Pat on the Shoulder or Real Empowerment? New ESMA Jurisdiction in No-Action Letters Compared with the SEC Experience

Abstract

No-action letters have been in use in the US by the Securities and Exchange Commission (SEC) for over 50 years. Intrigued by the usefulness and the agility provided by the no-action letters, market participants have made calls to introduce a similar competence/power for the European Securities and Markets Authority (ESMA). ESMA was eventually given the possibility to issue no-action letters. Arguably, the new power stands to be an amalgam of the already existing powers of ESMA brought together under one article. This article proposes that the new power is not free from accountability and efficacy problems and that some amendments are needed to address this dangerous lack. The dearth of scholarship on the no-action letters in the EU coupled with ESMA starting to issue its first no-action letters makes analysing this issue all the more pressing. In setting the scene, the article describes the no-action letters used by the SEC. The article then analyses ESMA as an EU agency and sets out its regulatory remit. Thereafter the new no-action power of ESMA is explained and compared with the established practice in the US. The article finally concludes by pointing out the deficiencies of the new power of ESMA and makes suggestions to improve its efficacy and accountability. Central Securities Depositories, resolution, legal and policy considerations, resolution objectives, interaction with CSDR and other harmonisation initiatives