On 15 April 2013, the European Securities and Markets Authority (“ESMA”) published a peer report (the “Report”) detailing the results of a review of the application of ESMA’s guidelines on money market funds (“MMFs”) by the European Union’s national securities supervisory authorities.
Following the Committee of European Securities Regulators guidelines on MMFs issued in May 2010 (the “Guidelines”) and ESMA’s subsequent Q&A documents promoting a common supervisory approach to the application of the Guidelines, the ESMA Board of Supervisors approved the undertaking of a peer review on the application of the Guidelines by the competent authorities in the Member States.
The peer review was split into two phases as follows:
Phase 1: self-assessment whereby the members of ESMA answered a number of question on the implementation and application of the Guidelines; and
Phase 2: a peer review assessment which involved each member’s self-assessment being reviewed by their peers.
The peer review was conducted on the basis of written submissions with evidence as to the implementation of certain of the Guidelines also being provided. Further to the submissions made by the Central Bank of Ireland, the Report confirms that Ireland has ensured the implementation of the Guidelines through the introduction of mandatory provisions implementing primary European legislation.
The Report highlights 5 good practices adopted by regulatory authorities following completion of the peer review:
- Internal organisation and supervisory tools The Report highlights the importance of ensuring that the appropriate organisational structures, resources and procedures are in place commensurate with the number of MMF funds in existence and under the supervision of the regulatory authority.
- Ex-ante review of MMF documentation The Report suggests that box-ticking exercises should be avoided where the approval of an MMF is sought. Instead, regulatory authorities should be in a position to ask for amendments to be made to fund documentation ahead of authorisation and a full assessment of the fund documentation should take place.
- Ex-post review of MMF documentation Regulatory authorities must be in a position to justify the method utilised to supervise the MMFs under their jurisdiction where ex-ante review does not take place. In addition, the regulatory authorities should be capable of requesting changes to fund documentation where ex-post reviews are utilised.
- On-going supervision of MMFs To ensure funds are maintaining their compliance with the Guidelines, regulatory authorities should ensure they receive periodic reporting from MMFs in addition to the annual and semi-annual reports they receive.
- Off-site and on-site inspection cycles Periodically off-site or on-site inspections of MMFs should be possible and an alert system should be used to prioritise on-site inspections in certain instances.
The good practices identified by the Report were included to ensure that steps can be taken to move towards common supervisory and enforcement practices across the MMF market.