Securities markets play an important role in the financing of economic activity. The financial crisis, however, highlighted the risks, which may arise from highly complex, intransparent financial instruments and internationally interconnected financial markets and institutions. Against this background, the issue of how to ensure that financial markets fulfil their functions both for individual participants and for economic systems and societies as a whole is important. The question also gains urgency in Europe in the light of a – real or perceived – scarcity of bank credit arising from regulatory constraints and a wider reconsideration of future bank business models: in this situation, securities markets can provide welcome and useful alternatives at least for medium to large firms to obtain financing, and many observers indeed expect a shift towards more securities markets versus bank financing in continental Europe over the coming years.
Securities markets authorities face the task of ensuring a smooth functioning of securities markets. Apart from operational issues, this has traditionally involved safeguarding fair treatment of savers and investors. This can happen either by ensuring a high degree of transparency on the part of issuers and a high standard of financial education, so that well-informed and educated investors are in a position to make good decisions on their own. Alternatively, to the extent that this approach is not considered to be sufficient, investors may actively be protected from their own unwise decisions and adverse financial consequences, by regulating the scope of financial instruments to be offered to them and by regulating which intermediaries are allowed to sell financial products under which preconditions. Of course, also a combination of these instruments may be used, which is actually the case in practice in most countries. To shed light on these issues and the challenges in the years ahead, SUERF – the European Money and Finance Forum and CNMV – Comisión Nacional del Mercado de Valores – jointly organised a conference in Madrid on the topic of “Challenges in securities markets regulation: Investor protection and corporate governance”. The conference, which marked the 25th anniversary of the establishment of CNMV, was attended by around 120 academics, regulators, central bankers and financial practitioners from around the world.