notify  the  budgetary  authority  of  its 
intention to implement any project which may have significant financial implications 
for the funding of its budget, in particular any project relating to property such as the 
rental  or  purchase  of  buildings.  It  shall  inform  the  Commission  thereof.  If  either 
branch of the budget authority intends to issue an opinion, it shall, within two weeks 
of  receipt  of  the  information  on  the  project,  notify  the  Authority  of  its  intention  to 
issue such an opinion. In the absence of a reply, the Authority may proceed with the 
planned operation. 

Article 50 
Implementation and control of the budget 

The  Executive  Director  shall  act  as  authorising  officer  and  shall  implement  the 
Authority's budget. 

By  1  March  following  the  completion  of  each  financial  year,  the  Authority 
accounting  officer  shall  forward  to  the  Commission's  accounting  officer  and  to  the 
Court of Auditors the provisional accounts, accompanied by the report on budgetary 
and  financial  management  during  the  financial  year.  The  Authority  accounting 
officer  shall  also  send  the  report  on  budgetary  and  financial  management  to  the 
members of the Board of Supervisors, the European Parliament and the Council by 
31 March of the following year. 

The Commission's accounting officer shall then consolidate the provisional accounts 
of the institutions and decentralised bodies in accordance with Article 128 of Council 
Regulation (EC, Euratom) No 1605/200238, (hereinafter referred to as the 'Financial 
Regulation'). 

3. 

After receiving the observations of the Court of Auditors on the provisional accounts 
of  the  Authority  in  accordance  with  the  provisions  of  Article  129  of  the  Financial 

38 

OJ L 248, 16.9.2002, p. 1. 

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Regulation,  the  Executive  Director,  acting  on  his  own  responsibility,  shall  draw  up 
the  final  accounts  of  the  Authority  and  transmit  them,  for  opinion,  to  the 
Management Board. 

The  Management  Board  shall  deliver  an  opinion  on  the  final  accounts  of  the 
Authority. 

The  Executive  Director  shall  transmit  those  final  accounts,  accompanied  by  the 
opinion  of  the  Management  Board,  by  1  July  following  the  completion  of  the 
financial year, to the Members of the Board of Supervisors, the European Parliament, 
the Council, the Commission and the Court of Auditors. 

The final accounts shall be published. 

The  Executive  Director  shall  send  the  Court  of  Auditors  a  reply  to  the  latter's 
observations by 30 September. He or she shall also send a copy of this reply to the 
Management Board and the Commission. 

The  Executive  Director  shall  submit  to  the  European  Parliament,  at  the  latter's 
request  and  as  provided  for  in  Article  146(3)  of  the  Financial  Regulation,  any 
information necessary for the smooth application of the discharge procedure for the 
financial year in question. 

The European Parliament, following a recommendation from the Council acting by 
qualified majority, shall, before 15 May of the year N + 2, grant a discharge to the 
Authority for the implementation of the budget for the financial year N. 

4. 

5. 

6. 

7. 

8. 

9. 

Article 51 
Financial rules 

The  financial  rules  applicable  to  the  Authority  shall  be  adopted  by  the  Management  Board 
after  the  Commission  has  been  consulted.  Those  rules  may  not  depart  from  Commission 
Regulation  (EC, Euratom)  No  2343/200239  unless  the  specific  operational  needs  for  the 
functioning of the Authority so require and only with the prior agreement of the Commission. 

Article 52 
Anti-fraud measures 

1. 

2. 

For  the  purposes  of  combating  fraud,  corruption  and  any  other  illegal  activity,  the 
provisions  of  Regulation  (EC)  No  1073/1999  shall  apply  to  the  Authority  without 
any restriction. 

The  Authority  shall  accede  to  the  Interinstitutional  Agreement  of  25  May  1999 
between  the  European  Parliament,  the  Council  of  the  European  Union  and  the 
Commission of the European Communities concerning internal investigations by the 

39 

OJ L 357, 31.12.2002, p.72. 

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European  Anti-Fraud  Office  (OLAF)40  and  shall  immediately  adopt  appropriate 
provisions for all staff of the Authority. 

3. 

The  funding  decisions  and  the  agreements  and  the  implementing  instruments 
resulting  from  them  shall  explicitly  stipulate  that  the  Court  of  Auditors  and  OLAF 
may,  if  need  be,  carry  out  on-the-spot  checks  on  the  beneficiaries  of  monies 
disbursed  by  the  Authority  as  well  as  on  the  staff  responsible  for  allocating  these 
monies. 

CHAPTER VII 
GENERAL PROVISIONS 

Article 53 
Privileges and immunities 

The Protocol on Privileges and Immunities of the European Communities shall apply to the 
Authority and its staff. 

Article 54 
Staff 

1. 

2. 

3. 

4. 

1. 

The Staff Regulations, the Conditions of employment of other servants and the rules 
adopted jointly by the European Community institutions for the purpose of applying 
these shall apply to the staff of the Authority, including its Executive Director. 

The  Management  Board,  in  agreement  with  the  Commission,  shall  adopt  the 
necessary implementing measures, in accordance with the arrangements provided for 
in Article 110 of the Staff Regulations. 

In  respect  of  its  staff,  the  Authority  shall  exercise  the  powers  conferred  on  the 
appointing  authority  by  the  Staff  Regulations  and  on  the  authority  entitled  to 
conclude contracts by the Conditions of employment of other servants. 

The  Management  Board  shall  adopt  provisions  to  allow  national  experts  from 
Member States to be seconded to the Authority. 

Article 55 
Liability of the Authority 

In  the  case  of  non-contractual  liability,  the  Authority  shall,  in  accordance  with  the 
general  principles  common  to  the  laws  of  the  Member  States,  make  good  any 
damage caused by it or by its staff in the performance of their duties. The Court of 
Justice shall have jurisdiction in any dispute over the remedying of such damage. 

40 

OJ L 136, 31.5.1999, p. 15. 

EN 

51 

   EN 

                                                 
2. 

1. 

2. 

3. 

