09 September 2005

EU and US associations call for regulatory convergence in transatlantic capital markets

Six EU and US associations issued a joint report on “The Case for Regulatory Simplification and Trading Efficiency”, calling for regulatory convergence of the transatlantic markets. The study underscores the need for establishing a much more coherent and cost-efficient regulatory framework for wholesale transatlantic business in financial services. The six sponsoring trade associations welcome the increased priority that has now been given by governments and regulatory authorities in both the US and the EU to the transatlantic dialogue in financial services.

The recommended areas highlight the extensive duplication and regulatory conflict that exists in some areas and the subtle differences in approach in others. These can create considerable compliance problems and unnecessary cost for international financial service institutions and their customers.

The report argues for the formulation of a common set of customer definitions for the purposes of classification, solicitation and documentation; a common approach to core investor protection objectives such as “know your customer”; the development of a common set of examination and registration requirements; a consensual regulatory approach to other firms’ outsourcing arrangements; and the development of a forward programme to simplify critical areas of regulation such as the obligation to deliver best execution, trade allocation procedures, distribution of research, etc.

The report also urges that the process of rules’ development should be underpinned by an agreed set of consensual US/EU principles of good regulation and a common approach to regulatory impact assessments.

The first volume of the report sets out the 'business case' for priority regulatory action for establishing a more coherent framework of regulation for the carrying on of US/EU cross-border business.

The second volume is divided into two sections. Section A addresses among others licensing and business conduct rules, financial promotion and solicitation, customer documentation, standards of execution, anti-money laundering requirements, market abuse, the handling of customer assets and the recognition of qualifications and licensing requirements for key employees in respect of equities and equity derivatives in the UK, France, Germany and Spain (including recent EU developments) and equities in the US. Section B addresses largely the same issues as Section A, but in respect of equity derivatives in the US.

EU US Regulation Report Vol1
EU US Report VOL2 A
EU US Report VOL2 B

© Graham Bishop