This article examines the proposed transition from a European Securities and Markets Authority (ESMA) Management Board to an Executive Board under the Market Integration and Supervision Package (MISP), arguing that such a shift represents a profound and contentious reconfiguration of ESMA governance. Central to this critique is the assertion that the proposed Executive Board is endowed with broad, autonomous discretionary powers that fundamentally exceed the executive tasks permitted under the parameters of the Meroni doctrine. Furthermore, the conferral of authority upon this Board to mandate the suspension of cross-border service rights under Draft Article 17aaa of MISP constitutes a definitive breach of the Romano doctrine. Ultimately, the reform effects a systemic disruption of collegial governance by institutionalizing five full-time Executive Board members as voting constituents within the Board of Supervisors, thereby engineering a structural imbalance where a centrally appointed core can effectively neutralise the collective deliberations of the Member State National Competent Authorities.

The evolution of the European Securities and Markets Authority (ESMA) since 2011 has been defined by its role as a peer-led coordinator, tasked with fostering supervisory convergence while respecting the decentralised competence of Member States’ National Competent Authorities (NCAs). Under the existing framework, the Management Board and Board of Supervisors serve as a vital constitutional anchor, ensuring that ESMA’s strategic and operational trajectory remains meticulously aligned with the collective interests and diverse market realities of NCAs. While ESMA has historically been granted direct oversight in specialised niches, most notably concerning Credit Rating Agencies, Trade Repositories, and systemically important third-country Central Counterparties (CCPs), these responsibilities remain strictly delineated exceptions to the rule of national supervision. However, the EU Commission’s MISP seeks to terminate this collaborative model, replacing it with an Executive Board that fundamentally reconfigures the power dynamics of the Union’s financial architecture by transforming these isolated exceptions into a pervasive new standard of centralised governance.

Under the proposed Articles 44a and 46a of MISP, the proposed Executive Board is endowed with a qualitative expansion of authority that extends far beyond administrative efficiency, granting it direct and exclusive supervisory mandates over EU-based significant Trading Venues, CCPs, Central Securities Depositories, and all Crypto-Asset Service Providers. This centralisation is augmented by the conferral of autonomous investigatory and sanctioning powers, alongside the unprecedented ability to override NCAs in matters of dispute settlement and alleged breaches of Union law. Furthermore, by integrating these executive members as full voting participants within the Board of Supervisors, the MISP creates a structural dilution of national influence. This appears to create a closed loop of technocratic decision making where the centrally appointed executive can effectively marginalize NCAs, particularly those of small jurisdictions, by treating the entire internal market as a single jurisdictional pillar.

Consequently, the transition from a Management Board, which derives its legitimacy from a carefully balanced synthesis of geographical diversity, national authority expertise, and supranational interests, to an independent Executive Board transcends a mere administrative update; it represents a constitutionally weak transformation that jeopardises the legal and operational integrity of the Union’s financial oversight framework. The proposed Executive Board is endowed with broad and autonomous discretionary powers that fundamentally exceed the clearly defined executive tasks permitted under the parameters of the Meroni doctrine.  

By empowering the Executive Board to intervene in cases of ‘serious supervisory failures’, a threshold left dangerously ill-defined under Draft Article 17aa, the MISP orchestrates a flagrant departure from the Meroni doctrine. Under Paragraph 1, the Executive Board is granted the near total discretion to determine when a failure ‘jeopardises the integrity of financial markets,’ a high-level policy assessment that transcends technical application and enters the realm of autonomous economic judgment. This overreach is compounded by Paragraph 4, which weaponises the Board’s opinion by granting it the binding authority to compel NCAs to ‘revoke or amend’ their own prior decisions or to ‘suspend the provision’ of financial services. This is not a mere technical oversight, it is a transfer of political and economic prerogative that the CJEU has strictly reserved for institutions with direct Treaty-based accountability. By allowing a technocratic body to unilaterally veto national approvals and mandate corrective actions based on its own subjective interpretation of ‘market shortcomings,’ Article 17aa creates an unconstrained delegation of power that bypasses the procedural safeguards of the TFEU and dismantles the constitutional balance between Union agencies and Member State authorities.

Furthermore, the conferral of authority upon the Executive Board to mandate the suspension of cross-border service rights under Draft Article 17aaa of MISP represents a definitive breach of the Romano doctrine. This constitutional principle dictates that EU agencies cannot exercise discretionary powers that produce normative effects or alter the legal status of market participants, prerogatives strictly reserved for the Union’s primary legislative and executive organs. Article 17aaa(2) weaponises this overreach by empowering the Executive Board to take a ‘decision requiring’ an NCA to halt an entity’s operations based merely on the Board’s own ‘reasonable grounds’, a standard that is inherently subjective and lacks exhaustive legislative definition. Furthermore, Article 17aaa(3) grants the Executive Board the extraordinary power to bypass national authorities entirely and issue a direct, binding decision to the private entity itself. By unilaterally abrogating the statutory ‘European Passport’, the bedrock of the internal market, the Executive Board moves beyond technical supervision into the realm of quasi-normative rule making. It assumes the role of a political arbiter, capable of altering the economic landscape of the Union without the procedural safeguards, accountability, or the ‘intermediation’ of the Commission required by the TFEU and the hierarchy of norms.”