The  personal  financial  liability  and  disciplinary  liability  of  Authority  staff  towards 
the Authority shall be governed by the relevant provisions applying to the staff of the 
Authority. 

Article 56 
Obligation of Professional Secrecy 

Members  of  the  Board  of  Supervisors  and  the  Management  Board,  the  Executive 
Director, and members of the staff of the Authority including officials seconded by 
Member  States  on  a  temporary  basis  shall  be  subject  to  the  requirements  of 
professional secrecy pursuant to Article 287 of the Treaty and the relevant provisions 
in the relevant community legislation, even after their duties have ceased.  

Without  prejudice  to  cases  covered  by  criminal  law,  any confidential  information 
received by persons referred to in paragraph 1 whilst performing their duties may not 
be divulged to any person or authority whatsoever, except in summary or aggregate 
form, such that individual financial market participants cannot be identified. 

Moreover,  the  obligation  under  paragraphs  1  and  the  first  subparagraph  of  this 
paragraph  shall  not  prevent  the  Authority  and  the  national  supervisory  authorities 
from  using  the  information  for  the  enforcement  of  the  legislation  referred  to  in 
Article 1(2), and in particular for legal proceedings for the adoption of decisions. 

Paragraphs 1 and 2 shall not prevent the Authority from exchanging information with 
national  supervisory  authorities  in  accordance  with  this  Regulation  and  other 
community legislation applicable to financial market participants. 

That information shall be subject to the conditions of professional secrecy indicated 
in paragraphs 1 and 2. The Authority shall lay down in its internal rules of procedure 
the  practical  arrangements  for  implementing  the  confidentiality  rules  referred  to  in 
paragraphs 1 and 2. 

4. 

The Authority shall apply Commission Decision 2001/844/EC, ECSC, Euratom41. 

Article 57 
Data protection 

This regulation shall be without prejudice to the obligations of Member States relating to their 
processing  of  personal  data  under  Directive  95/46/EC  or  the  obligations  of  the  Authority 
relating to its processing of personal data under Regulation (EC) No 45/2001 when fulfilling 
its responsibilities. 

Article 58 
Access to documents 

1. 

Regulation (EC) No 1049/2001 shall apply to documents held by the Authority. 

41 

OJ L 317, 3.12.2001, p.1. 

EN 

52 

   EN 

                                                 
2. 

3. 

1. 

2. 

3. 

The Management Board shall adopt practical measures for applying Regulation (EC) 
No 1049/2001 by 31 May 2011. 

Decisions  taken  by  the  Authority  pursuant  to  Article  8  of  Regulation  (EC)  No 
1049/2001 may be the subject of a complaint to the Ombudsman or of proceedings 
before the Court of Justice, following appeal to the Board of Appeal, as appropriate, 
in  accordance  with  the  conditions  laid  down  in  Articles  195  and  230  of  the  Treaty 
respectively. 

Article 59 
Language arrangements 

The provisions of Council Regulation No 142 shall apply to the Authority. 

The  Management  Board  shall  decide  on  the  internal  language  arrangements  for  the 
Authority. 

The  translation  services  required  for  the  functioning  of  the  Authority  shall  be 
provided by the Translation Centre for the Bodies of the European Union. 

Article 60 
Headquarters Agreement 

The necessary arrangements concerning the accommodation to be provided for the Authority 
in the Member State where its seat is located and the facilities to be made available by that 
Member State, as well as the specific rules applicable in that Member State to the Executive 
Director, the members of the Management Board, staff of the Authority and members of their 
families  shall  be  laid  down  in  a  Headquarters  Agreement  between  the  Authority  and  that 
Member State concluded after obtaining the approval of the Management Board. 

That Member State shall provide the best possible conditions to ensure proper functioning of 
the Authority, including multilingual, European-oriented schooling and appropriate transport 
connections 

Article 61 
Participation of third countries 

Participation in the work of the Authority shall be open to countries which are not members of 
the  European  Union  and  which  have  concluded  agreements  with  the  Community  whereby 
they  have  adopted  and  are  applying  Community  law  in  the  area  of  competence  of  the 
Authority as referred to in Article 1(2). 

Under the relevant provisions of these agreements, arrangements shall be made specifying, in 
particular, the nature, scope and procedural aspects of the involvement of these countries in 
the work of the Authority, including provisions relating to financial contributions and to staff. 
They may provide for representation, as an observer, on the Board of Supervisors, but shall 

42 

OJ 17, 6.10.1958, p. 385/58. 

EN 

53 

   EN 

                                                 
ensure  that  these  countries  do  not  attend  any  discussions  relating  to  individual  financial 
market participants, except where there is a direct interest. 

CHAPTER VIII 
TRANSITIONAL AND FINAL PROVISIONS 

Article 62 
Preparatory actions 

1. 

2. 

3. 

1. 

2. 

3 

The Commission shall be responsible for the administrative establishment and initial 
administrative  operation  of  the  Authority  until  the  Authority  has  the  operational 
capacity to implement its own budget. 

For  that  purpose,  until  such  time  as  the  Executive  Director  takes  up  his  duties 
following  his  appointment  by  the  Board  of  Supervisors  in  accordance  with  Article 
36, the Commission may assign one official on an interim basis in order to fulfil the 
functions of the Executive Directors. 

The  interim  Executive  Director  may  authorise  all  payments  covered  by  credits 
provided  in  the  budget  of  the  Authority,  once  approved  by  the  Management  Board 
and may conclude contracts, including staff contracts following the adoption of the 
Authority’s establishment plan.  

Paragraphs 1 and 2 are without prejudice to the powers of the Board of Supervisors 
and the Management Board. 

Article 63 
Transitional Staff provisions 

By  way  of  derogation  from  Article  54,  all  employment  contracts  concluded  by  the 
Committee  of  European  Securities  Regulators  or  its  Secretariat  and  in  force  on  the 
date of application of this Regulation shall be honoured until their expiry date. They 
may not be extended. 

