by Giovanna De Minico, Professor of Public Law, University of Naples “Federico II”, ordinary member of Conseil Superior of the Communications.



I would like to start by saying that though I share the basic spirit of this initiative and its twelve principles, I would moderate an excess of enthusiasm because the successful outcome of the regulatory action depends on its successive implementation. In fact, such generic principles do not go beyond the mere manifestation of intentions, therefore their ability to restore the confidence of the savers in the Financial market will be conditioned by how the political rule-maker will convert them into punctual rules of conduct for the Financial industry, if our Europe, which is not a State, is able to identify a unitary decisional author.

Therefore, the challenge is only at the start.

Let me raise two criticisms against the 12 principles: the first concerning the method, the second the substance.

The first: that posing an unmodifiable common framework by member States has not been attained because of the nature of the principles: soft, not binding rules, which enable to steer the future behaviour of political rule-makers. The latter can comply with them or not, but it must be clear that they will not be forced to implement them. Once again Europe seems unable to go beyond the mere manifestation of intent: the European financial acts offer a good example of ignored moral suasion. 

The second: there are two criticisms, which are not directed towards the twelve principles but rather towards the future legislator. 

The first concerns the space to be granted to the self-regulating different systems of financial markets, which today are too ample and lack a binding legal framework; this has allowed the private interest governments to contend for the operators through light rules and corporative supervision. Contrarily to some American literature, I do not believe that the plurality of Self Regulatory Organizations (SROs) will be ex se able to promote a regulatory race oriented to the top while lacking minimum quality standards, which the SRO regimes must satisfy. These rules should anticipate self-regulation in order to ensure that its exit is compatible with the common good. The 12 principles do not state this; consequently this must be stated by an unmodifiable binding source by the self-regulation of SROs. A common design should also be required of each SRO in such way as to ensure a diffused and balanced participation of the different regulated classes in its rule-making because asymmetrically composed boards have already produced unilaterally oriented rules.

My last objection concerns consumer protection. The only attention to this theme in the 12 principles is the short reference to information transparency, but nothing is said about the presence of the State.  

On my opinion, the State should assist consumers by promoting an updated, intelligible, clear and reliable information flow, thereby allowing the consumers to choose the investment product. Public intervention is not aimed at replacing investors in the assessment of a given investment proposal, assuming that this judgment should remain their exclusive responsibility in line with the “attention calling” method.

The final step of enforcement should provide adequate sanctions for the infringement of the rules; these sanctions should be designed by a single law-maker, observing the parameters of assurance, inflexibility and timeliness of the sanction. The costs generated by the violation of rules should in all cases be higher than the costs of compliance. Only if this equation is applied by the law-maker, the effectiveness of the rule would be enhanced. While concerning the judiciary remedies, the class action should be available in order to offer European collective protection, which has been almost ignored by the member States.

Special attention should be paid when – as in the EU plan - the system multiplies the levels of supervision rather than streamlining them. A sanction must be provided for at each level – i.e. State and supranational – where controls or supervisory duties are not carried out.  If not, the proliferation of agencies would go hand in hand with a watered-down responsibility, or even with the impossibility of laying on anyone the responsibility for a conclusive decision. This wide concept of enforcement would also call for a cross-border single reference figure for Aquilian liability, to which supervisory Authorities should be subjected in the event of non-fulfilment of their institutional tasks. While the European experience has provided for the accountability of the Authorities only in the event of torts committed with malice or gross negligence.

Since there is still a long way to go, I would tend to be less optimistic and more pro-active towards legislators in the future, if  the world Leaders' intent to restore consumer confidence and market effectiveness is to be considered real.