The Portuguese securities regulatory framework exhibits high levels of compliance with the Objectives and Principles of Securities Regulation promulgated by the International Organization of Securities Commissions (IOSCO), the International Monetary Fund's (IMF) 2006 Financial System Stability Assessment (FSSA) attests. According to the 2007 IMF detailed assessment based on the FSSA Portugal fully observes 26 of the 30 IOSCO Principles, largely observes 2, and partially observes 1, while Principle 30 was not assessed . Recommendations where shortcomings were identified pertain to the financial independence of the Portuguese Securities Market Commission (CMVM – the country's securities supervisor), its risk-based supervisory approach, and its enforcement and on-site inspection policies. However, there are reports of progress on each of these fronts, either in the assessment itself, or in a subsequent report by the IMF released in 2008. The assessment, for instance, acknowledges that CMVM's enforcement has been further strengthened by an amendment of the Securities Code, and a risk rating system has already been approved and will be implemented in 2006 as part of the Basel II implementation, thereby putting in place a consistent risk-based approach to supervision in Portugal. On-site inspections have also been improved by making closing meetings with the Boards of the inspected intermediaries standard procedure. Finally, as the 2008 IMF report adds, a permanent provision in the law barring the freezing of the CMVM's budget surplus by the government will come into effect in the summer of 2008. Another proposal has been made to revise the Ministerial Order that sets the supervisory fees of the CMVM.

General Overview

In the words of the International Monetary Fund's (IMF) 2006 Financial System Stability Assessment (FSSA), "the Portuguese securities regulatory framework exhibits high levels of compliance with the IOSCO [International Organization of Securities Commissions] Principles" (p. 34). Further, Portugal's financial system is "sound, well managed and competitive" (p. 5), with a strong financial policy framework to withstand shorter-term risks and vulnerabilities. The supervisory system is also deemed "active, professional and well organized" (p. 5) and "comparing very well with international standards" (p. 6). The detailed assessment that was published in 2007 as a result of the 2006 Financial Sector Assessment Program (FSAP) elaborates that Portugal fully observes 26 of the 30 IOSCO Principles, largely observes 2 (Principles 10 and 22), and partially observes 1 (Principle 2). Principle 30 was not assessed . As the FSSA notes, the Portuguese authorities have made considerable efforts to develop a "high quality macro prudential surveillance framework" (p. 5) to continue strong vigilance of the risks and challenges that may potentially affect the financial system.

The detailed assessment points out several areas of weaknesses in the securities sector supervision. For instance, the financial independence of the Portuguese Securities Market Commission (CMVM) is potentially jeopardized by the fact that the Ministry of Finance and Public Administration (MFAP) approves its budget and can appropriate or freeze the surpluses it generates from fees charged from the supervised entities. Further, the Bank of Portugal (BdP) has not yet adopted a risk-based supervisory approach in the supervision of financial intermediaries. Also, the CMVM does not have an adequately vigorous and transparent enforcement policy, and its on-site inspections could be more effective with a closing meeting with the board of the inspected intermediary. The IMF, therefore, recommends that permanent provisions be put in place to prevent the government from freezing or appropriating the CMVM's surpluses. The BdP is advised to complete a risk-rating system for financial intermediaries and the CMVM should revamp its enforcement policy and its on-site inspections of intermediaries. As for Principle 30 that was not assessed, the IMF points out that it is because a Committee on Payment and Settlement Systems (CPSS) assessment of Portugal's securities settlement systems was not conducted.

Secondary recommendations of the IMF for principles where Portugal gets a full compliance rating include the following. Firstly, the CMVM, BdP, and the Insurance and Pension Funds Supervisory Authority of Portugal (ISP) should conclude their trilateral Memorandum of Understanding (MoU) for financial sector supervisory coordination and it should be published on the CMVM's website. Second, the BdP should be more consultative in its rule-making process and the CMVM should broaden its investor education program by using mass media more extensively. Joint inspections of Euronext markets by the CMVM and other Euro national regulators are also advised in the interest of comprehensive monitoring these markets. Further, per the assessment, the Securities Code needs to be amended to clarify provisions to allow unhindered exchange of information and cooperation between the CMVM and its foreign counterparts. Annual consolidated accounts need to be published by the supervised entities on a timelier basis. The CMVM should eliminate the provision of tacit approval in the authorization of financial intermediaries. Lastly, the CMVM and the BdP should draw up contingency and coordination plans to handle financial crises, failures of intermediaries and other market disruptions.