All members of staff under contracts referred to in paragraph 1 shall be offered the 
possibility  of  concluding  temporary  agent  contracts  under  Article  2(a)  of  the 
Conditions of Employment of Other Servants at the various grades as set out in the 
Authority’s establishment plan. 

An  internal  selection  limited  to  staff  who  have  contracts  with  the  Committee  of 
European Securities Regulators or its Secretariat shall be carried out after the entry 
into  force  of  this  Regulation  by  the  authority  authorised  to  conclude  contracts  in 
order to check the ability, efficiency and integrity of those to be engaged. 

Depending on the type and level of functions to be performed, successful applicants 
shall  be  offered  temporary  agents’  contracts  of  a  duration  corresponding  at  least  to 
the time remaining under the prior contract. 

EN 

54 

   EN 

4. 

The relevant national law relating to labour contracts and other relevant instruments 
shall continue to apply to staff members with prior contracts who choose not to apply 
for temporary agent's contracts or who are not offered temporary agents contracts in 
accordance with paragraph 2. 

Article 64 
Amendments  

Council  and  Parliament  Decision  n°  …  of  …  establishing  a  Community  programme  to 
support specific activities in the field of financial services, financial reporting and auditing, is 
hereby amended insofar as the Committee of European Securities Regulators is removed from 
the list of beneficiaries set out in Section B of the Annex to that Decision 

Article 65 
Repeal  

Commission  Decision  2009/77/EC,  establishing  the  Committee  of  European  Securities 
Regulators, is hereby repealed.  

Article 66 
Evaluation 

1. 

Within  three  years  from  the  date  set  out  in  the  second  paragraph  of  Article  67  and 
every  three  years  thereafter,  the  Commission  shall  publish  a  general  report  on  the 
experience acquired as a result of the operation of the Authority and the procedures 
laid down in this Regulation. 

That report shall also evaluate progress achieved towards regulatory and supervisory 
convergence  in  the  fields  of  crisis  management  and  resolution  in  the  Community. 
The evaluation shall be based on extensive consultation, including with the Securities 
and Markets Stakeholder Group. 

2. 

The  report  and  any  accompanying  proposals,  as  appropriate,  shall  be  forwarded  to 
the European Parliament and to the Council. 

Article 67 
Entry into force  

This  Regulation  shall  enter  into  force  on  the  day  following  that  of  its  publication  in  the 
Official Journal of the European Union. 

It shall apply from 1 January 2011. 

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

EN 

55 

   EN 

Done at Brussels,  

For the European Parliament 
The President 

For the Council 
The President 

EN 

56 

   EN 

 
 
LEGISLATIVE FINANCIAL STATEMENT 

This document is intended to accompany and complement the Explanatory Memorandum. As 
such,  when  completing  this  Legislative  Financial  Statement,  and  without  prejudice  to  its 
legibility,  an  attempt  should  be  made  to  avoid  repeating  information  contained  in  the 
Explanatory  Memorandum.  Before  filling  in  this  template,  please  refer  to  the  specific 
Guidelines that have been drafted to provide guidance and clarification for the items below.  

1. 

NAME OF THE PROPOSAL: 

Regulation (EC) No xxx of the European Parliament and of the Council establishing 
a European Securities and Markets Authority 

2. 

ABM / ABB FRAMEWORK 

Policy Area(s) concerned and associated Activity/Activities: 

Internal Market – Financial markets 

3. 

BUDGET LINES 

3.1. 

Budget  lines  (operational  lines  and  related  technical  and  administrative 
assistance lines (ex- B..A lines)) including headings: 

New lines need to be created (the names and numbers are only indicative):  

Headings:  

12 

Internal Market 

12.04 Financial Markets 

12.0404 

European Securities and Markets Authority 

Budget lines:  

12.0404.01  ESMA  –  Subsidy  under  Titles  1  an  2  (Staff  and  administrative 
expenditure) 

12.0404.02  ESMA – Subsidy under Title 3 (Operating expenditure) 

3.2. 

Duration of the action and of the financial impact: 

Indeterminate 

EN 

57 

   EN 

3.3. 

Budgetary characteristics (add rows if necessary): 

Budget 
line 

Type of expenditure 

New 

EFTA 
contribution 

Contributions 
from applicant 
countries 

Heading in 
financial 
perspective 

120401
0101 

Non-
comp 

120401
0102 

Non-
comp 

Diff43 

YES 

YES 

NO 

No 1a 

Diff 

YES 

YES 

NO 

No 1a 

4. 

SUMMARY OF RESOURCES 

4.1. 

Financial Resources 

4.1.1. 

Summary of commitment appropriations (CA) and payment appropriations (PA) 

EUR million (to 3 decimal places) 

Section 
no. 

Expenditure type 

2011 

2012 

2013 

Total 

Operational expenditure44 

Commitment Appropriations 
(CA) 

8.1 

Payment 
(PA) 

Appropriations 

a 

b 

5, 465  7, 202  8, 491  21, 158 

5, 465  7, 202  8, 491  21, 158 

Administrative expenditure within reference amount45 

Technical  &  administrative 
assistance (NDA) 

8.2.4 

c 

-- 

-- 

-- 

-- 

TTOOTTAALL  RREEFFEERREENNCCEE  AAMMOOUUNNTT  

Commitment 
Appropriations 

Payment Appropriations 

a+c  5, 465  7, 202  8, 491  21, 158

b+
c 

5, 465  7, 202  8, 491  21, 158

43 
44 
45 

Differentiated appropriations. 
Expenditure that does not fall under Chapter 12 01 of the Title 12 concerned. 
Expenditure within article 12 01 04 of Title 12. 

