The European Securities and Markets Authority (ESMA) has surveyed the NCA’s on their supervisory measures and penalties relating to EMIR and issued a report containing the results. The report helps you to better understand the information checked by NCAs (from TRs and in combination with information submitted by counterparties) and its use, for a range of supervisory measures.
This first Annual Report on supervisory measures and penalties focuses on the provisions related to:
- the clearing obligation (Article 4 of EMIR);
- the reporting obligation (Article 9);
- non-financial counterparties (Article 10); and
- the risk mitigation techniques (Article 11).
Different data entities and data quality is central
The report shows that the NCA’s have different sources of data (seems obvious as some firms reports directly and others use TR’s). The NCA’s also use public data (e.g. press-releases, annual reports, websites) to perform their supervisory duties in relation to Articles 4, 9 and 11. Though NCA’s choses data sources dependent on the data quality, as commented by the Swedish NCA, they expect to use progressively more data from TRs as its quality has increased thanks to the new reporting requirements in place since November 2017.
Penalties imposed in relation to Articles 4, 9, 10 and 11 of EMIR
The fines in place for breaches related to EMIR requirements (specifically under Articles 4, 9, 10 and 11) varies quite substantially. The amounts range between a minimum of 125 euros in Luxemburg and a maximum of 100 million euros in France.
There have so far (until 2017) been three instances of penalties imposed by the NCA’s, two in Italy and one in the UK.
- In 2017 and Italian pension fund was imposed two times by penalties of a total of 165,000 Euros. This was due to the wrong assumption by the pension fund that purchased OTC derivatives did not qualify for reporting.
- Also in November 2017 Merrill Lynch International failed to report 69 million of ETD trades over the course of a two-year period. Merrill Lynch International was fined GBP 35 million for the breach.
ESMA concludes that there has been initially an important focus on raising awareness on EMIR requirements, which has then gradually shifted to the monitoring and the enforcement of, first, the implementation of the requirements, and then, of the ongoing compliance.
Could this mean that we should expect to see more fines in the future, as the NCA’s controls matures?
Read the full report here
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