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8 - Supervision, enforcement and redress

Published online by Cambridge University Press:  26 February 2010

Niamh Moloney
Niamh Moloney
Affiliation:
London School of Economics and Political Science
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Summary

Public supervision and enforcement in the retail markets

Public supervision and enforcement in the retail markets

The mounting evidence on the relationship between ‘law in action’, in terms of supervision and enforcement, and strong financial markets is primarily concerned with capital-raising and cannot be directly transplanted to the retail markets. Nonetheless, the intuition that strong retail markets demand robust ‘law in action’ in the form of effective supervision and enforcement is reasonable, not least given the difficulties of private enforcement (section II below). There appears to be a link between participation and effective enforcement; investor trust, strongly associated with engagement, has been related to the perception that market actors comply with regulation. The connection between supervision/enforcement and engagement is also reflected in the inclusion of compliance and trust-in-enforcement indicators in the Commission's Consumer Markets Scoreboard, while CESR's deepening dialogue with the retail sector also suggests stakeholders' concern with enforcement.

The EC regime

The EC's investor protection regime is based on a public supervision and enforcement model; EC private redress initiatives, while developing, remain tentative. Pan-EC supervision, at present, is based on mutual recognition of domestic supervision. Domestic supervisors, operating under a home Member State control model, supervise their firms' pan-EC activities. There are some exceptions. Under MiFID, branch compliance with conduct-of-business, best execution, order handling and transparency requirements, but not conflict-of-interest rules, is supervised by the Member State in which the branch is situated (Article 32(7)).

Type
Chapter
Information
How to Protect Investors
Lessons from the EC and the UK
 , pp. 426 - 463
Publisher: Cambridge University Press
Print publication year: 2010

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