Independence in Financial Services

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Given the complexity and insufficient transparency of service providers in financial markets, market discipline alone is insufficient to ensure their independence. This cautionary view was expressed at an ECMI-CEPS event on June 6 by Steven Maijoor, Chairman of the European Securities and Markets Authority (ESMA). Referring to audits, credit ratings and investment advice Maijoor favoured clearer rules to tackle the conflicts of interest arising from ownership structures and the bundling of professional services. Panellist MEP Wolf Klinz considered that hard disclosure and other practical steps could significantly improve advice and other services.

On the rotation of audit firms, Maijoor was convinced of its necessity, while Klinz warned that it could make auditors less resilient to client pressures. Another panellist, Fabrice Demarigny (Mazars), observed that joint auditing would have the positive effect of creating more choice in the market and avoiding dependence on a small number of players. Tony Bromell (ICAEW) stressed that independence is central but that the quality of audits also depends on skills and training.