Eg Phd, Mphil, Dclinpsychol

This thesis has been submitted in fulfilment of the requirements for a postgraduate degree (e.g. PhD, MPhil, DClinPsychol) at the University of Edinburgh. Please note the following terms and conditions of use: This work is protected by copyright and other intellectual property rights, which are retained by the thesis author, unless otherwise stated. A copy can be downloaded for personal non-commercial research or study, without prior permission or charge. This thesis cannot be reproduced or quoted extensively from without first obtaining permission in writing from the author. The content must not be changed in any way or sold commercially in any format or medium without the formal permission of the author. When referring to this work, full bibliographic details including the author, title, awarding institution and date of the thesis must be given. OPTIMUM GOVERNANCE OF INVESTMENT CONDUCT IN THE CAPITAL MARKETS UNION —A LEGAL AND ECONOMIC ANALYSIS CHIA-HSING LI PhD in Law The University of Edinburgh 2017 ABSTRACT The Action Plan on Building a Capital Markets Union (‘CMU’) in the European Union (‘EU’) was launched by the European Commission in 2015. It aims to pursue a further development and integration of European capital markets by 2019. However, in the wake of the global financial crisis of 2007–09 and the Eurozone crisis, it is proven that appropriate governance is indispensible to underpin such integrated markets. Therefore, in order to establish a solid CMU, this thesis attempts to answer one crucial question: ‘whether investment conduct should be supervised centralisedly at the European level in the CMU’. This thesis, at first, explores the regulatory system of investment conduct in the EU to date, with particular emphasis given to the competence allocation between the EU and Member States (and between Member States). Two findings are important: first, even though the rules of investment conduct are harmonised to a large extent in the EU, supervisory issues still matter to investment intermediaries and their clients in cross-border transactions; and, second, the current supervisory system of investment conduct in the EU might bring significant costs in cross-border transactions, but this does not necessarily mean that the installation of a single supervisor in charge of investment conduct supervision is inevitable in the CMU. This thesis then examines the proposed single supervisor in detail, with an aim to find out the optimum institutional governance of investment conduct in the CMU. Based on the transaction cost approach, this thesis compares the proposed single supervisor and the current system from the perspectives of private law systems and administrative regulation respectively. From the perspective of private law governance, it is undeniable that many issues of private law in governing investment conduct are still unclear and complex in the EU, but the proposed single supervisor provides little help to these issues. By comparison, a non-mandatory pan-EU alternative dispute resolution (‘ADR’) for cross-border disputes of investment conduct might be a better option in reducing transaction costs in the CMU. From the perspective of administrative governance, the proposed single supervisor may also be difficult to pass the EU Treaty principles of subsidiarity and proportionality. This is because the total transaction costs of European capital markets will not decrease (but even increase) after the introduction of the proposed single supervisor. It is further argued that, other than the establishment of the proposed single supervisor, policymakers have to pay more attention on how to ensure the current network-based system functions effectively in the CMU. In the light of this, not only a negative answer of the research question is concluded, but also policy recommendations for designing the optimum governance of investment conduct in the CMU are given in this thesis. Keywords: European Single Supervisor; Investment Conduct Regulation; Transaction Cost Approach; Capital Markets Union LAY SUMMARY Thanks to the right of establishment and the freedom to provide services, investment intermediaries nowadays can freely provide investment services in the European Union (‘EU’). Investment intermediaries can decide to do so either on the Internet, over the phone, or through their branches or subsidiaries in other Member States. Their (potential) clients in other Member States could also enjoy a wide variety of choices. However, due to the fact that these transactions may be considered as cross-border and supranational, which competent authority is appropriate to supervise these transactions is a complicated question. Furthermore, once disputes occur, which competent authority is able to handle and resolve these disputes efficiently is also hard to be answered. On the one hand, some may claim that investment intermediaries’ behaviour should be under the centralised supervision at the EU level. On