According to reports, The European Securities and Markets Authority (ESMA) will be given a wide range of new powers by the European Commission (EC). As well as being empowered to directly supervise certain EU investment funds, ESMA will be given new powers to help enforce the EU Benchmarks Regulation (BMR) and the Markets Abuse Regulation (MAR). The move highlights just how important the new Regulations are to the EU as it looks to crack down on insider trading and market manipulation.
Under BMR, firms that administer, contribute to or use benchmarks in financial instruments or contracts will need to meet stringent requirements that ensure the accuracy and integrity of benchmarks. Under the Regulation, buy-side firms will only be able to use authorized or registered benchmarks. MAR, meanwhile, requires that buy-side firms put in place safeguards to identify and reduce the risk of market abuse and insider trading; including through the use of market surveillance.
Under the EC’s new proposals, ESMA will be given the responsibility of authorizing and directly supervising ‘critical’ benchmarks in the EU under BMR. These are benchmarks where the value of contracts supporting the benchmark is at least €500bn, or where a Member State recognizes a benchmark as critical. Additionally, ESMA will be empowered to endorse non-EU benchmarks for use within the bloc.
The new powers that ESMA will be given to enforce MAR are even more far-reaching. Under the EC’s proposals, ESMA will be able to coordinate market abuse investigations between national regulators. Moreover, in cases where ESMA believes that market activity is abusive or fraudulent, and has cross-border implications, it will be able to initiate an abuse investigation directly.
This move is the clearest signal yet of how important these new Regulations are, and how large an impact they will have on the financial markets. These Regulations are, in RIMES’ opinion, true game-changers and should not be underestimated by firms. Our advice is for buy-side firms to audit their compliance functions in the light of the new Regulations and take immediate steps to ensure their processes, systems and expertise are fit for purpose.
For more information on how RIMES RegFocus® can help you overcome the challenges of BMR and MAR, please contact us.
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