EN 

58 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
Human 
associated 
(NDA) 

resources 

and 
expenditure 

Administrative costs, other than 
human resources and associated 
costs,  not  included  in  reference 
amount (NDA) 

8.2.5 

d 

-- 

-- 

-- 

-- 

8.2.6 

e 

-- 

-- 

-- 

-- 

Total indicative financial cost of intervention 

TOTAL CA including cost 
of Human Resources 

TOTAL  PA  including  cost 
of Human Resources 

a+c
+d
+e 

b+c
+d
+e 

5, 465  7, 202  8, 491  21, 158 

5, 465  7, 202  8, 491  21, 158 

Co-financing details 

Co-financing body:  

EUR million (to 3 decimal places) 

2011 

2012 

2013 

Total 

Member States (national supervisory 
authorities or ministries of finance) 

TOTAL CA including co-financing 

f 

a+c+d
+e+f 

8, 197 

10, 803 

12, 737 

31, 737 

13, 662 

18, 005 

21, 228 

52, 895 

4.1.2.  Compatibility with Financial Programming 

(cid:133) 

Proposal is compatible with existing financial programming. 

× 

× 

(cid:133) 

(cid:133) 

Proposal  will  entail  reprogramming  of  the  relevant  heading  in  the  financial 
perspective. 

Proposal  may  require  application  of  the  provisions  of  the  Interinstitutional 
Agreement46 (i.e. flexibility instrument or revision of the financial perspective). 

Proposal  will  entail  reprogramming  of  the  relevant  heading  in  the  financial 
perspective. 

Proposal  may  require  application  of  the  provisions  of  the  Interinstitutional 
Agreement47 (i.e. flexibility instrument or revision of the financial perspective). 

4.1.3.  Financial impact on Revenue 

× 

Proposal has no financial implications on revenue 

46 
47 

See points 19 and 24 of the Interinstitutional agreement. 
See points 19 and 24 of the Interinstitutional agreement. 

EN 

59 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
4.2. 

Human Resources FTE (including officials, temporary and external staff) – see 
detail under point 8.2.1. 

Annual requirements 

2011 

2012 

2013 

n + 3 

n + 4 

n + 5 
and 
later 

Total  number  of  human 
resources 

2,4 

2,4 

2,4 

5. 

CHARACTERISTICS AND OBJECTIVES 

5.1. 

Need to be met in the short or long term 

In the short term, create the European Securities and Markets Authority as a part of 
the  new  European  System  of  Financial  Supervisors,  consisting  of  a  network  of 
European  and  national  supervisory  authorities  and  aiming  at  a  more  effective  and 
efficient  organisation  of  financial  supervision  in  the  EU.  In  the  longer  term,  the 
ESMA  should  enhance  coordination  of  supervision  of  the  EU  securities  sector  and 
contribute to developing a European dimension of financial supervision to complete 
the EU single market for financial services. 

5.2. 

Value-added  of  Community  involvement  and  coherence  of  the  proposal  with 
other financial instruments and possible synergy 

The financial crisis has highlighted several substantial weaknesses of the current EU 
framework  for  financial  supervision.  The  following  problems,  which  underpin  the 
need of the Community involvement, have been identified: 

•  There  is  no  mechanism  to  ensure  that  national  supervisors  arrive  at  the  best 

possible supervisory decisions for cross-border institutions;  

•  Co-operation and information exchange between national supervisory authorities 

is insufficient;  

•  All  the  technical  details  of  financial  regulation  have  to  go  through  slow  and 

cumbersome procedures; 

•  Joint  action  by  national  authorities  needs  to  take  account  of  the  patchwork  of 

regulatory and supervisory requirements;  

•  Only national solutions are available and can be implemented in the face of pan-

European problems.  

The current EU Committees of Supervisors48 have limited powers to deal with such 
issues. 

48 

Committee  of  European  Banking  Supervisors,  Committee  of  European  Insurance  and  Occupational 
Pensions Supervisors and Committee of European Securities Regulators. 

EN 

60 

   EN 

 
 
 
 
 
 
 
 
 
                                                 
5.3. 

Objectives, expected results and related indicators of the proposal in the context 
of the ABM framework 

The  following  general  objectives  have  been  identified  for  the  European  System  of 
Financial  Supervisors,  and  in  particular  for  the  European  Securities  and  Markets 
Authority: 

1. 

2. 

3. 

4. 

Balance  home  and  host  supervisor  interests,  i.e.,  reinforce  processes  and 
practices for challenging the decisions of national supervisors on a cross-border 
basis; 

Ensure  a  level  playing  field  for  financial  market  participants  operating  in 
various Member States; 

Improve crisis prevention and crisis management on the European scale, and 

Improve  effectiveness  and  cost  efficiency  of  supervision  for  supervised 
companies. 

Flowing from the general objectives, a number of specific tasks for the ESFS have 
been defined:  

1.  All of the current tasks of the current EU Committees of supervisors; 

2. 

3. 

4. 

5. 

6. 

The development of technical standards to build a single rulebook in the EU 

Ensure  consistent  application  of  EU  rules  and  mediate  on  and  Settle 
disagreements between national supervisors; 

Ensure coordinated decision making in emergencies; 

The supervision of certain entities with a pan European reach 

Ensure a common supervisory culture. 

The following table presents the specific objectives of the European Securities and  
Markets Authority and matches them with related indicators: 

Objective 

The  development  of 
technical standards to 
build 
single 
a 
rulebook in the EU 

Proposed indicator 

•  Number  of  adopted  technical  standards  relative  to  those  required  to  be 

developed 

•  Number of standards proposed by ESMA and rejected by the Commission 

•  Number of adopted non-binding recommendations 

EN 

61 

   EN 

 
Ensure 
consistent 
application  of  EU 
rules 

Ensure  a  common 
supervisory  culture: 
in 
participation 
colleges 
of 
supervisors 

Ensure  a  common 
supervisory  culture: 
other activities 

direct 
out 
Carry 
supervision  of  pan-
European 
financial 
market participants  

Ensure 
coordinated 
decision  making  in 
emergencies 

Ensure  a  common 
supervisory  culture: 
Collect  and  manage 
micro-prudential 
information 

•  Number of successful mediations without binding settlement 

•  Number of warnings on manifest breach of the Community law 

•  Number of colleges with ESMA participation 

•  Average  number  of  meetings  per  college  attended  by  ESMA 

representatives 

•  Number of hours training for supervisors 

•  Number of staff participating in exchanges / secondments 

•  Number of peer reviews conducted 

•  Number of obstacles to convergence identified and removed 

•  New practical tools and instruments to promote convergence 

•  Number of on-site inspections 

•  Number of complaints / appeals from supervised companies 

•  Number of mediations in crisis situations 

•  Number  of  notifications  to  the  European  Systemic  Risk  Board49  on 

emergency situations 

•  Progress  in  development  of  the  central  databases:  completeness  and 

timeliness of information 

•  Number of direct requests to individual companies to provide supervisory 

information to ESMA 

5.4.  Method of Implementation (indicative) 

(cid:133)  Centralised Management 

(cid:133) 

(cid:133) 

directly by the Commission 

indirectly by delegation to: 

(cid:133) 

executive Agencies 

49 

A new body tasked with macro-prudential supervision, to operate under the auspices of the European 
Central Bank. 