With regard to most of the above key as well as secondary recommendations, there are acknowledgements by the IMF or assertions by the Portuguese authorities that they have been implemented or are on their way to being implemented. For instance, the IMF does acknowledge that in terms of the appropriation of surpluses, the situation was corrected for the year 2006, and the CMVM and the MFAP have assured the IMF that permanent provisions to safeguard the CMVM surpluses from freezing or appropriation by the MFAP will be put in place. Further, the BdP has taken the initiative to formulate written rules on public consultations. Also, the CMVM's policy on administrative sanctions has changed and administrative fines are imposed more frequently and more stringently. The enforcement regime has also been further strengthened by an amendment to the Securities Code that mandates the CMVM to publish the convictions for very serious administrative infractions. More importantly, the IMF does note that the risk rating system has already been approved and implemented in 2006 as part of the Basel II implementation, thereby putting in place a consistent risk-based approach to supervision in Portugal. Lastly, the CMVM is observed as envisioning joint inspections of Euronext markets. To add to these IMF acknowledgements, the Portuguese authorities point out that the Internal Audit Department has already been set up; closing meetings with the Boards of intermediaries that are inspected are already standard procedure; all annual consolidated accounts will be required to be published four months after the accounts closing date with the transposition of the EU Transparency Directive; and the elimination of the clause of the CMVM's tacit approval for intermediary authorization is also underway in the Securities Code's amendment.

Indicating further progress in the implementation of the FSAP recommendations, the government of Portugal approved the inclusion of a permanent provision in the law barring the freezing of the CMVM's budget surplus by the MFAP. This provision will come into effect in the summer of 2008, mentions an update provided by the 2008 IMF Article IV report. A proposal has also been made to revise the Ministerial Order setting the supervisory fees of the CMVM, the same report notes.

Commenting on the general preconditions necessary for the effective regulation of securities markets, including "sound macroeconomic policies, appropriate legal, tax and accounting frameworks, and the absence of entry barriers to the market" (p. 9), the IMF notes that they "appear to be in place in Portugal" (p. 9). Recent legislations have considerably strengthened the country's corporate governance framework and simplified and improved insolvency proceedings and dispute resolution. A proposal has been forwarded by the CMVM to simplify the tax regime for mutual funds, and for listed small and medium companies. The accounting framework is largely aligned with International Financial Reporting Standards, and there are no signs of barriers to entry the financial sector, since the authorization process is reasonable and ensures intermediary stability as well as investor protection. Overall, the regulatory framework for the issuers of securities is in line with the IOSCO Principles. The key laws governing the securities market and the powers and responsibilities of the three regulatory agencies, according to the IMF, are the Securities Code (SC) and the CMVM Statute (regulating the CMVM); the Organic Law of the BdP and the Legal Framework of Credit Institutions and Financial Companies (LFCIFC) (regulating the BdP); and the SC and LFCIFC (regulating the MFAP). Other regulatory documents include particular regulations issued by the CMVM and the BdP, including procedures, manuals, and guidelines. Further, the Companies Code provides the basic corporate governance framework for all Portuguese companies.

