ESMA fines S&P €1.1 million
The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, has fined S&P Global Ratings Europe Limited (S&P) a total of €1,110,000 and issued a public notice for breaches of the Credit Rating Agencies Regulation (CRA Regulation).
ESMA found that S&P published credit ratings before the concerned securities were issued by the rated entities and announced to the market. This was due to internal control failures and led to breaches by S&P of its transparency obligations.
Verena Ross, ESMA’s Chair, said: “Today’s action against S&P emphasises the importance ESMA places on CRAs complying with their obligations of timely disclosure of information regarding ratings to the market.
Publishing a credit rating before the issuance of the rated securities may result in harm to the issuer, to investors and more generally to the orderly functioning of the financial markets.”
The breaches covered by the fine specifically relate to:
- deficiencies in S&P’s internal control mechanisms, which did not ensure compliance with its obligations regarding the timely disclosure of credit ratings;
- the failure by S&P to disclose on a non-selective basis and in a timely manner decisions to discontinue credit ratings;
- the failure by S&P to submit up-to-date rating information to ESMA.
All breaches were found to have resulted from negligence on the part of S&P. In calculating the fine, ESMA considered both aggravating and mitigating factors provided for in the CRA Regulation.
FCA and HM Treasury prepare to repeal EU market abuse regime
In the July 2019 Economic Crime Plan, the UK government committed to reviewing the criminal market abuse regime to ensure that the FCA can take action against market abuse in a way that is commensurate to the seriousness and market impact of the abusive behaviour.
The FCA and HM Treasury have now completed the Criminal Regime Review. The review has identified a number of areas where the government believes it would be appropriate to update the criminal regime. More details are to emerge but the government is proposing to repeal the European Union’s market abuse regulations and the civil market abuse regime, replacing them with UK-specific legislation.
The UK’s criminal market abuse regime sets out the UK’s criminal sanctions for insider dealing and market manipulation. It helps the FCA fulfil its statutory objectives of protecting consumers, enhancing market integrity, and promoting competition but it has not been materially updated since it was introduced.
EBA consultation on standards for supervisors assessing the new market risk internal models under the Fundamental Review of the Trading Book
Following last week’s EBA consultation announcement on 22nd March, a further consultation on EBA’s draft Regulatory Technical Standards (RTS) on the assessment methodology under which competent authorities verify institutions’ compliance with the requirements applicable to their internal models under the Fundamental Review of the Trading Book (FRTB) rules has been announced.
The consultation paper is in three chapters, (i) governance; (ii) the internal risk-measurement model covering for the expected shortfall and the stress scenario risk measure; (iii) the internal default risk model. Each is aimed at setting out a framework for competent authorities to assess the requirements of an institution to use an internal model approach (IMA) for calculating their own funds requirements for market risk
The consultation is open until 26th June.
A selected summary of key developments for regulated financial institutions
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