Public consultation on the operations of the European Supervisory Authorities

I. Tasks and powers of the ESAs

Question 1: In general, how do you assess the work carried out by the ESAs so far in promoting a common supervisory culture and fostering supervisory convergence, and how could any weaknesses be addressed?

The Swedish Investment Fund Association is a business organisation for the fund industry organising the majority of those fund companies selling funds in Sweden, mostly UCITS funds. Our main objective is to promote fund management to benefit savers and fund companies. We are also a member of the European business organisation EFAMA and the replies given here are a complementary view from our national perspective. On those questions below where we have replied "no comment" we refer to the EFAMA reply.

Our contacts with ESMA are mostly in connection with consultations in the financial area. We have very little insight into the work of ESMA since all contacts are managed by our NCA and very little information is shared with the industry. We feel it is a weakness that the industry is not invited to give information about the workings of the industry in areas that ESMA is targeting and we would suggest that the ESA’s promote a more open culture where industry representatives, both on a national and EU level is involved at a much earlier stage than what is currently the case. A closed culture will, in our view, only result in unequal transparency, where some market participants receive information ahead of others.

Question 2: With respect to each of the following tools and powers at the disposal of the ESAs:

  • peer reviews (Article 30 of the ESA Regulations);
  • binding mediation and more broadly the settlement of disagreements between competent authorities in cross-border situations or cross-sectorial situations (Articles 19 and 20 of the ESA Regulations);
  • supervisory colleges (Article 21 of the ESA Regulations);

To what extent:

a) have these tools and powers been effective for the ESAs to foster supervisory convergence and supervisory cooperation across borders and achieve the objective of having a level playing field in the area of supervision?

As has been explained above, the insights we have into these processes are very limited. Peer Reviews, mediation and supervisory collages would benefit from more exchanges with the industry which would pick up areas to investigate further or acknowledge where practices would not be appropriate for a specific market.  

b) has a potential lack of an EU interest orientation in the decision making process in the Boards of Supervisors impacted on the ESAs use of these tools and powers?

No comment

Question 3: To what extent should other tools be available to the ESAs to assess independently supervisory practices with the aim to ensure consistent application of EU law as well as ensuring converging supervisory practices? Please elaborate on your response and provide examples.

No comment

Question 4: How do you assess the involvement of the ESAs in cross-border cases? To what extent are the current tools sufficient to deal with these cases?

We have observed situations where the Swedish Pension Authority has reported on fraud and serious misconduct in cross border UCITS funds sold in the Swedish market. In these recent situations there has been little or no information on the activities of the Swedish NCA in cross border situations or on how a situation can be remedied or escalated. There is no information on or if the ESA’s has been involved from the NCA. It appears unclear how host country responsibility for consumer protection should be conducted. If communication between NCA’s are conducted it is not publicly reported which leads to a situation where public trusts erodes. On a market, such as the Swedish fund market, where cross border influence is very dominant, it is important for the market to feel confident that there is effective supervision and that the NCA’s and the ESA’s are paying attention and taking action when problems with cross border activities occurs. There are no known or officially recognized channels for the industry to bring information such as this to the attention of the ESA’s.  

Question 5: To what extent are the ESAs tasks and powers in relation to guidelines and recommendations sufficiently well formulated to ensure their proper application? If there are weaknesses, how could those be addressed?

Many times guidelines and recommendations are necessary. Consulting on such guidelines and recommendations is however crucial for them to work. Especially on markets where very little information about the work performed before the consultation is shared. We are happy with the way ESMA acknowledges views from the industry during such consultations but it is very important that more time is given during consultations and that the industry is involved, not only when issuing guidelines but also in connection with Q&A’s and opinions. We see examples of Q&A’s and opinions which would have benefitted from an industry perspective. We are  of the opinion that the ESA’s sometimes go beyond the legislative act they are trying to explain. Many times we believe this could have been resolved by involving industry representatives at an earlier stage.   

