The Case for A European Securities Commission
Roberta S. Karmel
Brooklyn Law School
Columbia Journal of Transnational Law, Fall 1999
The free movement of capital is one of the four freedoms set forth in the Treaty of Rome. Although good progress has been made with respect to monetary integration, culminating with commencement of the European Monetary Union, the introduction of the euro in most of the European Union (EU) countries in 1999 and the formation of a European Central Bank, integration of the equity markets is far from complete. Despite the adoption of various directives relevant to public investors and equity trading markets, there is not an integrated European market enabling issuers to float public offerings or savers to invest and trade across national borders in a single market. The persistence of national equity markets has several causes. One important factor is the lack of a common equity culture across Europe. Nevertheless, the time is ripe for a public securities market that will transcend national boundaries. All over Europe, governments are attempting to foster an equity culture for both ideological and practical reasons. A European equity market is needed in order to finance the needs of the enterprises and peoples of Europe. While laws and regulators cannot create a market, they can either impede or foster one. At the very
least, regulation can eliminate anticompetitive practices that inhibit market development. In addition, securities regulation designed to protect investors and instill confidence in the equity markets can change the conduct of issuers and traders that discourage savers from investing in equities. These objectives have not and probably cannot be met through directives of the European Commission. Quicker and more flexible responses to developments in the capital markets are required. This paper will argue that a European Securities and Exchange Commission (European SEC) is needed to foster an equity culture throughout Europe and to develop and administer flexible regulations to govern a European equity market. The paper will also discuss some of the programs a European SEC could undertake.
Accepted Paper Series
Date posted: September 13, 1999
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