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14 October 2013

Consob publishes its three-year strategic plan

The plan preparation is based on a logical model that starts out from the risk assessment connected with forecast changes to the economic-financial situation and the institutional context of reference.

The 2013-2015 strategic plan is also based on informative elements arising from the closure of the previous 2010-2012 planning cycle. These elements in the first place regarded the verification that the risk areas identified previously still remain or recognising their altered characteristics. In actual fact, the joint analysis of the action taken to mitigate the risks identified in the 2010-2012 strategic plan and the current external context factors has examined the evolution of the risk areas over the two three-year periods and, consequently, the institute's strategic objectives have been identified.

Below, for each risk area, details are given of the strategic objectives for the three-year period 2013-2015.

Risk area 1: increase in the number of issuers marked by uncertainty as to their status as a going concern and consequent possibility of earning manipulation and mispricing of the related securities.

  • To strengthen the supervision of the economic-financial information relating to the issuers of financial instruments traded on Italian markets or disseminated to the public, made available directly or in a derivative fashion (studies, ratings assessments, blogs, forums) in order to promptly identify the potential cases of incorrect representation of the economic-financial positions of the issuers and ensure the transparency and integrity of the markets, fighting the manipulation of information.
  • To strengthen the supervision of the issuers at greatest systemic risk, such as those with highest capitalisation or belonging to the financial segment, to be implemented through a systematic and in-depth analysis of all subjects. As regards small/medium capitalisation issuers, to apply a "sample" supervisory approach, identifying those showing signs of critical issues by means of specific risk-based models.
  • To focus controls on the medium/large auditing companies involved to a significant extent in the auditing of listed companies (by means of direct intervention of preventive supervision) and to assess the criteria for the execution of the powers of the delegation pursuant to Art. 22, subsection 4 of Decree 39/2010 for the implementation of quality controls on small legal auditors (not focussed on the auditing of listed companies).

Risk area 2: the low profitability increases the risk of conflicts of interest between majority shareholders and minority shareholders.

  • To focus a systematic analysis of situations of conflict of interest on all companies of the FTSE Mib and for companies not on the FTSE Mib, to guide supervision of corporate governance of subjects showing a greater risk of expropriation of the minorities, identified according to a specific risk-based analysis model.

Risk area 3: the reduced profitability and liquidity of intermediaries increases the risk of conflicts of interest with customers.

  • To supervise the distribution of the intermediaries with a focus on placement, also through out-of-office offers of products marked by complex profiles and accentuated conflicts of interest.
  • To supervise coherence with the provisions of the Consolidated Law on Finance and the Intermediaries' Regulation of the commercial policies of the asset management companies, starting from the definition of the range of products.
  • To supervise the asset management companies managing real estate funds approaching maturity, with particular regards to the obligation to define and update a coherent equity forecast plan with the duration of each fund and market conditions.

Risk area 4: the needs for funding of the bank issuers, increasing the risks of inadequate transparency in the disclosure to investors, such as to prejudice the correct function of the markets and the stability of the financial system.

  • To guarantee the correctness of the disclosure given in the offer documentation of products and on the issuer situation, with specific attention paid to the credit risk and to signal the most critical offers in terms of supervision with regards to MiFID by means of the implementation and development of supervisory models of non-equity products on the basis of product mapping and processing of results obtained from the Memorandum of Understanding with the Bank of Italy.

Risk area 5: the growth of the fragmentation of trade increases the risk of failure to comply with transparency and best execution obligations.

  • To strengthen supervision of information flows to Consob (transaction reporting) and to the public (transparency) through the development of computerised monitoring of the correct fulfilment of obligations and to strengthen the supervision of the regulation of best execution by the trader intermediaries, in particular, examination of the automatic selection mechanisms of the trading platforms ("smart order routing").

Risk area 6: the great development of high frequency trading and automated trading increases the risks of a non-orderly fulfilment of trading and the possibility of new forms of market abuse.

  • To strengthen the supervisory initiatives aimed at raising the quality of the organisational requirements and control systems for trading venues and investment firms operating in highly-automated environments (algorithmic trading and HFT), verifying and monitoring respect of suitable compliance levels with ESMA guidelines over time.

Moreover, the following two areas of intervention have been identified, which, although not deriving from specific risks, take the form of medium/long-term actions aimed at grasping opportunities that enable the institute to improve in the pursuit of its institutional aims:

  • to ensure suitable growth and structuring of the capital market in order to encourage the development of financial sources as an alternative to bank debt for businesses, in particular for small and medium-sized businesses, and more extensive possibilities for diversification of portfolios for investors;
  • to create a stable relationship between the institute and the consumer associations through interaction methods able to guarantee a constant, bi-univocal flow between the parties involved.

Press release

Full Strategic Plan (in Italian only)

© Consob - Commissione Nazionale per le Società e la Borsa

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