Date: 21st February 2022

BETTER FINANCE and its member organisations representing individual, minority shareholders see the framework for sound functioning and trustworthy listed issuers as comprising three key dimensions: first, sustainable corporate governance (corporate reporting); second, robust statutory audit market; and sound supervision, both of listed issuers and of auditing firms.

In terms of corporate governance, we believe that it represents the most important dimension as fraud can be prevented or identified the easiest within the company itself. For this, EU law must harmonise legislation across Member States to ensure the independence of internal (governing) bodies within listed issuers, particularly those who are responsible for the sound management of the company and further empower minority shareholders.

Regarding statutory audit, the solutions adopted so far have not improved the situation and many local markets are still characterized by oligopolies of large audit firms. The lack of harmonization in terms of the applicable framework across the EU and inconsistent supervision further creates regulatory arbitrage and different standards of investor protection.

One potential solution, supported by BETTER FINANCE, is that of joint audits, which will ensure a better quality of statutory audits, fewer conflicts of interests, and will create the necessary conditions for new market entrants to break the oligopoly.

In terms of supervision, we often observe inconsistencies at the national level. EU law should harmonise this approach and provide further powers to ESMA to ensure supervisory convergence.