The CMVM and BdP share the regulation and supervision of the Portuguese securities market under a "partially integrated functional approach" (p. 8), per the 2007 IMF assessment. Under this system, the CMVM regulates and supervises the securities markets, the collective investment schemes (CISs), and all market participants, except financial intermediaries, whose regulation and supervision are limited to market conduct. It is the responsibility of the BdP to authorize and prudentially regulate and supervise financial intermediaries in securities. However, these intermediaries are also subject to registration with the CMVM if they wish to provide investment services. As for the MFAP, it has very specific powers relating to authorization of financial intermediaries that are subsidiaries of credit institutions domiciled in non-EU countries, authorization of regulated markets, and establishment of minimum capital requirements for financial intermediaries. Coordinated supervision is ensured through the 1997 bilateral Memorandum of Understanding (MoU), the 2002 Protocol for the exchange of information on the issuance of securities, as well as a high-level committee, the National Council of Financial Supervisors (CNSF), which was created in 2002 and has representatives from the BdP, CMVM, and the ISP. Yet another forum for national cooperation among financial regulators is the newly formed National Committee for Financial Stability (CNEF) that has representatives from the CMVM, BdP, ISP, and MFAP, the 2007 annual report of the CMVM adds. The CMVM is listed as an IOSCO member on the IOSCO website and Portugal is also a signatory to the ISOCO MMoU. The IOSCO MMoU is based on the thirty IOSCO Objectives and Principles of Securities Regulation (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.

Under Portuguese legal and regulatory framework, banks and other specialized entities such as brokers, dealers and wealth management companies can participate in the securities market, notes the 2007 IMF assessment. Banks can provide investment services under a universal banking model that excludes the management of CISs, which can only be provided by investment fund management companies. There are two cash markets operating in Portugal as well, Eurolist, operated by Euronext Lisbon and the Special Market for Public Debt (MEDIP), operated by MTS Portugal S.A. Eurolist is a single market integrating the markets of Amsterdam, Brussels, Lisbon, and Paris. Central counterparty and clearing services to Eurolist are provided by LCH Clearnet S.A., while settlements are made via INTERBOLSA on a delivery-versus-payment (DvP) basis. The 2007 CMVM annual report adds that Euronext merged with the New York Stock Exchange (NYSE) to form the NYSE Euronext Group in 2007. The College of Euronext Regulators (that includes the CMVM) also signed a MoU with the Securities and Exchange Commission of the US for joint regulation of NYSE Euronext and coordinated supervision of the European and North American markets. MEDIP, as the IMF continues, is integrated into MDS, a single market for public debt with presence in many European countries such as Belgium, Finland, France, Germany, Italy, Netherlands, and Poland. It was launched in 2002 and is a wholesale market for Portuguese government bonds and treasury bills. MTS Telematico electronic platform is the trading floor and works as a blind system, while Euroclear Bank and Clearstream provide settlement services on a DvP basis. Nevertheless, the IMF assessment notes that the Portuguese securities market is not very developed with a market capitalization on only about 44 percent of the national GDP and only very few companies listed on Eurolist. The market is also highly concentrated, with 10 big companies cornering about 88 percent of the market (as of 2005). Also, barring MEDIP, the secondary markets are quite illiquid. Retail and foreign investors are important players in the secondary markets, secondary evidence suggests. In the financial intermediation field, too, the market is highly concentrated. As for the CIS industry, its size remains modest, despite steady growth since 2000 and an increase in products and services available. Derivatives markets are not very prominent in Portugal and have, in fact, shown a downward trend, observes the IMF assessment.

The Principles

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

FC

Although the IMF assessment gives an "implemented" rating to Portugal for this principle, it does note that there may be overlaps in the authorization and registration powers of the CMVM and the BdP. However, both the authorities as well as the supervised institutions assert that the arrangements are necessary and complementary since the BdP conducts the general prudential reviews while the CMVM assesses whether the applicants have adequate functions in place to carry out their particular activities. The IMF, nevertheless, advises some streamlining of the processes despite the existence of provisions requiring the BdP to consult with the CMVM before authorizing intermediaries supervised by the latter. As for coordination between the two regulators, the detailed assessment notes that the CMVM and the BdP has a MoU for this purpose; however, its scope could be enlarged to cover supervisory reports and crisis management. The CMVM, BdP and the ISP also coordinate on a trilateral basis under the umbrella of the CNSF, and the IMF suggests that the MoU for this coordination be published on the CMVM website in the interest of transparency.

