Harmonization of U.S.-EU Securities Regulation: The Case for a Single European Securities Regulator

I. EUROPEAN SECURITIES MARKETS A. Introduction Europeanists have long dreamt of a single securities As early as 1960, the Economic Community called on member states to ease the movement of capital for, inter alia, the trading of securities quoted on stock exchanges. (1) The Commission's White Paper of 1995 to the Council on Completing the Internal Market (1985 White Paper) reconfirmed the importance of a single securities market, stating: Work currently in hand to create a securities market system, based on Community stock exchanges, is also relevant to the creation of an internal This work is designed to break down barriers between stock exchanges and to create a Community-wide trading system for securities of international interest. (2) In March 2001, the Council in Stockholm announced a bold, new initiative to force the integration of the Union's (EU) financial markets into a single securities market. (3) The Council asked for the full implementation of the Financial Markets Action Plan, a comprehensive legislative program originally prepared by the in 1999, to create the legal conditions necessary to achieve: (1) capital raising on an EU-wide basis; (2) a common legal framework for an integrated securities market; (3) a single set of financial statements for listed companies; (4) limitations on systemic risk in securities settlement; (5) a secure and transparent environment for cross-border restructuring; and (6) a single market for investors. (4) The impetus behind the Council's endorsement of the Financial Markets Action Plan came from a report prepared by a panel of non-governmental experts, known as the of Wise Men, who argued that the EU critically needed reform in the area of securities regulation. (5) What made the Committee of Wise Men's report unique, however, was not its diagnosis of the problem that plagued the financial markets but the recommended cure. As the existence of the Financial Markets Action Plan showed, even the was aware that market and regulatory fragmentation was keeping the financial markets weak and lethargic. (6) The Committee of Wise Men proposed the establishment of two new, intergovernmental committees: a Securities Committee (ESC) and a Committee of Securities Regulators (CESR). (7) CESR would have responsibility for the development and implementation of regulations given to the ESC. (8) At first glance, the EU project to create a single securities market through the centralization of regulatory authority appears only as a affair. The current proposals refer only to markets and stock exchanges, and there is little discussion of foreign issuers or foreign investors, as if the securities market stops at the borders of the EU. But the reason for such a project is anything but domestic. It originated from an envy of the United States and a desire to emulate the success of the U.S. capital markets. (9) The U.S. Securities and Exchange (SEC), with its broad rulemaking and enforcement powers, is a frequently cited model for a single securities regulator. (10) The appeal of the SEC is that it has been historically a successful and effective securities regulator, overseeing and nurturing the development of the largest, most sophisticated securities market in the world. The SEC model, however, deserves closer inspection, especially in the context of Europe. It will be difficult to establish a European Securities Commission in the mold of the SEC because of the vast political, economic, and regulatory differences between the EU and the United States. When it was created in 1934, the SEC enjoyed the backing of a strong federal government and supremacy over states' securities regulation. …