The European Union's executive will propose a law to safeguard the rights of investors who buy and sell shares and other securities across the bloc's borders, an EU official said on Thursday.
Sometimes it is unclear who is the legal owner of a security when it passes through several intermediaries, said Patrick Pearson, a senior official at the European Commission, which will propose the draft measure in September.
"We now have 27 fractured laws," Pearson told an industry conference, referring to national laws in the 27 EU states.
Investors in Europe also lost money in swindler Bernard Madoff's $65 billion fraud on Wall Street and were caught up in the demise of US investment bank Lehman Brothers.
"In both cases, it was actually not clear at all who owns what […] You see the mess in determining who owns what," Pearson said.
The plethora of differing national securities rules in the EU impedes market integration and bumps up costs by hindering competition in clearing and settlement of trades, Pearson said.
A draft law on legal certainty would protect rights regarding dividends and voting in company meetings within the EU so that investors are not locked into national markets.
Pearson said it would also encourage more cross-border trading in shares by bringing down costs through competition.
The EU executive is likely to use the draft law to regulate central securities depositories (CSDs) and spur competition.
"We want to discuss an obligation on our member states to guarantee full exportability and importability of securities," Pearson said.
CSDs would play a key role in this, which will spark "uncomfortable" discussion due to many vested interests, Pearson added.
The European Parliament and EU states have joint say on EU financial rules.
(EURACTIV with Reuters.)