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FCLTGlobal submits memorandum to ESMA on evidence of short-term decision-making in global capital markets

Representatives from FCLTGlobal were delighted to participate in the European Securities and Markets Authority’s (ESMA) workshop on short-termism, held in Paris on 16 September 2019. ESMA’s work on short-termism followed a Call for Advice issued by the European Commission to develop a report presenting the evidence and possible advice on potential undue short-term pressure on corporations.

The workshop was a series of structured segments based on research and evidence gathered by ESMA staff: investment strategy and investment horizon; disclosure of environmental, social and governance (ESG) factors and the contribution of such disclosure to long-term investment strategies; the role of fair value in better investment decision-making; institutional investors’ engagement; remuneration of fund managers and corporate executives; and use of credit default swaps (CDS) by investment funds. FCLTGlobal submitted a memorandum on evidence of short-termism in the capital markets, which we hope will prove useful to ESMA as it prepares a report for the European Commission late this year. Highlights include:

ESMA is an independent EU authority that contributes to safeguarding the stability of the European Union’s financial system by enhancing the protection of investors and promoting stable and orderly financial markets. It achieves this by assessing risks to investors, markets and financial stability, completing a single rulebook for EU financial markets, promoting supervisory convergence and directly supervising credit rating agencies and trade repositories.

To further substantiate its report on short-termism, ESMA shared responses to the questionnaire that issued in June 2019 to gather evidence on potential short-term pressures on corporations stemming from the financial sector.  Based on its findings from the survey and the workshop, inter alia, ESMA will deliver a report to the European Commission that presents evidence and possibly advice on potential undue short-termism. The Commission will consider ways to follow up on the report’s findings, which may include policy actions.