ESMA promotes harmonised regulatory action on short-selling in the EU

European financial markets have been very volatile over recent weeks.  The developments have raised concerns for securities markets regulators across the European Union.  ESMA has been actively monitoring the markets over the last few weeks and has been exchanging information with national competent authorities on the functioning of the markets and the market infrastructure. 

Given these recent market developments, ESMA wants to emphasise the requirements in the Market Abuse Directive (MAD) referring to the prohibition of the dissemination of information which gives, or is likely to give, false or misleading signals as to financial instruments, including the dissemination of rumours and false or misleading news[1].  European competent authorities will take a firm stance against any behaviour that breaches these requirements and ESMA will support national authorities to act swiftly against any such behaviour which is clearly punishable.  While short-selling can be a valid trading strategy, when used in combination with spreading false market rumours this is clearly abusive.

In the area of short-selling regulation, many authorities already have either requirements for the disclosure of net short positions and/or bans of certain types of short sales in place[2].  Recent developments have meant that all competent authorities have reinforced the monitoring of their markets and are keeping their regulatory requirements under review.  ESMA has coordinated discussions between the national competent authorities, specifically on the content and timing of any possible additional measures necessary to maintain orderly markets.  

Today some authorities have decided to impose or extend existing short-selling bans in their respective countries. They have done so either to restrict the benefits that can be achieved from spreading false rumours or to achieve a regulatory level playing field, given the close inter-linkage between some EU markets. These measures have been aligned as far as possible in the absence of a common EU legal framework in the area of short-selling and given the very different national legal bases on which such measures can be taken.

The following countries have today announced or will shortly announce new bans on short-selling or on short positions: Belgium, France, Italy and Spain[3]. Information on these measures can be retrieved from the websites of the relevant competent authorities. The measures will take effect as of 12 August 2011.

[1]Articles 5 and1(2)(c) of MAD.

[2] List of measures adopted by competent authorities on short-selling:

[3]Greece already introduced a ban on short-selling on 8 August 2011.

ESMA Statement on disclosures related to sovereign debt to be included in IFRS financial statements


ESMA Statement on disclosures related to sovereign debt to be included in IFRS financial statements

According to European Regulation no 1095/2010 establishing the European Securities and Markets Authority (“ESMA”), ESMA shall act in the field of financial reporting, to ensure the effective and consistent application of European Securities and Markets legislation.

As a result of recently increased market interest in sovereign debt[1], ESMA has increased its coordination of the monitoring activities of competent authorities in response to the specific market circumstances and developments in this area.

Consequently, ESMA would like to stress the need for enhanced transparency in European listed issuers’ interim and annual financial statements using International Financial Reporting Standards (IFRSs)[2]. In doing this, ESMA would point out that IFRSs are issued by the International Accounting Standards Board, and the IFRS Interpretations Committee provides the authoritative guidance on the interpretation of IFRSs. Consequently this statement should not be understood as constituting guidance or recommendations on IFRS, but rather as assisting issuers in preparing disclosures on sovereign debt.

ESMA underlines that an appropriate application of relevant IFRS is essential in order to ensure adequate disclosures by listed companies of their exposures to sovereign debt and related instruments. ESMA considers that, when material, disclosures should be provided country by country.

Whilst ESMA acknowledges that reporting requirements for interim financial statements prepared under IFRS are not the same as for annual financial statements, ESMA believes that the IFRSs that most closely address those issues related to holdings of sovereign debts as financial assets, within the scope of this document, for all financial statements are: IFRS 7 Financial instruments: DisclosuresIAS 1 – Presentation of Financial Statements, IAS 34 – Interim financial reporting and IAS 10 – Events after the Reporting PeriodWithout constituting an exhaustive list, particular attention should be given to the IFRS provisions mentioned in the Appendix to this Statement.

ESMA would like to encourage all issuers to provide any additional information that might be relevant to investors’ understanding of the financial information. For example, an entity might consider including or making reference in its financial reporting to any disclosures made in relation to stress testing on exposures to sovereign debt performed by the issuer or a third party organisation.

ESMA will continue to coordinate competent authorities’ monitoring of the application of the relevant requirements by listed issuers with respect to sovereign debt exposures in order to ensure an adequate level of transparency.

The whole Public statement can be found on the following link:

[1] Sovereign debt, for the purpose of this statement, refers to bonds issued by and loans given to central and local government and governmental bodies.

[2] European Regulation 1606/2002 regarding adoption of the International Accounting Standards.