EN 

62 

   EN 

 
 
 
                                                 
× 

bodies set up by the Communities as referred to in art. 185 of the 
Financial Regulation 

(cid:133) 

national public-sector bodies/bodies with public-service mission 

(cid:133) 

Shared or decentralised management 

(cid:133)  with Member states 

(cid:133)  with Third countries 

(cid:133) 

Joint management with international organisations (please specify) 

Relevant comments: 

6. 

MONITORING AND EVALUATION 

6.1.  Monitoring system 

The Regulation establishing the European Securities and Markets Authority provides 
for evaluation of the experience acquired as a result of the operation of the Authority 
and the procedures laid down in this Regulation every three years from the effective 
start  of  its  operation.  To  this  end,  the  Commission  shall  publish  a  general  report, 
which  will  also  evaluate  progress  achieved  towards  regulatory  and  supervisory 
convergence. The report and any accompanying proposals shall be forwarded to the 
European Parliament and to the Council.  

6.2. 

Evaluation 

6.2.1.  Ex-ante evaluation 

Two  impact  assessments  have  been  carried  out  for  the  proposal  to  reform  the 
financial supervision system in the EU:  

(1)  The  first  general  impact  assessment  (SEC(2009)  715)  accompanied  the 
Communication 'European financial supervision' of 27 May (COM(2009) 252). The 
analysis  in  that  report  led  to  selecting  the  creation  of  the  European  System  of 
Financial  Supervisors  as  the  best  option  for  the  reform  of  micro-prudential 
supervision framework in the EU. 

(2) The second, more specific impact assessment has been carried out to accompany 
the  draft  Regulations  establishing  the  European  Banking  Authority,  the  European 
Insurance and Occupational Pensions Authority and the European Securities Markets 
Authority. In this IA a number of options for particular tasks and governance aspects 
of  the  new  Authorities  have  been  considered.  It  also  includes  budgetary  estimates 
which have been used in this Legislative Financial Statement.  

6.2.2.  Measures taken  following  an intermediate/ex-post evaluation (lessons learned from 

similar experiences in the past) 

Not applicable. 

EN 

63 

   EN 

6.2.3.  Terms and frequency of future evaluation 

The final set of indicators to assess the performance of the European Securities and 
Markets Authority will be decided by the Commission at the time of conducting the 
first required evaluation. For the final assessment, the quantitative indicators will be 
as important as the qualitative evidence gathered in the consultations, including the 
input from the specially designed securities markets stakeholder' group. he evaluation 
will be repeated every three years. 

7. 

ANTI-FRAUD MEASURES  

For  the  purposes  of  combating  fraud,  corruption  and  any  other  illegal  activity,  the 
provisions of Regulation (EC) No 1073/1999 of the European Parliament and of the 
Council of 25 May 1999 concerning investigations conducted by the European Anti-
Fraud Office (OLAF) shall apply to the Authority without any restriction. 

The  Authority  shall  accede  to  the  Interinstitutional  Agreement  of  25  May  1999 
between  the  European  Parliament,  the  Council  of  the  European  Union  and  the 
Commission of the European Communities concerning internal investigations by the 
European  Anti-Fraud  Office  (OLAF)  and  shall  immediately  adopt  appropriate 
provisions for all staff of the Authority. 

The  funding  decisions  and  the  agreements  and  the  implementing  instruments 
resulting  from  them  shall  explicitly  stipulate  that  the  Court  of  Auditors  and  OLAF 
may,  if  need  be,  carry  out  on-the-spot  checks  on  the  beneficiaries  of  monies 
disbursed  by  the  Authority  as  well  as  on  the  staff  responsible  for  allocating  these 
monies. 

EN 

64 

   EN 

8. 

DETAILS OF RESOURCES 

8.1. 

Objectives of the proposal in terms of their financial cost 

Please refer to Annex 1 for a detailed breakdown of the Authority's costs and to Annex 2 for the main underlying assumptions and Annex 3 
for a detailed establishment plan. 

EN 

65 

EN 

 
  
8.2. 

Administrative Expenditure 

8.2.1.  Number and type of human resources 

Types of post 

Staff to be assigned to management of the action using existing and/or 
additional resources (number of posts/FTEs) 

2011 

2012 

2013 

Year n+3  Year n+4  Year n+5 

Officials or 
temporary 
staff50 (XX 01 
01) 

A*/AD 

1,2 

B*, 
C*/AST 

1,2 

Staff  financed51  by  art. 
XX 01 02 

Other  staff52  financed by 
art. XX 01 04/05 

-- 

-- 

1,2 

1,2 

-- 

-- 

1,2 

1,2 

-- 

-- 

TOTAL 

2,4 

2,4 

2,4 

8.2.2.  Description of tasks deriving from the action 

•  Operational management of the Commission relations with the Authority (equivalent 

of time of one AD in an operational unit) 

•  Financial  management  of  the  subsidy  from  the  Community  budget  to  the  Authority 
(equivalent of time of one AST in an operational unit and 20% of one AST time in the 
financial unit) 

•  Monitoring  and  auditing  (20%  of  one  AD  time  in  Internal  Audit  Capability  of  DG 

Markt)  

8.2.3. 

