Summary

Summary: Investors' trust is one of the essential components of a well functioning financial market. It is built upon the quality and reliability of the information disseminated through the market. At the same time there can be no workable - and profitable - market without risk. In recent years, technological developments and innovative new financial products have allowed markets and operators to define sophisticated methodologies and instruments to measure, control and manage risk. Recently, the balance between trust and risk has been shaken by accounting scandals and the reappearance on the global scene of a further complicating factor: uncertainty. Can markets ensure stability against uncertainty? Are Europe's financial markets structures as fragile as the US' have shown to be? What is the best approach in order to reduce investors' mistrust through re-building the integrity of financial markets? The legislator and the regulators are looking for solutions and so does the financial industry.

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Enron: the spark that lit the fuse

The series of accounting scandals that started with ENRON's collapse at the end of 2001, broke investors' confidence through two different types of violation. On the one hand, alleged accounting frauds and balance sheet manipulations undermined investors' faith in the reliability of information on the real economic situation companies. On the other hand, the perceived lack of independence of accountants, damaged trust in the audit system and put all the current market disciplines into question.