18 October 2013

ESMA consults on Technical Advice to the Commission on procedural rules to impose fines on Trade Repositories

The European Securities and Markets Authority (ESMA) received a formal request on 29 April 2013 from the European Commission (Commission) to provide technical advice to assist the Commission in  formulating procedural rules to impose fines and periodic penalty payments to trade repositories (TRs) by delegated act.

ESMA has prepared this document in order to consult the interested parties for the purposes of producing the advice. Respondents to this consultation are encouraged to provide the relevant information in support of their arguments or proposals.

This document sets out ESMA’s preferred options for the procedural rules on imposition of fines and  periodic penalty payments to TRs and welcomes comments in order to assist in the production of the advice.

In particular, ESMA’s preferred options for the abovementioned procedural rules are in respect of:

• the procedures to guarantee the rights of defence both during and upon completion of investigations, including for any oral hearings;
• the reasonable time limit for written submissions and/or convocation of any oral hearing;
• the procedures regarding access to files by the persons subject to investigations, preservation of legitimate interests of other persons in the protection of their business secrets and protection of confidential information affecting third parties;
• the documents to be submitted by the independent investigation officer (investigation officer) to ESMA’ Board of Supervisors (BoS);
• the limitation periods for imposition or enforcement of penalties;
• the methods for the collection of fines or periodic penalty payments.

In order to deliver its advice to the Commission, ESMA took into account the existing regulatory framework of the Union, in particular in areas where European institutions have the right to impose fines on market participants. In addition, ESMA has considered the rules of procedure regarding fines and periodic penalty payments that apply to Credit Rating Agencies (CRAs) pursuant to Regulation (EC) No 1060/2009 of 16 September 2009, as amended, (Regulation 1060/2009) and, in particular, to Commission Delegated Regulation (EU) No 946/2012 of 12 July 2012 (Delegated Regulation) (Annex II) and the relevant experience acquired by ESMA when operating under these rules of procedure.

In the present document relevant to TRs, ESMA has considered that it would be desirable to appoint a  panel or committee to carry out particular steps of the procedure in order to achieve a more effective process, whilst fully respecting the rights of defence of persons subject to investigation and the principle of collegiality which governs ESMA’s operations. The execution of such steps by an appointed panel or committee would ensure that the BoS is able to function properly and perform its duties whilst reserving  for it the adoption of any decision of principle. ESMA has considered that these steps are interim and procedural measures and therefore managerial or administrative in nature. Therefore, ESMA has considered that the particular steps could be delegated under Article 41(1) of the Regulation (EU) No 1095/2010 (ESMA Regulation). In such case, the BoS would retain collective responsibility for the consequences of such steps and the possibility to exercise control. Accordingly, this document sets out certain proposals which ESMA believes could be carried out by such a panel or committee.

ESMA notes that the advice requested is in relation to the requirement at Article 64 (7) of EMIR for the Commission to make further rules of procedure for the exercise of the power by ESMA to impose fines or periodic penalty payments, and accordingly this technical advice does not address the matter of procedures in respect of supervisory measures (under Article 73 of EMIR) unconnected with fines or withdrawals of registration under Article 71 of EMIR which are outside the scope of the empowerment under Article 64(7) of EMIR or the request for technical advice.

In addition, regarding periodic penalty payments imposed by ESMA during the investigation phase (Article 66(1)(b) in relation to Articles 61, 62 and 63 of EMIR), such periodic penalty payments should be subject to a separate, fast procedure distinct from the one applicable for the imposition of fines (the procedure set forth by Articles 64(1) to 64(6) does not apply). This procedure will not be covered by the consultation paper. Periodic penalty payments imposed under Article 66(1)(b) of EMIR by ESMA will be covered by the technical advice to be sent to the Commission, but the practicalities of this procedure still need to be elaborated.

Next steps

ESMA will consider the feedback it received to this consultation and will provide by 31 December 2013 its advice on technical aspects of the future regulation which will be adopted by the Commission in the form of a delegated act in accordance with Article 290 of the TFEU.

The rules will be defined by the Commission via Delegated Act. The consultation is open until 15 November and ESMA aims to deliver its advice by 31 December 2013.

Press release

Full Consultation Paper

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