The Belgian market is fully integrated into the European market, as noted in the International Monetary Fund's 2006 Financial System Stability Assessment (FSSA). At the time of the Assessment, Euronext Brussels was the only regulated stock exchange in Belgium. Euronext merged with the NYSE Group on April 4, 2007, to form the first transatlantic stock exchange group. According to the FSSA, which assessed Belgium's compliance with the International Organization of Securities Commission's Objectives and Principles of Securities Regulation, supervision in the securities area is of high standards. The general preconditions for effective securities regulation appear to be in place. Moreover, Euroclear is a safe, sound, efficient, and reliable system for the clearance and settlement of securities transactions. Weaknesses were identified in a few areas, including transparency of the securities enforcement procedure and the use of bearer shares. Securities regulation in Belgium is mainly based on the 2002 Law on the Supervision of the Financial Sector and on Financial Services. Since January 1, 2004, the Banking, Finance, and Insurance Commission is the single supervisory authority for the Belgian financial sector, created as a result of the integration of the Insurance Supervision Office into the Banking and Finance Commission, pursuant to the 2002 Law. The EU Directive No. 2004/39/EC on Markets in Financial Instruments has been implemented in Belgium as of July 1, 2007.

General Overview

In its 2006 Financial System Stability Assessment (FSSA) of Belgium's compliance with the International Organization of Securities Commissions (IOSCO) Objectives and Principles of Securities Regulation, the International Monetary Fund (IMF) concludes that supervision in the securities area is of a high standard. The general pre-conditions to effective securities regulation appear to be in place, including an appropriate legal, tax, and accounting framework; efficient procedures; and sound macroeconomic policies. Moreover, Euroclear is a safe, sound, efficient, and reliable system for the clearance and settlement of securities transactions. However, the IMF report highlights a few areas that still require action. In particular, the Banking, Finance, and Insurance Commission (CBFA), the single supervisory authority, should increase the transparency of the securities enforcement procedure. The report recommends abolishing Belgian companies' use of bearer shares, which are fully transferable and not included in the company's share registry. It further advises enhancing the capacity for prudential supervision and oversight of the Euroclear system.

Securities regulation in Belgium is mainly based on the 2002 Law on the Supervision of the Financial Sector and on Financial Services. Since January 1, 2004, the CBFA has been the sole supervisory authority for the Belgian financial sector, created as a result of the integration of the Insurance Supervision Office into the Banking and Finance Commission, pursuant to the 2002 Law. As of July 1, 2007, EU Directive No. 2004/39/EC on Markets in Financial Instruments (MiFID) has been fully transposed into Belgian law, making Belgium the fourth member state to fully implement the Directive.

The Belgian market is fully integrated into the European market, according to the IMF's 2006 FSSA. At the time of the FSSA, Euronext Brussels was the only regulated stock exchange in Belgium, with a total market capitalization of €232 billion and 227 listed companies. Euronext merged with the NYSE Group on April 4, 2007 to form the first transatlantic stock exchange group. Capital markets in Belgium have been shaped by the dominance of small and medium-sized companies, and strong ownership concentration, as stated in the IMF's 2006 FSSA.

The IOSCO multilateral memorandum of understanding (MMoU) is based on the thirty IOSCO Objectives and Principles of Securities Regulation adopted in 1998 and the experience gathered by securities regulators in using bilateral memoranda of understanding. The IOSCO MMoU provides a standardized framework for sharing enforcement-related information and a gradually expanding network of participating regulatory agencies. IOSCO members who wish to sign the IOSCO MMoU participate in a comprehensive screening process to establish that they have the legal capacity to fully comply with the terms of the IOSCO MMoU. Belgium's CBFA is a signatory to the MMoU and an ordinary member of IOSCO.

The Principles

1. The responsibilities of the regulator should be clear and objectively stated.

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According to the IMF's 2006 FSSA, "the CBFA is an independent regulator with a full mandate to regulate and supervise securities markets activities" (p. 47). Nevertheless, there is insufficient publicly available information to address Belgium's compliance with this principle.

2. The regulator should be operationally independent and accountable in the exercise of its functions and powers.

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As stated in the IMF's 2006 FSSA, "the CBFA is an independent regulator with a full mandate to regulate and supervise securities markets activities" (p. 47). While the agency lacks absolute budgetary independence, it has adequate budget and resources to operate. Moreover, it is accountable in the exercise of its functions through annual reports and a strict code of conduct. However, there is insufficient publicly available information to address Belgium's compliance with this principle.

3. The regulator should have adequate powers, proper resources and the capacity to perform its functions and exercise its powers.

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See Principle 2.

4. The regulator should adopt clear and consistent regulatory processes.

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There is insufficient information publicly available addressing Belgium's compliance with this principle.

5. The staff of the regulator should observe the highest professional standards, including appropriate standards of confidentiality.

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There is insufficient information publicly available addressing Belgium's compliance with this principle.