Sources of human resources (statutory) 

× 

Posts  to  be  redeployed  using  existing  resources  within  the  managing 
service (internal redeployment) 

12 posts have been already requested in the Legislative Financial Statement annexed to a 
draft decision establishing a Community programme to support specific activities in the 
field of financial services, financial reporting and auditing (COM(2009)14 final). In total 
about 8 out of those posts will be redeployed within DG MARKT to deal with the new 

50 
51 
52 

Cost of which is NOT covered by the reference amount. 
Cost of which is NOT covered by the reference amount. 
Cost of which is included within the reference amount. 

EN 

66 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
European  Supervisory  Authorities  (full  or  part  time):  6  in  operational  units;  1  in  the 
financial unit and 1 in the IAC. 

8.2.4.  Other  Administrative  expenditure  included  in  reference  amount  (XX  01  04/05  – 

Expenditure on administrative management) 

Not applicable 

8.2.5.  Financial  cost  of  human  resources  and  associated  costs  not  included  in  the 

reference amount 

EUR million (to 3 decimal places) 

Year 
n+3 

Year 
n+4 

Year 
n+5 

and later 

Type of human resources 

2011 

2012 

2013 

Officials  and  temporary  staff 
(XX 01 01) 

0,293 

0,293 

0,293 

Staff  financed  by  Art  XX  01 
02  (auxiliary,  END,  contract 
staff, etc.) 

(specify budget line) 

0 

0 

0 

cost 

Total 
of  Human 
Resources  and  associated 
costs 
in  reference 
amount) 

(NOT 

0,293 

0,293 

0,293 

Calculation– Officials and Temporary agents 

2 officials in an operational unit 

0,2 of one official's time in the financial unit 

0,2 of one official's time in Internal Audit Capability of DG Markt 

2,4 x 0,122 = 0,293 

Calculation– Staff financed under art. XX 01 02 

Not applicable 

EN 

67 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
8.2.6. Other administrative expenditure not included in reference amount 

EUR million (to 3 decimal places)

Year 
n 

Year 
n+1 

Year 
n+2 

Year 
n+3 

Year 
n+4 

Year 
n+5 

and 
later 

TOTAL 

XX 01 02 11 01 – Missions 

XX 01 02 11 02 – Meetings & Conferences 

XX 01 02 11 03 – Committees53  

XX 01 02 11 04 – Studies & consultations 

XX 01 02 11 05 - Information systems 

2 

Total 

Other  Management 

Expenditure (XX 01 02 11) 

3  Other 

expenditure 

administrative 
including reference to budget line) 

nature 

of 

an 
(specify 

expenditure, 
than  human  resources  and 
in 

Total  Administrative 
other 
associated  costs  (NOT 
reference amount) 

included 

Calculation - Other administrative expenditure not included in reference amount 

Not applicable 

ANNEX 1 

Draft budget for the European Securities and Markets Authority 

In thousands € 

53 

Specify the type of committee and the group to which it belongs. 

EN 

68 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
2011 

2012 

2013 

2014 

2015 

2016 

Title 1 - Staff costs 

7 455 

10 162 

12 706 

14 788 

14 757 

14 757 

Management 

1 751 

2 002 

2 252 

2 502 

2 502 

2 502 

Senior / expert staff: 

Temporary agents 

3 556 

5 334 

6 985 

8 128 

8 128 

8 128 

Seconded national experts 

0 

0 

0 

0 

0 

0 

Administrative 
other support staff: 

and 

Temporary agents 

1 016 

1 270 

1 524 

1 905 

1 905 

1 905 

Contract agents 

0 

0 

0 

0 

0 

0 

Staff benefits 

948 

1 291 

1 614 

1 880 

1 880 

1 880 

Staff training: general 

26 

36 

46 

53 

53 

53 

Staff  training:  enhancing 
supervisory skills 

Expenditure 
staff recruitment 

relating 

to 

126 

189 

248 

288 

288 

288 

31 

41 

38 

31 

0 

0 

-  Building, 
and 

2 

Title 
equipment 
administrative 
expenditure 

Rental  of  buildings  and 
associated costs 

Information 
communication 
technology 

and 

Movable  property  and 
associated costs 

Current 
expenditure 

administrative 

Postage 
Telecommunications 

Meeting 
Travelling expenses 

expenses 

/ 

/ 

1 876 

3 013 

3 391 

3 697 

3 698 

3 698 

860 

1 595 

1 595 

1 595 

1 595 

1 595 

264 

368 

466 

546 

546 

546 

58 

57 

81 

79 

102 

120 

120 

120 

100 

117 

117 

117 

136 

190 

241 

282 

282 

282 

502 

700 

887 

1 038 

1 038 

1 038 

EN 

69 

   EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
Title 3 - Operations 

4 331 

4 831 

5 131 

5 331 

5 331 

5 331 

Powers 

Consultations: 
stakeholder group 

Common 
culture:  participation 
colleges of supervisors 

supervisory 
in 

216 

216 

216 

216 

216 

216 

0 

0 

0 

0 

0 

0 

training 

supervisory 
Common 
for 
culture: 
national  supervisors  and 
staff 
& 
secondments 

exchanges 

Collection of information: 
development 
and 
maintenance  of  a  central 
European database 

International 
relations: 
observers  in  international 
supervisory committees 

relations: 
International 
cooperation  with 
3rd 
countries  on  equivalence 
decisions 

Supervision 
of 
European entities 

pan-

Governance 

Board of Supervisors 

Management Board 

Joint Steering Committee 

Board of Appeal 

500 

1 000 

1 300 

1 500 

1 500 

1 500 

3 000 

3 000 

3 000 

3 000 

3 000 

3 000 

50 

50 

50 

50 

50 

50 

60 

60 

60 

60 

60 

60 

300 

300 

300 

300 

300 

300 

83 

26 

10 

86 

83 

26 

10 

86 

83 

26 

10 

86 

83 

26 

10 

86 

83 

26 

10 

86 

83 

26 

10 

86 

TOTAL 

13 662 

18 005 

21 228 

23 816 

23 785 

23 785 

Of  which  Community 
contribution 

Of  which  Member 
States 
contribution 
supervisory 
(national 
authorities  or  ministries 

