As the single supervisor for Credit Rating Agencies (CRAs) and Trade Repositories (TRs) in the EU, ESMA has responsibilities and powers to deal with possible infringements.
ESMA’s enforcement powers - context and scope
CRAs and TRs under ESMA’s supervision must comply with requirements under the CRA Regulation and EMIR respectively, and they will be liable where they commit infringements specified under that legislation. Part of ESMA’s supervision of CRAs and TRs involves the investigation of such possible infringements, and taking enforcement action in appropriate cases. ESMA’s responsibilities and powers in this context are provided by legislation: CRA Regulation 1060/2009 and Delegated Regulation 946/2012, EMIR 648/2012 and Delegated Regulation 667/2014.
Where ESMA finds an infringement has been committed by a CRA or TR, ESMA adopts one or more supervisory measures, which may include the issuing of a public notice, requiring the supervised entity to bring the infringement to an end, and withdrawing the registration of the supervised entity. If ESMA finds that an infringement has been committed negligently or intentionally, it also imposes fines on the entity concerned.
How enforcement works
The process of taking enforcement action against CRAs or TRs involves three stages,
- Supervisory investigation: ESMA teams perform supervisions and investigations with the purpose of ensuring CRAs and TRs comply with the requirements under the CRA Regulation and EMIR. They may for instance request information, examine records and documentation, summon persons and conduct interviews, and inspect CRAs’ or TRs’ business premises. Where, as part of their investigations in a given case, ESMA supervisors find serious indications of possible facts liable to constitute infringements of the CRA Regulation or EMIR, the case is referred for further investigation to an independent investigating officer (‘IIO’) appointed within ESMA.
- IIO investigation: Similar to ESMA’s supervisors, the IIO has investigative powers whereby for example he may require information and documents, summon and interview persons, and execute on-site inspections. The rights of defence of the persons concerned are fully respected during the investigation. The IIO will make findings as to the commission of infringements and, as the case may be, recommend measures or fines to be imposed for those infringements. The supervised entity will be given the opportunity to make submissions on the IIO’s findings and the IIO will duly consider such submissions before submitting any findings and the file on which they are based to ESMA’s Board of Supervisors.
- Board decision: On the basis of the file and findings submitted by the IIO, and after having heard the CRA/TR concerned, the Board of Supervisors independently decides whether any infringements have been committed, adopts appropriate supervisory measures for infringements found, and imposes fines for the infringements that have been found to be committed negligently or intentionally.
ENHANCED TRANSPARENCY OF ENFORCEMENT DECISIONS
ESMA will, from 2018, publish more extensive and detailed public versions of its enforcement decisions. So far, ESMA’s practice has been to publish its findings and only a general overview of its reasoning in the public version of its enforcement decisions. In the future public versions of its enforcement decisions, ESMA intends to provide more details on the reasons of ESMA’s findings.
This will have a number of benefits, including more legal certainty for entities supervised by ESMA and a better understanding of ESMA’s enforcement role by stakeholders, including CRAs & TRs, investors and issuers.
The public version of the enforcement decisions will comply with the applicable rules regarding the protection of professional secrecy and personal data and so may be redacted compared to the non-public version. For that purpose, a confidentiality check will take place with the entity concerned.