Question 6: What is your assessment of the current tasks and powers relating to consumer and investor protection provided for in the ESA Regulations and the role played by the ESAs and their Joint Committee in the area of consumer and investor protection? If you have identified shortcomings, please specify with concrete examples how they could be addressed.

Functioning supervision is a fundamental precondition for consumers to feel safe on financial markets. If consumers do not feel that there is supervision, confidence in the markets is lost. In cross border situations where the national authority is pointing towards a distant foreign NCA and no information about any action from either the local NCA or the foreign NCA or the ESA’s is given for months, then the level of consumer protection is considered as low, even if there are tasks and powers in place. Information about how the NCA’s cooperate and how the ESA’s are involved in the process is very important to maintain consumer confidence.

Question 7-18

No comment

Question 19: In what areas of financial services should an extension of ESMA’s direct supervisory powers be considered in order to reap the full benefits of a CMU?

In this respect we are mainly referring to ESMA's supervisory powers in the area of investment funds. As has been explained above there are concerns about the functioning of the supervision in connection with cross border marketing of funds. However, the problems we are experiencing seem to emanate from a hesitance to use those powers and tasks that are already in place. By intervention a local NCA can require action from another NCA and the process can be escalated further by involving the ESA’s. In such a case the ESA’s can act as a mediator and a supervisor of supervisors. Rather than transferring the supervisory powers of the NCA’s we would suggest promoting those mechanisms already in place by encouraging NCA’s to use ESA’s to resolve cross border situations.  

Question 20: For each of the areas referred to in response to the previous question, what are the possible advantages and disadvantages?

As regards investment funds we fear that moving supervision from the NCA to ESMA would further distance the supervision from the entities that are supervised. The contacts between the supervised entities and the supervisor would be more complicated and there would inevitably be a lack of understanding of the specific markets where the supervised entities operate. This would especially affect smaller markets. Company law is an area that is not harmonised throughout the union which makes it necessary to interpret legislation according to the company law model in place in each Member State. These are all reasons why an NCA is better suited to supervise its own market participants, at least in the area of investment funds. National authorities are also better suited to give service to consumers, such as answering questions and handling complaints.

Question 21: For each of the areas referred to in response to question 19, to what extent would you suggest an extension to all entities or instruments in a sector or only to certain types or categories?

We propose that the ESA:s are strengthened in their role as mediators and facilitators for NCA’s. Other than that we are of the opinion that the powers of ESA:s should not be extended. 

II. Governance of the ESAs

Question 22 – 25

No comment

Question 26: To what extent are the provisions in the ESA Regulations appropriate for stakeholder groups to be effective? How could the current practices and provisions be improved to address any weaknesses?

We are in favor of stakeholder groups and think that they should be used more frequently. Their effectiveness is, however, dependent on their right to access and share information with the rest of the market. Also, each stakeholder group cover a very wide area and it is impossible to deliver qualitative input on all the subjects without being able to discuss with the rest of the market. Also, the stakeholder groups are seldom composed of representatives from all Member States which makes it difficult to obtain all views. Getting into contact with the stakeholder groups is also difficult since they do not have an official platform or office. Access to stakeholder groups will therefore be dependent on personal contacts and those countries with many representatives on a stakeholder group will have their opinion heard before those who have no representatives.

III. Adapting the supervisory architecture to challenges in the market place

Question 27-28

No comment

IV. Funding of the ESAs

Question 29: The current ESAs funding arrangement is based on public contributions. Please elaborate on each of the following possible answers (a) and (b) and indicate the advantages and disadvantages of each option.


Many NCA’s are funded by the industry, ie the industry is funding its own supervision. In our opinion, the ESA’s mandate should not be extended to the supervision of national entities. Instead the role of the ESA’s is to mediate, facilitate and harmonise the operation of the NCA’s. These tasks should be funded through public contributions.

b) should they be changed to a system partly funded by industry?


Questions 30-32

No comment

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