the other hand, we may still have to take into account the costs of building up such a single supervisor and the heterogeneity of capital markets between Member States. This is the debate this thesis aims to examine. This thesis explores the current regulatory system in the EU and attempts to verify the challenges of the current system, whether there is a need for the establishment of the proposed single supervisor, and whether we have other alternatives to tackle these challenges. This provides some valuable policy recommendations for establishing a true Single Market for capital in the EU—a Capital Markets Union. DECLARATION This is to certify that that the work contained within has been composed by me and is entirely my own work. No part of this thesis has been submitted for any other degree or professional qualification. Signed: __________________________ Dated: __________________________ ACKNOWLEDGEMENT I have learnt a lot in the process of this PhD journey–not only about my research subject, but also, most importantly, about the life. This three-year journey, which has led me to the end of this thesis, is the most crucial lesson in my life. I have been very fortunate to meet many exceptional people. Without the guidance given by them, all of this would not have been possible. First of all, I would like to express my deepest gratitude to my supervisors, Professor Emilio Avgouleas and Dr. Parker Hood, for their continuous support, for their patience, motivation and immense knowledge. Their excellent guidance helped me in all the time of my research and writing of this thesis. I would also like to thank Professor Marco Ventoruzzo and Professor Andrew Scott, who participated in my oral examination and provided valuable comments at the last stage. Special thanks go to the Office of the Chief Economist, the Scottish Government and to University of Edinburgh. My stay in Edinburgh was made possible by the scholarship funded by them. Additional funding was provided by the Government Scholarship to Study Abroad of Ministry of Education and Dr Sun Yat-sen Scholarship of the KMT Party, for which I give my thanks to my home country, Taiwan. Last but not the least, I am very happy to write these lines to thank my wife Fiona Ying-Chen Huang. This thesis would not have been possible without her constant support and advice. I dedicate this thesis to my wife Fiona Ying-Chen Huang, for all of her love. SUMMARY TABLE OF CONTENTS List of Figures ix List of Tables xi List of Abbreviations xiii Chapter I Introduction 1 Chapter II Competence Allocation of Investment Conduct Regulation in the EU—Rules and Rule-Making System 15 Chapter III Competence Allocation of Investment Conduct Regulation in the EU—Supervisory System 73 Chapter IV Transaction Cost Approach of Investment Conduct Governance 133 Chapter V Optimum Private Law Governance of Investment Conduct in the Capital Markets Union 193 Chapter VI Optimum Administrative Governance of Investment Conduct in the Capital Markets Union 259 Chapter VII Conclusion 303 Bibliography 309 i [This page is left blank intentionally.] ii DETAILED TABLE OF CONTENTS List of Figures ix List of Tables xi List of Abbreviations xiii Chapter I Introduction 1 1. Research Background 1 2. Research Question and Objectives 5 3. Research Methodology 5 4. Definitions 7 5. Thesis Outline 11 Chapter II Competence Allocation of Investment Conduct Regulation in the EU—Rules and Rule-Making System 15 1. Introduction 15 2. Internal Market and Single Passport of Investment Intermediaries in the EU 17 2.1. Right of Establishment and Freedom to Provide Services 17 2.2. Harmonisation, Mutual Recognition and Home Country Control 18 3. Harmonisation of Investment Conduct Rules in the EU 23 3.1. Four-Level System Established by Lamfalussy Process 23 3.2. ESMA’s Rule-Making Powers Conferred by De Larosière Reforms 27 3.3. Exhaustively Harmonised Rules in MiFID Regime 32 3.3.1. Clients’ Classification 34 3.3.2. General Requirement 37 3.3.3. Marketing Requirement 38 3.3.4. Information Requirement 40 3.3.5. Conflict-of-Interest Requirement 43 3.3.6. Quality-of-Service Requirement 48 3.3.7. Best Execution Requirement 52 3.3.8. Product Requirement 56 4. Challenges of Current System 61 iii 4.1. Institutional Tension between EU Institutions, ESMA and Member States 61 4.2. Limited Function of A Single Rulebook 65 4.3. Unclear Influence on Private Law 68 5. Concluding Remarks 71 Chapter III Competence Allocation of Investment Conduct Regulation in the EU—Supervisory System 73 1. Introduction 73 2. Incomplete Home Country Control of Investment Conduct Supervision in the EU 75 2.1. Role of Home/Host Member States in Different Business Models 75 2.2. Overlaps of ‘Two Peaks’ within Home/Host Country Division 80 3. Supranational System of Investment Conduct Supervision in the EU 86 3.1. Sector-Based Supervision of ESFS 86 3.2. De Larosière Reforms Conferring ESMA More Supervisory Powers 88 3.2.1. Enhanced Soft Powers 89 3.2.2.

Load more