‘No action’ letters: EU efficacy and accountability​

Research topics:

Commentary on the new no action letter jurisdiction of ESMA in light of the SEC’s established no action letter practice

Research questions:

Is the new no action letter process a viable state-of-the-art construction within the wider regulatory governance powers of ESMA?

Etka Atak

1 vlog

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, calls have been made by the market participants 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 amalgamation of the already existing powers of ESMA brought together under one article. The author 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 makes this issue all the more pressing, coupled with ESMA starting to issue its first no action letters. 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.

KEYWORDS:No action letters, ESMA, SEC, reform, regulatory governance, soft/quasi rule-making, judicial deference, guidelines, recommendations, questions and answers, coordination function, common supervision, accountability

1. Regulation (EU) 2019/2175 of the European Parliament and of the Council of 18 December 2019 amending
2. Regulation (EU) No 1093/2010 establishing a European Supervisory Authority (European Banking Authority),
3. Regulation (EU) No 1094/2010 establishing a European Supervisory Authority (European Insurance and Occupational Pensions Authority),
4. Regulation (EU) No 1095/2010 establishing a European Supervisory Authority (European Securities and Markets Authority),
5. Regulation (EU) No 600/2014 on markets in financial instruments,
6. Regulation (EU) 2016/1011 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds,
7. Regulation (EU) 2015/847 on information accompanying transfers of funds [2019] OJ L 334/1