At the end of last month, the European Securities and Markets Authority (ESMA) published a new update to its Q&A document on the EU Benchmarks Regulation (BMR). The Q&A’s purpose is to clarify BMR and promote common, uniform and consistent supervisory approaches and practices in its implementation.
The latest update clarifies that prospectuses need to include reference to the BMR Register of administrators and benchmarks which have been authorized or registered under the Regulation. The list is comprised of information provided by the national competent authorities of member states. The guidance is broken down as follows:
• Prospectuses approved on or after January 1, 2018 (the date BMR came into force) must include reference to administrators that are included on the Register by the time the prospectus is published. Where an administrator is not included on the Register, prospectuses must acknowledge this fact.
• Prospectuses approved prior to January 1, 2018 must be updated as soon as possible and by 1 January 2019 at the latest. If by January 1, 2019 the relevant administrator is not included in the register, these prospectuses should be updated to include a statement to that effect.
These developments will provide clarity to consumers of financial products and will likely accelerate the process of alignment with BMR. Significantly, ESMA’s guidance comes hot on the heels of a report from Better Finance, the investor rights campaign group, that up to a third of European investors are breaching the rules by not providing required benchmark information in fund documents.
However, ESMA’s latest Q&A, along with other regulatory initiatives, such as new requirements for investors to provide consumers with Key Information Documents for Packaged Retail and Insurance-based Investment Products (PRIIPs), highlights a trend towards the greater scrutiny of financial products and constituent datasets, and greater transparency for clients.
The challenge for firms is to keep on top of an ever more complex market and be able to offer clients and regulators alike the detailed information they are increasingly demanding. When it comes to BMR, a key challenge clearly now lies in monitoring the Benchmarks Register for updates and ensuring these changes are reflected in financial contracts and instruments, as well as the customer-facing documents that support them.
To help firms address these challenges, the market is innovating RegTech services that allow rapid compliance at low cost. RIMES’ award-winning RegFocus℠ BMR Control, for instance, assists firms through a feature-rich benchmark inventory management, enrichment and control platform. This platform keeps businesses up-to-date with all changes to the Benchmarks Register as they occur, helping them ensure compliance and delivery transparency for customers.
RIMES will be discussing other regulatory developments at its upcoming RegTech Market Surveillance Conference, which will take place in New York on June 13. To register, email firstname.lastname@example.org.
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