5 465 

7 202 

8 491 

9 526 

9 514 

9 514 

8 197 

10 803 

12 737 

14 289 

14 271 

14 271 

EN 

70 

   EN 

 
  
  
  
  
  
  
  
  
  
  
  
  
of finance) 

Source: Commission and the L3 Committees, estimates and calculations 

EN 

71 

   EN 

 
ANNEX 2 

Applied  methodology  and  main  underlying  assumptions  for  the  financial  model  of 
the Authority 

The cost of setting up the European Securities and Markets Authority has been estimated 
according  to  three  cost  categories:  the  staff  costs,  the  infrastructure  costs  and  the 
operations  costs,  in  line  with  the  general  cost  classification  used  in  accounts  of  the 
existing EU regulatory agencies. The total costs of creating the ESMA has been estimated 
at  about  13.662  million  Euro  in  the  first  year  of  operations  (2011),  reaching  21.228 
million Euro after two years (2013) – see Annex 1. 

It  is  proposed  that  the  Community  budget  funds  40%  of  the  costs  and  Member  States 
fund 60%. The reasons for this proposal are the following: 

•  a well-balanced and mixed financing is the best way to ensure that the Authorities act 
(and  are  perceived  to  be  doing  so)  independently  from  Member  States  and  from  the 
Community  institutions.  If  one  particular  source  of  funding  were  to  be  overly 
dominant,  this  could  cast  a  shadow  on  the  credibility  of  the  decisions  made  by  the 
Authorities  and  thus  undermine  the  new  framework  proposed  to  safeguard  financial 
stability; 

•  given that national supervisors will continue, in this new framework, to carry-out the 
bulk  of  supervisory  activities  on  the  ground,  it  seems  appropriate  to  reflect  this  in  a 
slightly higher contribution from Member States. In doing so, we would also allow for 
a smooth evolution from the present situation where the level 3 committees are almost 
exclusively funded by Member States;  

•  however,  it  is  of  the  essence  that  a  significant  part  of  the  funding  comes  from  the 
Community  budget.  Indeed,  the  new  Authorities  will  serve  objectives  which  have  a 
clear  Community  dimension:  preserving  financial  stability  in  the  Internal  Market  as 
well as sustainable growth in the EU. Moreover, one of the Authorities' core tasks and 
powers  is  to  ensure  a  consistent,  efficient  and  effective  application  of  Community 
rules in the sector. This justifies, at least, a 40% funding from the Community budget 
(as most of these entities are normally fully funded through the Community budget). 
Furthermore, one can doubt whether all Member States will be able to cope with the 
sharp increase in their contributions that would be required under the new framework, 
which will be much more costly than the present level 3 arrangements.  

•  the  need  for  Community  funding  is  also  particularly  important  to  ensure  that  the 
Authorities are truly independent from Member States. The choice has been made, in 
order to limit as much as possible interferences in the technical work of supervisors, to 
limit the Commission's participation to the minimum in the supervisory boards (with 
one non-voting member) and the management boards (with one voting member) of the 
Authorities.  If  there  were  to  be  in  addition  an  excessive  reliance  on  Member  States' 
contributions, the credibility of the Authorities' independence would be seriously put 

EN 

72 

   EN 

 
at risk. A significant Community contribution is needed to compensate for the limited 
role  which  is  being  given  to  the  Commission  in  the  decision-making  bodies  of  the 
Authorities; 

•  this approach is the most conducive to a stable funding, with no over reliance on one 
source or on contributions from big Member States who could threaten the continued 
operation of the Authorities by putting an end to their financial contributions. Finally, 
this approach is also more fair than a full or very large funding from Member States: 
national  supervisors  use  a  variety  of  funding  models  at  national  level  -  some  from 
general  taxation,  some  from  levies  on  the  industry.  Were  the  Authority  to  be 
predominantly funded by Member States there would be a risk of an unlevel playing 
field across the EU. 

The staff cost estimates are based on the assumption that the ESMA will aim to double its 
staff as compared to the staff numbers in the existing Level 3 Committees in the first year 
of its operation. This means an increase from 20 to 40. It has been also assumed that the 
number of staff would increase relatively fast in the start-up phase. The authority would 
hire  on  average  15  new  employees  per  year.  It  would  reach  the  "cruising  speed"  with 
around 90 staff.  

The  need  for  increased  staffing  numbers  reflects  the  significant  number  of  new  tasks 
which  the  authority  will  need  to  undertake  in  addition  to  its  previous  responsibilities. 
These  new  tasks  are  outlined  in  detailed  in  the  explanatory  memorandum  which 
accompanies  the  proposed  regulations.  They  include,  but  are  not  limited  to,  developing 
new  technical  standards  in  a  number  of  areas  of  financial  services  legislation,  ensuring 
consistent  application  of  Community  rules,  settling  disagreements  between  national 
competent  authorities,  attending  colleges  of  supervisors  and  facilitating  peer  reviews. 
Each of these activities will require significant new resource. The detailed breakdown of 
estimated staff numbers by various categories is presented in Annex 3. 

Another assumption adopted for estimation of the staff costs is that the Staff Regulation 
of EU institutions would be applied in all the Authorities. This is reflected – with some 
modifications – in per head rates used under Title 1 (see Annex 1 for details). The impact 
of the locations of the L3 Committees has also been taken into account (through the cost-
of-living multipliers). 

The  figures  under  Title  2  relating  to  the  cost  of  infrastructure  have  been  based  on  the 
input from the existing Level 3 Committees. The CESR provided estimates of their costs 
in this category, based on extrapolation of their real costs linked with running offices and 
administration in their current locations. Given that Paris is a financial centres and among 
the most expensive business locations in the world, the estimated costs naturally exceed 
the average levels for the EU regulatory agencies. 