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

ID

Portugal gets a "partially implemented" rating from the 2007 IMF detailed assessment for this principle. This is because the CMVM does not have legal financial independence from the Ministry of Finance and Public Administration (MFAP). Its budget has to be approved by the MFAP, which can impact its level of resources and the priority for such resources. In recent years, the MFAP has also effected budgetary cuts in expenditure and appropriated surpluses from the fees charged by the CMVM on the supervised institutions. However, in terms of the appropriation of surpluses, the situation was corrected for the year 2006, and the CMVM and the MFAP have assured the IMF that permanent provisions to safeguard the CMVM surpluses from freezing or appropriation by the MFAP will be put in place. Indicating further progress on this front, the government of Portugal approved the inclusion of a permanent provision in the law barring the freezing of the CMVM's budget surplus by the MFAP. This provision will come into effect in the summer of 2008, mentions an update provided by the 2008 IMF Article IV report. A proposal has also been made to revise the Ministerial Order setting the supervisory fees of the CMVM, the same report notes. As regards legal protection of the CMVM staff, the assessment mentions that forthcoming legal provisions on personal civil liability that have already been approved by the Executive will accord the CMVM staff legal protection equal to that enjoyed by the BdP staff. In this context, it is pertinent to add that the 2007 detailed assessment of Portugal against the Basel Core Principles (BCP) for Effective Banking Supervision by the IMF found that the country is compliant with the principle on legal protection for banking supervisors and that the 1992 Legal Framework of Credit Institutions and Financial Companies provides legal protection to the BdP staff.

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

FC

This principle is implemented, per the 2007 detailed assessment by the IMF. Both the CMVM and the BdP "have adopted very centralized models of decision making, whereby all departmental actions have to be approved by the board" (p. 16), the assessment continues. The IMF notes that while this arrangement can be beneficial in small organizations as it facilitates alignment of actions across the agency with its overall strategies and objectives and helps achieve consistency, it can also lead to delays in taking prompt action. However, this model has worked well both in the BdP and the CMVM due to their modest size and the full-time positions of their board members. The CMVM has also initiated the process of setting up an Internal Audit Department, which the assessment supports in view of its larger size. The Portuguese authorities further update the assessment by stating that the Internal Audit Department has already been set up.

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

FC

This principle is implemented, per the 2007 detailed assessment by the IMF, and further "the work carried out by the CMVM for the development of procedures (including manuals, guidelines, check lists, and, when appropriate, standardized formats for reports) is impressive" (p. 21). As for rulemaking, the BdP is observed as taking a narrow approach towards public consultation due to the prudential nature of the regulations it promulgates. The IMF, nevertheless, calls for a more systematic use of public consultation and appreciates the BdP's initiative to formulate written rules on public consultations. With respect to investor education, the assessment observes that the CMVM's efforts in this area "are significant" (p. 21) and suggest that the program could be broadened with the use of mass media.

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

FC

This principle is implemented, per the 2007 detailed assessment by the IMF. However, the assessment does suggest that the monitoring of compliance with the code of conduct to be assigned to the Internal Audit Department of the CMVM.

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.

FC

This principle is implemented, per the 2007 detailed assessment by the IMF. There are three Self-Regulatory Organizations (SROs) in Portugal: Euronext Lisbon, MTS Portugal and Opex, and they are all demutualized. By way of comment, the IMF states that "according to IOSCO Methodology, under Principle 6 the assessor must only assess whether SROs are in place. The assessment of the adequacy of the mechanisms in place is assessed under Principle 7" (p. 23).

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.

FC

This principle is implemented, per the 2007 detailed assessment by the IMF. However, the assessment does recommend joint inspections by regulators of all Euro countries to strengthen the oversight of the Euronext markets and notes that the CMVM itself envisions such inspections.

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

FC

This principle is implemented, per the 2007 detailed assessment by the IMF. However, the assessment does qualify this statement by mentioning that although a broad review of the anti-money laundering (AML) provisions as required by IOSCO was conducted, a full AML/CFT (combating the financing of terrorism) assessment of Portugal was not.

9. The regulator should have comprehensive enforcement powers.

FC

This principle is implemented, per the 2007 detailed assessment by the IMF. The IMF makes no recommendations with regard to this principle.

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.