6. The regulatory regime should make appropriate use of Self-Regulatory Organizations (SROs) that exercise some direct oversight responsibility for their respective areas of competence, to the extent appropriate to the size and complexity of the markets.

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There is insufficient information publicly available addressing Belgium's compliance with this principle.

7. SROs should be subject to the oversight of the regulator and should observe standards of fairness and confidentiality when exercising powers and delegated responsibilities.

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There is insufficient information publicly available addressing Belgium's compliance with this principle.

8. The regulator should have comprehensive inspection, investigation and surveillance powers.

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According to the IMF's 2006 FSSA, "the CBFA has all necessary powers to carry out inspections and investigations, as well as a range of sanctioning powers" (p. 47). Moreover, a comprehensive inspection program for investment firms and collective investment schemes (CIS) is in place. The IMF report recommends increasing the transparency of the securities enforcement procedure. Nevertheless, there is insufficient publicly available information to address Belgium's compliance with this principle.

9. The regulator should have comprehensive enforcement powers.

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See Principle 8.

10. The regulatory system should ensure an effective and credible use of inspection, investigation, surveillance and enforcement powers and implementation of an effective compliance program.

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See Principle 8.

11. The regulator should have authority to share both public and non-public information with domestic and foreign counterparts.

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As stated in the IMF's 2006 FSSA, "the CBFA has the ability to share confidential information with foreign counterparties under a formal agreement" (p. 47). In carrying out its functions, the CBFA cooperates and shares resources with the National Bank of Belgium (NBB). Two joint bodies were established to facilitate collaboration: the Financial Services Authority Supervisory Board (FSASB), which consists of the supervisory boards of both institutions, and the Financial Stability Committee (FSC), which comprises both entities' management boards. The FSSA recommends strengthening cooperation between the CBFA and the NBB. However, there is insufficient publicly available information to address Belgium's compliance with this principle.

The IOSCO MMoU is based on the thirty IOSCO Principles adopted in 1998 and the experience gathered by securities regulators in using bilateral MoUs. The IOSCO MMoU provides a standardized framework for sharing enforcement-related information and a gradually expanding network of participating regulatory agencies. IOSCO members who wish to sign the IOSCO MMoU participate in a comprehensive screening process to establish that they have the legal capacity to fully comply with the terms of the IOSCO MMoU. Belgium's CBFA is a signatory to the MMoU and an ordinary member of IOSCO.

12. Regulators should establish information sharing mechanisms that set out when and how they will share both public and non-public information with their domestic and foreign counterparts.

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See Principle 11.

13. The regulatory system should allow for assistance to be provided to foreign regulators who need to make inquiries in the discharge of their functions and exercise of their powers.

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See Principle 11.

14. There should be full, timely and accurate disclosure of financial results and other information that is material to investors’ decisions.

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According to the IMF's 2006 FSSA, "the CBFA sets and enforces detailed prospectus and on-going disclosure requirements" (p. 48). However, the use of bearer shares may affect the dissemination of disclosure information, undermining the rights of investors. The IMF report recommends giving more powers to the CBFA to impose material-event disclosure requirements upon unlisted companies. Furthermore, while transaction reporting requirements for large shareholders are in place, the IMF advises making them public and extending the requirements to directors and related parties. Effective July 1, 2006, EU Prospectus Directive No. 2003/71/EC, which establishes a harmonized format for prospectuses in the EU, was implemented in Belgium by the 2006 Act on the Public Offers of Financial Instrument and the Admission of Financial Instruments to Negotiation on Regulated Markets (Prospectus Act). As stated in a 2008 report by the European law firm NautaDutilh, the Prospectus Act replaces the Act of April 22, 2003, and introduced new rules on the public offering of securities in Belgium and the admission of securities to trading on a Belgian regulated market. However, there is insufficient publicly available information to address Belgium's compliance with this principle.

15. Holders of securities in a company should be treated in a fair and equitable manner.

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In the context of strong ownership concentration, there is a lively debate in Belgium about the separation between ownership and control, as well as the opposition between controlling and minority shareholders, according to a 2006 report by Bogaert and Peeters. On May 23, 2007, per a 2007 study by the international law firm Allen&Overy, EU Takeover Directive No. 2004/25/EC was fully transposed into Belgian law by the 2007 Law on Public Takeovers, and the 2007 Royal Decree on Public Takeovers. The new legislation was expected to enter into force on September 1, 2007. Nevertheless, there is insufficient information publicly available addressing Belgium's compliance with this principle.

16. Accounting and auditing standards should be of a high and internationally acceptable quality.

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The Deloitte & Touche IAS Plus website discloses that, as of 2005, Belgian companies listed in a European Union (EU) and/or European Economic Area securities market are required to prepare their consolidated financial statements in accordance with International Financial Reporting Standards. Moreover, according to the IMF's 2006 FSSA, "accounting and auditing standards are of an internationally acceptable quality" (p. 48). Nevertheless, the available sources do not directly address Belgium's compliance with this principle.

