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November 29, 2017

ESMA published the results of its Peer Review on the guidelines on certain aspects of the compliance function under Markets in Financial Instruments Directive (MiFID). The guidelines cover national competent authorities’ supervision of investment firms’ compliance functions, particularly how those functions carry out risk assessments, monitor compliance obligations, report to senior management, and fulfil their advisory role.

The review found a high level of compliance, by the majority of European economic area national competent authorities, with the guidelines. However, significant weaknesses were identified in the supervisory approaches of Cyprus, Iceland, and the Netherlands. ESMA will follow up regarding the points of insufficient compliance and partial compliance with the relevant national competent authorities. The review also identified a number of good practices by a number of national competent authorities in their supervision. Key good practices identified included the following:

  • Pre-screening of compliance officers by national competent authorities
  • Clear communications of expectations to the compliance function at the authorization stage
  • National competent authorities undertaking onsite visits shortly after a firm’s authorization, particularly for riskier firms

The ESMA Supervisory Convergence Work Program 2016 included a peer review on the guidelines to assess compliance by the national competent authorities, identify good practices, and determine potential areas for improvement. The work involved assessing the approaches of thirty-one European Economic Area national competent authorities to supervising investment firms’ compliance functions, against the guidelines requirements. The assessment covered the period from July 01, 2014 to June 30, 2016. The assessment also involved on-site visits of the national competent authorities from Austria, Cyprus, Denmark, France, and Slovakia. The peer review aims to enhance supervisory convergence in the application of these guidelines and to help national competent authorities to enhance their supervisory approach toward the compliance function.      

 

Related Link: Peer Review (PDF)

Keywords: Europe, EU, Securities, Peer Review, Compliance Function, MiFID, Guidelines, ESMA

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