Reuters: Regulatory News: UPDATE 1-EU watchdog should not have power to ban short-selling

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UPDATE 1-EU watchdog should not have power to ban short-selling Sep 12th 2013, 08:58 Thu Sep 12, 2013 4:58am EDT By Huw Jones LONDON, Sept 12 (Reuters) - The power of the European Union's Paris-based market watchdog to ban short-selling in any member state should be annulled, an adviser to the EU's top court said in an opinion that will please Britain which brought the case. Britain had argued that such a power, part of a new EU law introduced last year, went beyond what the watchdog could do under the EU treaty. This is one of several attempts by Britain to push back on increasing centralisation of regulation at EU level at the expense of London, the bloc's biggest financial centre. "The emergency powers granted by that article to the European Securities and Markets Authority to intervene in the financial markets of member states so as to regulate or prohibit short selling go beyond what could be legitimately adopted as a harmonising measure necessary for the establishment or functioning of the internal market," Advocate General Niilo Jaaskinen said in a statement. Jaaskinen said the article in the EU's short-selling law granting ESMA such power should be annulled. The advocate general said the emergency power should have been based on a different part of the EU treaty which require decisions to be taken on the basis of unanimity among member states. Such non-binding opinions from advocate generals at the European Court of Justice are typically endorsed by the full court in a majority of cases. Short-selling refers to the selling of shares that are not owned by the seller. The seller is betting that the price of the shares will fall so they can be bought back at a lower price. The EU law seeks to coordinate short-selling bans and avoid the piecemeal measures taken by EU states, including Britain, during the 2007-09 financial crisis to shield banking shares. The law gives ESMA the power to force member states to introduce a ban if there is a threat to the orderly functioning of markets and financial stability. A spokesman for Britain's finance ministry said the UK supported the short-selling law and had engaged constructively with the European Commission, ESMA and other member states. "Our legal challenge does not change this. We are seeking legal clarity on how powers given to ESMA to restrict or ban short selling sit with the principles established under the existing case law," the spokesman said. The European Commission, which drafted the law, and ESMA had no comment. Link this Share this Digg this Email Reprints

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