The  operation  costs  are  specific  to  the  competencies  and  the  governance  model  of  the 
European Supervisory Authorities. Regarding powers, various types of activities foreseen 
for  the  ESFS  have  been  considered  in  terms  of  generating  extra  operational  costs  apart 
from  the  general  staff  costs.  It  has  been  possible  to  attribute  such  costs  to  a  number  of 

EN 

73 

   EN 

 
activities,  e.g.  running  the  stakeholder  groups,  developing  the  European  supervisory 
databases, participating in the colleges of supervisors, organising training for supervisors 
from  the  Member  States  or  carrying  out  on-site  inspections  of  directly  supervised 
companies.  The  specific  costs  for  these  operations  are  very  often  linked  with  missions 
and  meetings,  but  can  also  include  substantial  expense  on  outsourced  services,  e.g.  to 
create and maintain a database or organise trainings.  

On the other hand, it has been judged that many of the ESFS activities are not linked with 
extra  operational  costs  and  are  fully  reflected  in  the  general  staff  costs.  These  are  for 
example  the  development  of  technical  standards,  guidelines  and  recommendations, 
ensuring  consistent  application  of  the  Community  law  or  the  coordination  in  crisis 
situations. 

Regarding  the  governance,  the  operational  costs  will  stem  from  activities  of  various 
bodies  foreseen  to  ensure  proper  functioning  of  the  European  System  of  Financial 
Supervisors  in  general  and  the  Authorities  in  particular:  the  Board  of  Supervisors,  the 
Management Board, the Joint Steering Committee and the Board of Appeals.  

The methods of calculating the budget of ESMA are presented in Table 1. 

Table 1. Estimated budget of ESMA in the first year of operation (2011) 

In thousands € 

Title 1 - Staff costs 

Total staff: 

Multiplier 
living 

cost-of-

Paris 

Management 

Senior / expert staff: 

Temporary agents 

Seconded 
experts 

national 

Administrative 
other support staff: 

and 

Temporary agents 

Contract agents 

EN 

43 

Average annual cost per 
head (based on DG BUDG 
guidelines and 3L3 advice) 

1,27 

250,2 

127,0 

127,0 

127,0 

53,3 

7 

28 

8 

74 

5 709

1 751 

- 

3 556 

- 

- 

1 016 

- 

   EN 

 
  
 
  
  
 
  
  
 
Staff benefits 

15% of total staff costs 

Staff training: general 

Average 
amount 
person (COM data) 

per 

Staff  training:  enhancing 
supervisory skills 

Advice from 3L3 

Expenditure  relating  to 
staff recruitment 

3  candidates  interviewed 
per post on average 

-  Building, 
and 

Title  2 
equipment 
administrative 
expenditure 

Rental  of  buildings  and 
associated costs 

CESR 
estimates 

data 

and 

Information 
communication 
technology 

and 

CESR data and estimates 

Movable  property  and 
associated costs 

CESR data and estimates 

Current 
expenditure 

administrative 

CESR 
estimates 

data 

and 

Postage 
Telecommunications 

/ 

CESR data and estimates 

Travel 
expenses 

and  meeting 

CESR data and estimates 

0,6 

4,5 

0,8 

948 

26 

126

31 

1 876 

860 

264 

58 

57 

136 

502 

Title 3 - Operations 

-  

4 331

Powers 

 Costed activity 

 Assumptions 

 Total cost 

Consultations 

Financial 
Stakeholder Group 

Services 

Common 
culture 

supervisory 

Participation  in  colleges 
of supervisors 

a 

One  FSSG  per  each  ESA. 
30  members  meeting  4 
year.  Annual 
times 
remuneration  6000€  per 
Industry 
person. 
representatives 
be 
to 
reimbursed  for  travel  but 
not remunerated. 

216

0

EN 

75 

   EN 

 
  
  
  
 
 
 
 
 
 
  
 
Common 
culture 

supervisory 

training 
and 

Common 
supervisors 
exchanges 
secondments 

for 
staff 
& 

the 

amount 
 Based  on 
foreseen for action grants to 
the L3C for 2010-2015  

Collection of information  Developing 

managing 
European database 

the 

and 
central 

 CESR estimate 

International relations 

Contacts  with 
third 
country  authorities  and 
other  international  bodies 
e.g. 
equivalence 
advice 

for 

11 missions outside EU per 
year for 2 persons.  

Supervision 
of 
European entities 

pan-

On site inspections 

CESR estimates 

Governance 

 Costed activity 

 Assumptions 

 Total cost 

Board of Supervisors 

Decision making 

Management Board 

Management 

 Joint 
Committee 

Steering 

Cross-sector cooperation 

Board of Appeal 

Appeals 

 26  members 
be 
reimbursed - 4 meetings per 
year.  

to 

 6  members 
including  4 
representatives  of  national 
supervisors.  Meeting  every 
month,  when  possible  back 
to  back  with  meetings  of 
Board of Supervisors.  

 Periodic  meetings 
for 
chairperson from each ESA 

 6  members,  assuming  8 
meetings  per  year,  and 
annual  remuneration  8000€ 
per person  

TOTAL 

Source: Commission and the L3 Committees estimates and calculations 

500

3 000

110 

300

83

26

10

86

13 662

EN 

76 

   EN 

 
  
  
ANNEX 3 

Establishment Plan (preliminary) 

Function group 
and grade 

Posts 

(temporary) 

2011 

2012 

2013 

2014 

AD 16  

AD 15  

AD 14  

AD 13  

AD 12  

AD 11  

AD 10  

AD 9  

AD 8  

AD 7  

AD 6  

AD 5  

1 

1 

1 

3 

7 

11 

5 

2 

3 

1 

2 

2 

7 

16 

24 

12 

4 

6 

AD total  

35 

50 

64 

74 

AST 11  

AST 10  

AST 9  

AST 8  

AST 7  

AST 6  

AST 5  

AST 4  

1 

1 

3 

1 

1 

1 

2 

2 

6 

2 

1 

2 

EN 

77 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
AST 3  

AST 2  

AST 1  

AST total  

Total  

8 

43 

10 

60 

12 

76 

15 

89 

Source: Commission 

EN 

78 

   EN