CP

This principle is broadly implemented, per the 2007 detailed assessment by the IMF, because the "BdP has not yet implemented a formal risk rating system reflecting the assessment of the risk profile of financial intermediaries" (p. 48). Nevertheless, the assessment notes that the risk rating system has already been approved and will be implemented in 2006 as part of the Basel II implementation, thereby putting in place a consistent risk-based approach to supervision in Portugal. To enhance on-site inspections, the assessment advises the CMVM to schedule closing meetings with the Boards of intermediaries that are inspected as standard procedure for on-site inspections. (This recommendation, per the Portuguese authorities, has been implemented). As regards enforcement, the assessment makes two recommendations. First, the CMVM should apply administrative fines more vigorously and second, it should disclose administrative sanctions to the public in the interest of transparency and to keep the public informed about disciplinary actions brought against securities issuers or intermediaries. With regard to these recommendations, the assessment does acknowledge that the CMVM's policy on administrative sanctions has changed and administrative fines are imposed more frequently and more stringently. The enforcement regime has been further strengthened by an amendment of the Securities Code that mandates the CMVM to publish the convictions for very serious administrative infractions.

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

FC

This principle is implemented, per the 2007 detailed assessment by the IMF. Portugal has signed the IOSCO MMoU, implying that the IOSCO screening committee "considered that the Portuguese legal framework complies with Principles 11, 12, and 13" (p. 31), the assessment continues. Further, Article 376 of the Securities Code which "imposes a condition for the exchange of information with foreign counterparties, since it has to be connected with cross border activities with relevant connection to the national territory" (p. 30) does not hamper the CMVM's efforts to exchange information with its foreign counterparts and in practice, there has been active cooperation with foreign authorities. Nevertheless, the IMF recommends the amendment of Article 376.

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.

FC

This principle is implemented, per the 2007 detailed assessment by the IMF. The Securities Code authorizes the CMVM and the Legal Framework of Credit Institutions and Financial Companies authorizes the BdP to enter into information exchange agreements with domestic as well as foreign regulators. No additional authorization from another authority is required either to sign a MoU or to share information. In practice, too, the two regulators, CMVM and BdP have entered into a MoU with each other in 1997 and with numerous other foreign regulators. Further, the CMVM is also a signatory of the Multilateral agreement Committee of European Securities Regulators MoU and the IOSCO MMoU, and the Declaration of Boca Raton on cooperation and supervision of derivative markets, and clearing and settlement systems.

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.

FC

This principle is implemented, per the 2007 detailed assessment by the IMF. Portugal has signed the IOSCO MMoU, implying that the IOSCO screening committee "considered that the Portuguese legal framework complies with Principles 11, 12, and 13" (p. 31). Further, Article 376 of the Securities Code which "imposes a condition for the exchange of information with foreign counterparties, since it has to be connected with cross border activities with relevant connection to the national territory" (p. 30) does not hamper the CMVM's efforts to exchange information with its foreign counterparts and in practice, there has been active cooperation with foreign authorities. Nevertheless, the IMF recommends the amendment of Article 376. As for the BdP, although it has a more limited scope for assistance, the IMF assessment concludes that "CMVM provisions would be sufficient to provide cooperation in the terms required by IOSCO" (p. 32).

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

FC

This principle is implemented, per the 2007 detailed assessment by the IMF, and the disclosure regime is "reasonable since it provides different levels of disclosure depending on the type of market where securities are traded and the nature of the securities" (p. 36). Further, with the application of the EU Prospectus Directive into Portuguese legislation, the rules on the prospectus of a public offering in a regulated market will also be amended. (This Directive, per the assessment, was transposed into Portuguese law during the FSAP mission.) The assessment, however, questions the timeliness of the publication of annual consolidated accounts. It also notes that detailed guidelines or industry studies have not been developed by the Department of Markets, Issuers and Information of the CMVM to help its analysts in reviewing the prospectuses, although the analysts have developed their expertise with the help of the structure given to the department. To the criticism of the long lag in the publication of annual consolidated accounts, the Portuguese authorities respond by stating that once the EU Transparency Directive is transposed into domestic law (it occurred in January 2007), all annual consolidated accounts will be required to be published four months after the accounts closing date.

