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Committee of European Securities Regulators

Committee of European Securities Regulators. WORLD BANK conference - 8 November 2005 Advanced Program in Accounting and Auditing Regulation CESR An Introduction Michel Colinet Director for Financial Information, CESR. Overview. What is CESR? Role of CESR and the Lamfalussy Process

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Committee of European Securities Regulators

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  1. Committee of European Securities Regulators WORLD BANK conference - 8 November 2005 Advanced Program in Accounting and Auditing Regulation CESR An Introduction Michel Colinet Director for Financial Information, CESR

  2. Overview • What is CESR? • Role of CESR and the Lamfalussy Process • CESR inter-institutional relationship • CESR working methods and organisation • CESR-Fin: organisation, key objectives and sub-committees • Concluding remarks

  3. What is CESR? • Committee of European Securities Regulators: 27 members (EU+EEA). • Officially established in June 2001 by European Commission Decision • background: Lamfalussy Reportpresented by a Committee of Wise Men on the Regulation of European Securities Markets • Introduced a 4 level approach to the development of EU securities legislation – now extended to banking and insurance • Role for CESR at Level 2 and 3 of Lamfalussy process • Independent Committee regrouping senior representatives (Chairs and Senior Officer) from national public authorities competent in the field of securities regulation • Operational arrangements of CESR set out in a Charter. Exchange of confidential information among Members under signed MOU.

  4. LEVEL 4 LEVEL 4 Enforcement LEVEL 3 LEVEL 3 Increasing Supervisory Convergence Guidelines and Standards LEVEL 2 LEVEL 2 Implementing Measures LEVEL 1 LEVEL 1 EU Directives and Regulations Role of CESR and the Lamfalussy Process (1) THE FOUR LEVEL PROCESS

  5. Role of CESR and the Lamfalussy Process (2) • LEVEL 1 = general measures ; high level objectives ( = Directives) • LEVEL 2 = sets out technical requirements necessary to achieve objectives of Level 1 (Directives or Regulations) • LEVEL 3= measures intended to foster consistent and uniform implementation (developed by CESR for use by its members ) • LEVEL 4 = European Commission (EC) checks Member States compliance with EU legislation and may take action against Member States in case of breach of Community Law. CESR may contribute at level 4 by supplying information to the EC

  6. Role of CESR and the Lamfalussy Process (3) LEVEL 2 Commission Mandate to CESR CESR‘s Final Advice sent to EU Commission Proposal for Implementing Measures presented to ESC Vote by ESC within 3 months Adoption of Implementing Measures by EU Commission

  7. Role of CESR and the Lamfalussy Process (4) Level 2 • Preparation of Level 2 advices to the European Commission represented the largest part of CESR's activities until June 2004 • Areas covered by CESR at Level 2: Prospectus and Transparency Directives, MiFid, Investment Management • Examples of CESR’s advices for Level 2 implementing measures in the area of financial reporting • Prospectus regulation (historical and prospective financial information, pro forma information, auditor’s involvement, MD&A…) • Technical measures for ongoing financial reporting by listed companies (Transparency Directive) • Assessment of Equivalence between Canadian, Japanese and US GAAP and IFRS.

  8. Role of CESR and the Lamfalussy Process (5) Level 3 • Foster consistent and uniform transposition and day to day implementation of Level 1 & 2 legislation • Active role for CESR at Level 3 • Convergence in supervision practice • Administrative guidelines, interpretations, recommendations, common standards, peer reviews and comparison of regulatory practices • Examples in the area of financial reporting: CESR Recommendations on • Transition to IFRS: enhanced disclosures and explanations on impact of the transition from old GAAP to IFRS • Presentation and audit of historical financial information in prospectus (IPO and SPO) • Alternative Performance Measures : presentation of non GAAP performance indicators • Standards on Enforcement of Financial Information • Significant shift towards greater emphasis on Level 3 work which has gained pace over 2004 and will continue to be the focus

  9. CESR‘s Inter-Institutional Relationships

  10. CESR‘s working methods (1) • CESR Chair and Vice-Chair elected for a period of two years.  The Committee of Chairs (of national authorities) meets at least four times a year.  • Each Expert Group is Chaired by the Headof a CESR member (Chair or Commissioner) and experts from all the members participate • CESR works with the support of a Secretariat • A representative of the European Commission participates as observer in all debates (except in discussions related to individual and/or firms).