17. The regulatory system should set standards for the eligibility and the regulation of those who wish to market or operate a collective investment scheme.

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According to the IMF's 2006 FSSA, the regulation of CISs is well developed in Belgium. The main laws governing CISs include the 1990 Law Relating to the Financial Transactions and the Financial Markets, and the 2004 Law relating to Certain Forms of Collective Management of Investment Portfolios. In its 2006 report, the IMF recommends abolishing the use of bearer shares. Nonetheless, the assessment does not directly address Belgium's compliance with this principle.

18. The regulatory system should provide for rules governing the legal form and structure of collective investment schemes and the segregation and protection of client assets.

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See Principle 17.

19. Regulation should require disclosure, as set forth under the principles for issuers, which is necessary to evaluate the suitability of a collective investment scheme for a particular investor and the value of the investor’s interest in the scheme.

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According to the IMF's 2006 FSSA, the regulation of CISs is well developed. Moreover, prior to an offering, prospectuses and marketing material have to be reviewed. The IMF report recommends abolishing the use of bearer shares. Nonetheless, there is insufficient publicly available information to address Belgium's compliance with this principle.

20. Regulation should ensure that there is a proper and disclosed basis for asset valuation and the pricing and the redemption of units in a collective investment scheme.

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According to the IMF's 2006 FSSA, the regulation of CISs is well developed. Moreover, rules have been established "to deal with delegations, changes to unit holder rights and net asset value calculation" (p. 48). The FSSA recommends abolishing the use of bearer shares. Nonetheless, there is insufficient publicly available information to address Belgium's compliance with this principle.

21. Regulation should provide for minimum entry standards for market intermediaries.

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There is insufficient information publicly available addressing Belgium's compliance with this principle.

22. There should be initial and ongoing capital and other prudential requirements for market intermediaries that reflect the risks that the intermediaries undertake.

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According to the IMF's 2006 FSSA, "investment firms are subject to internal control, risk management, and capital adequacy rules" (p. 48). Moreover, on-site inspections by the CBFA, as well as semi annual external audits, are performed on investment firms. The FSSA noted that additional rules, including the requirement to keep a registry of client complaints, would be adopted following the transposition of the EU's MiFID into Belgian law. The MiFID was incorporated into Belgian law on November 1, 2007. Nevertheless, there is insufficient publicly available information to address Belgium's compliance with this principle.

23. Market intermediaries should be required to comply with standards for internal organization and operational conduct that aim to protect the interests of clients, ensure proper management of risk, and under which management of the intermediary accepts primary responsibility for these matters.

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See Principle 22.

24. There should be procedures for dealing with the failure of a market intermediary in order to minimize damage and loss to investors and to contain systemic risk.

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As stated in the IMF's 2006 FSSA, a winding-up process, as well as an investor compensation fund has been established in Belgium. However, there is insufficient publicly available information to address Belgium's compliance with this principle.

25. The establishment of trading systems including securities exchanges should be subject to regulatory authorization and oversight.

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At the time of the IMF's 2006 FSSA, the CBFA had full powers to supervise Euronext Brussels. It also coordinated operational supervision of the exchange, including risk management, with the other Euronext regulators. Moreover, while the CBFA did not have direct licensing authority over the exchange, it had to be consulted in the granting of a license. The FSSA recommended further enhancing the coordination of Euronext oversight. However, Euronext merged with the NYSE Group on April 4, 2007, and there is insufficient information publicly available addressing Belgium's compliance with this principle following the merger.

26. There should be ongoing regulatory supervision of exchanges and trading systems which should aim to ensure that the integrity of trading is maintained through fair and equitable rules that strike an appropriate balance between the demands of different market participants.

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There is insufficient information publicly available addressing Belgium's compliance with this principle.

27. Regulation should promote transparency of trading.

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There is insufficient information publicly available addressing Belgium's compliance with this principle.

28. Regulation should be designed to detect and deter manipulation and other unfair trading practices.

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In 2005, the EU Market Abuse Directive No. 2003/6/EC was transposed into Belgian law by the 2005 Royal Decree amending the Provisions on Market Abuse of the Law of August 2, 2002, on the Supervision of the Financial Sector and on Financial Services. Nonetheless, there is insufficient information publicly available addressing Belgium's compliance with this principle.

29. Regulation should aim to ensure the proper management of large exposures, default risk and market disruption.

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There is insufficient information publicly available addressing Belgium's compliance with this principle.

30. Systems for clearing and settlement of securities transactions should be subject to regulatory oversight, and designed to ensure that they are fair, effective and efficient and that they reduce systemic risk.

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According to the IMF's 2006 FSSA, Euroclear is a safe, sound, efficient, and reliable system. Moreover, Euroclear observed almost all of the Committee on Payment and Settlement Systems and the IOSCO Recommendations for Securities Clearing and Settlement Systems. The FSSA recommends further enhancing the capacity for prudential supervision and oversight of Euroclear. However, there is insufficient publicly available information to address Belgium's compliance with this principle.