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

FC

This principle is implemented, per the 2007 detailed assessment by the IMF. The IMF makes no recommendations with regard to this principle.

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

FC

This principle is implemented, per the 2007 detailed assessment by the IMF. The IMF makes no recommendations with regard to 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.

FC

This principle is implemented, per the 2007 detailed assessment by the IMF. With the continued growth of the CIS industry, however, the assessment recommends the CMVM to continue closely monitoring them to handle their growth effectively and ensure that the market participants fulfill their obligations at all times.

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.

FC

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.

FC

See Principle 17.

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.

FC

See Principle 17.

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

FC

This principle is implemented, per the 2007 detailed assessment by the IMF. Portugal is however recommended to eliminate CMVM's tacit approval provision to authorize intermediaries. (To this, the Portuguese authorities respond by stating that the CMVM has not registered a single intermediary under the rule of positive silence; however, the elimination of this clause is also underway in the Securities Code's amendment.) The amended Securities Code came into effect in October 2007, per information on the CMVM website. The assessment further observes that although there is no disclosure of the specific qualifications of investment advisers, it does not adversely affect the implementation of this principle since their registration is contingent on fulfilling fit and proper criteria including attending courses and taking qualifying examinations.

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

CP

This principle is broadly implemented, per the 2007 detailed assessment by the IMF, because the "BdP has not yet implemented a formal risk rating system reflecting the assessment of the risk profile of financial intermediaries" (p. 48). Nevertheless, the assessment notes that the risk rating system has already been approved and will be implemented in 2006 as part of the Basel II implementation, thereby putting in place a consistent risk-based approach to supervision in Portugal.

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.

FC

This principle is implemented, per the 2007 detailed assessment by the IMF, and "the approach taken by the CMVM has been reasonable, since it has included elements of risk both in the off-site supervision (activity warning system) as well as in the on-site supervision (market share)" (p. 50). However, the assessment does recommend the implementation of a risk-based supervisory approach to make the process more efficient.

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.

FC

This principle is implemented, per the 2007 detailed assessment by the IMF. Further, as the CMVM informs the IMF, the transposition of the EU Directive on recovery and liquidation into Portuguese law will require the BdP to consult the CMVM before proposing the appointment of a judicial liquidator or liquidation committee for an institution registered with the CMVM. Also, both the CMVM and the BdP are preparing contingency plans to deal with intermediary failure. The assessment advises them to fully coordinate such plans.

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

FC

This principle is implemented, per the 2007 detailed assessment by the IMF. The IMF makes no recommendations with regard to this principle.

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.

FC

This principle is implemented, per the 2007 detailed assessment by the IMF. However, the assessment does point to the need for joint inspections of the Euronext markets by all Euro national regulators for more effective and strengthened oversight of these markets and notes that this is already envisioned by the CMVM.

27. Regulation should promote transparency of trading.

FC

This principle is implemented, per the 2007 detailed assessment by the IMF. Further, with the transposition of the EU Transparency Directive into Portuguese law, pre-trade transparency will also be a legal requirement.

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

FC

This principle is implemented, per the 2007 detailed assessment by the IMF. The IMF makes no recommendations with regard to this principle.

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

FC

This principle is implemented, per the 2007 detailed assessment by the IMF. However, as a disclaimer, the IMF adds that the "effectiveness of mechanisms to monitor risks faced by LCH Clearnet was not evaluated" (p. 58), since it was not assessed as a central counterparty. The IMF calls for a separate assessment of LCH-Clearnet S.A. given that it is a central counterparty for five markets (Paris, Brussels, Amsterdam, Lisbon and London for the derivatives market).

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.

II

This principle was not assessed by the IMF, either as part of an IOSCO Principles assessment or as part of a Committee on Payment and Settlement Systems (CPSS) assessment of Portugal's securities settlement systems. However, the IMF's IOSCO detailed assessment does mention that INTERBOLSA provides settlement services for Euronext Lisbon and that all its rules as well as the CPPS/IOSCO self assessment are publicly available on its website. Further, the CMVM is charged with the registration of the INTERBOLSA as a central securities depository and settlement provider.