  11. CESR‘s working methods (2) • CESR issues an Annual and Half-Yearly Report (submitted to the European Commission and presented to the European Parliament and the Council) which provides extensive information on CESR • CESR reports regularly to the European Parliament and maintains strong links with the European Securities Committee • CESR’s offices located in Paris (Avenue de Friedland 11-13, 75008 Paris. • Website: www.cesr-eu.org.

  12. CESR‘s working methods (3) Transparency is an integral part of CESR‘s working practices • CESR Public Statement on Consultation Practices • High level Market Participants Consultative Panel • Consultation procedure includes (mainly for Level 2 work): • Call for evidence at reception of a new mandate from the EC • Consultative Working Groups (market experts) set up to advise the CESR Expert Groups • Public consultations on draft papers (sometimes re-consulting if necessary). • Public hearings for interested parties to voice their concerns and to make suggestions (held in Paris) • Responses to consultations are published on the CESR website • The final advice is issued with a feedback statement

  13. CESR organisation (post June 2004) Market Participants Consultative Panel CESR Chairs Plenary meeting 4 x year Permanent Operational Groups Expert Groups • Level 2 • MiFID • Intermediaries • Cooperation and Enforcement • Markets • Transparency • Investment Management Mediation Task Force CESR-Pol CESR-Fin Level 3 • Level 3 • Investment Management • Clearing and Settlement • Prospectus Review Panel

  14. CESR-Fin -Organisation ARC CESR-Fin SAC SISE ATF SCE EFRAG EECS

  15. CESR Fin Key objectives • IFRS: • Monitor pro-actively the development and EU adoption (endorsement) of international accounting standards (IAS/IFRS) • Level 2 and 3 regulatory work • Enforcement of compliance with IFRS:foster a proper and consistent application of IAS/IFRS by EU listed companies, through coordination of national supervision activities and exchange of information • Audit:Monitor developments in Europe in the field of auditing.

  16. CESR-Fin subcommittees(1) SISE (Subcommittee on Endorsement of International Standards) • Monitors development and UE endorsement of IAS/IFRS (comment letters…) • PermanentObserver to Accounting Regulatory Committee (ARC), European Financial Reporting Advisory Group (EFRAG) and IASB Standards Advisory Committee (SAC) • Level 2: advice to the EC on Equivalence of Canadian, Japanese and US GAAP with IFRS (June 2004) • Level 3: • Recommendation on Transition to IFRS (Dec 2003) • Recommendation on Alternative Performance Measures (May – Oct 2005)

  17. CESR-Fin subcommittees(2) ATF (Audit Task Force) Monitoring of EU regulatory developments – focus on audit of publicly accountable companies • 8th Directive on Company Law + EU endorsement of auditing standards • Oversight of audit profession & Consideration of independence requirements

  18. CESR-Fin subcommittees(3) Enforcement of IFRS(will be further developed by M. Østergaard and M. Suurväli) -> SCE (Sub-Committee on Enforcement) • Develops standards and guidance for harmonizing enforcement methodology in the EU -> EECS (European Enforcers Coordination Sessions) • Forum of EU National Enforcers: discussion of enforcement decisions and practical issues in relation to financial reporting under IFRS • Database of national enforcement decisions

  19. Concluding remarks • Markets are beginning to integrate at differing speeds, and this looks set to be encouraged further by the FSAP; • CESR has had, and continues to have, a very ambitious workload. The emphasis of CESR work is shifting significantly from providing Level 2 advice, to an increasing emphasis on supervisory convergence i.e. Level 3; • CESR is actively working on developing all the tools available in the new legislative framework to deliver Level 3 convergence; • IFRS: continuation of monitoring work on new or revised standards/interpretations and importance to deepen coordination of enforcement for fostering consistent application of standards thoughout the EU

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