EU Regulatory Updates

Author: Clerkin Lynch LLP

Date Published 12/04/2023

ESMA guidance for cross-border supervision

The European Securities and Markets Authority (“ESMA”), the financial markets regulator and supervisor of the European Union (“EU”), has published a  supervisory briefing (the “Supervisory Briefing”) regarding the supervision of cross-border activities of investment firms to ensure convergence in approach amongst local regulators across EU member states .

The provision of investment services across the EU has assumed greater importance under MiFID II. Brexit has also changed traditional models employed by many firms within Europe. However, the provision of services across member state borders within the EU depends on cooperation between “home” and “host” supervisory authorities. Accordingly the Board of Supervisors of ESMA decided to launch a peer review on the supervision of cross-border activities of investment firms in 2021 to examine the area. This was followed by a related report on 10 March 2022 with a series of recommendations. In this report, ESMA identified key areas where home supervisors needed to improve their approach particularly in the context of investment firm’s cross-border activities for retail clients. Key topics focused on included authorisation, ongoing supervision and enforcement work. However the need to calibrate supervisory work to the nature, scale and complexity of firms’ cross-border activities and the risks they pose was also emphasised.

As a result, the Supervisory Briefing covers the following areas:

  • authorisation of firms with cross-border plans;
  • processing of passport notifications and their impact on the supervisory approach applied to firms;
  • arrangements in place to carry out ongoing supervisory activities;
  • carrying out of ongoing supervision; and
  • carrying out of investigations and inspections.

Firm’s can expect to see the approach of local regulatory authorities in their home member state updated to reflect this.