This concentration of authority is further exacerbated by the Executive Board’s autonomous sanctioning powers, which represent a qualitative shift toward a “centralised commander” model of supervision. Proponents of the MISP reform frequently invoke the landmark Short Selling case (C-270/12) to provide a veneer of judicial legitimacy; however, such a reliance constitutes a fundamental misreading of the Court’s restrictive criteria. The CJEU’s validation of ESMA’s powers in 2014 was explicitly contingent upon their temporary, emergency nature and the existence of “precisely delineated” operational triggers. In stark contrast, the MISP proposal seeks to change these exceptional tools into a permanent and generalised regime of executive command. This overreach is rendered even more legally precarious by the 2024 CJEU judgment in Case C-551/22 P, which represents a significant judicial direction toward a ‘revived Meroni strictness.’ In this ruling, the Court explicitly reaffirmed that a resolution scheme adopted by a technocratic body, in that case, the SRB, does not possess autonomous legal effects for third parties until it is endorsed by the Commission. By confirming that an action for annulment must be directed against the Commission rather than the agency, the CJEU reinforced the principle that the core of executive decision making cannot be transferred to an independent body. The MISP Executive Board’s proposed autonomy, characterised by its power to take direct action against Member State NCAs and impose sanctions without a secondary layer of Commission approval, would appear to be directly at odds with this contemporary jurisprudence. Under the standard set in C-551/22 P, granting the Board the power to bypass the Commission’s political oversight would appear to constitute an impermissible delegation of discretionary power that lacks a legally responsible institutional anchor.

Furthermore, the MISP proposal fails the rigorous evidentiary threshold of the subsidiarity test by proceeding upon the unsubstantiated assumption that centralisation possesses an inherent functional superiority over decentralised oversight. Effective financial supervision, particularly concerning the granular monitoring of trading conduct, is fundamentally predicated upon geographic and informational proximity, based on a comprehensive understanding of the operational and governance structure of the supervised entity. The proposed Executive Board, by its very design, lacks a mechanism for geographic representativeness, institutionalising a structural detachment from the diverse market ecosystems it intends to govern. By marginalising the specialised expertise of NCAs, the reform causes a critical loss of the informational proximity necessary to understand local market nuances, effectively risking the “regulatory backwardness” of less-developed financial regions that Article 174 TFEU seeks to prevent. This “one-size-fits-all” regulatory architecture threatens to benefit dominant financial centres (such as Paris) at the expense of smaller, peripheral hubs, creating an injustice that ignores the mandate for territorial cohesion. Consequently, Article 174 TFEU serves as a substantive legal constraint and a treaty-level justification for the subsidiarity principle; it establishes that the Union’s development must be “harmonious” rather than lopsided. By prioritising a centrally appointed technocratic core that neutralises NCA deliberations, the reform constitutes a definitive breach of the Treaty mandated duty to maintain territorial and economic balance.

The proposed reform also represents a systemic disruption of the collegial governance that has historically underpinned the Union’s supervisory architecture. By institutionalising the five full-time members of the Executive Board as voting constituents within the Board of Supervisors, the MISP proposal engineers a structural imbalance where a centrally appointed core can effectively neutralise the collective deliberations of the Member States. This configuration facilitates the emergence of an “insulated technocratic island,” a decision-making apparatus strategically detached from the granular complexities and idiosyncratic risks of the national markets it is mandated to oversee. Such a design fundamentally separates the vital link between European level executive action and the domestic financial stability responsibilities that remain the primary burden of NCAs. This dilution of the NCAs’ proportional influence constitutes a departure from the principle of institutional equilibrium and risks fostering a democratic deficit within the financial markets’ oversight framework, bypassing the localised expertise and accountability structures essential for maintaining market integrity and investor confidence across the Union’s diverse economic landscape.

In conclusion, the proposed replacement of the Management Board with an autonomous Executive Board under the MISP creates a centralised authority that is essentially ultra vires by design. By concentrating far reaching investigatory, enforcement, and sanctioning powers within a narrow, non-representative body, the reform significantly compromises the institutional balance and invites an elevated risk of annulment under Article 263 TFEU. To maintain a legally robust and operationally stable Union for capital markets and savings and investments, the EU must give up the pursuit of an unaccountable executive core and instead move toward a model of “cooperative oversight” that reinforces the existing partnership between ESMA and NCAs. A superior alternative lies in the formalisation of a reinforced Management Board, designed to enhance ESMA’s operational agility without hollowing out its representative legitimacy. This model would involve augmenting the current Board with permanent, specialised sub-committees tasked with the granular oversight of cross-border infrastructures, yet governed by a mandate that remains strictly subordinate to the collective Board of Supervisors. Rather than constructing a constitutionally fragile Executive Board that ignores the revived Meroni strictness of C-551/22 P, the legislative focus should remain on deepening the collaborative “Union method.” A reinforced Management Board ensures that the expansion of ESMA’s technical capabilities does not come at the expense of the democratic and geographic representation required by the Treaties.

Prof. Christopher P. Buttigieg, is the Chief Officer responsible for Supervision at the MFSA, has over 25 years of experience in regulation and supervision, is a member of the Board of Supervisors of the European Banking Authority (EBA) and European Securities and Markets Authority (ESMA), a member of the ESMA Management Board, was the Chair of the ESMA Data Standing Committee (until December 2022) and is currently the Chair of the ESMA Proportionality and Coordination Committee. He is an Associate Professor in the Banking, Finance and Investments Department of the University of Malta. Prof Buttigieg is a member of the Board of Trustees of ERA, the academy of European Law. LinkedIn Profile: https://mt.linkedin.com/in/christopher-p-buttigieg-1242a839?trk=public_post_feed-actor-name