A well-functioning securities market requires consensus and trust among the general public, investors, politicians and companies. It is therefore very much in the interest of Swedish listed companies, their owners and their advisers to contribute to the development and maintenance of good ethics in the securities market. This is best achieved by the business community and other stakeholders together designing and agreeing on rules and what is good and generally accepted practice. This is known as self-regulation. Self-regulation is also an important instrument to prevent overly detailed legislation.
The Swedish Corporate Governance Code and the Takeover Rules are examples of areas where Sweden has preferred self-regulation to legislation. The main advantage of this is that the market’s foremost expertise, with its wealth of practical experience, participates actively in the formulation and substance of the rules, which in turn leads to strong, broad support and high levels of compliance among those who are to apply the rules.
Another great advantage of self-regulation is that it is flexible and can be developed and adapted quickly in response to changes. Moreover, self-regulation probably results in lower costs for companies compared with legislation developed remotely from the market.
The ever-growing and detailed EU regulation, with its increasing number of mandatory rules, also poses challenges for Swedish self-regulation and requires the market to either find alternative solutions to EU regulation or to devise ways to implement EU regulation in the field.
Although some areas traditionally covered by Swedish self-regulation have now been superseded and are now covered by European legislation, new forms have also been developed to utilise self-regulation within these new European frameworks. For example, regulatory tasks in the securities area have been delegated by the Swedish Financial Supervisory Authority, (Finansinspektionen), to the Swedish Securities Council and the Swedish Accounting Standards Board, which underlines the strong position of self-regulation in Sweden.