Achieving supervisory convergence: the role of ESMA in fostering trust in networks of regulators

This paper examines how the European Securities and Markets Authority (ESMA) has ensured supervisory convergence in the domestic implementation of the Undertakings for Collective Investments in Transferable Securities (UCITS) directive. UCITS is widely considered a success case of EU law implementation and a relatively high level of trust is observed among the regulators overseeing its implementation in the member states. Over time, UCITS has been instrumental in creating a harmonised regime for the sales of investment funds across the EU via the passporting principle, which means that funds authorised in one MS can be sold in another MS without further authorisation. ESMA’s founding regulation gives the agency an explicit mandate to ensure consistent, efficient and effective application of EU law, and to foster supervisory convergence. In this regard, building trust among domestic regulators in the National Competent Authorities (NCAs) is an essential component of successful implementation of EU law. Using Bratspies’ (2008) conceptualisation of regulatory trust as stewardship, expertise, and transparency, we conduct a case study of the evolution of regulatory trust in networks of EU domestic regulators working on the UCITs directive. We investigate the role of the ESMA in fostering regulatory trust over time, drawing on official documents, semi-structured interviews with regulators, and a questionnaire.