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RIMES and leading industry figures call on buy-side compliance teams to prepare for major regulatory change

RIMES and leading industry figures call on buy-side compliance teams to prepare for major regulatory change


RIMES, together with the European Fund and Asset Management Association (EFAMA) and the Financial Markets Law Committee (FMLC), has cautioned compliance teams against overlooking important regulatory challenges during its first Regulatory Seminar.

Investment managers need to comply with MAD II requirements, which came into force this month, and prepare for the imminent arrival of MiFID II and the EU Regulation on Financial Benchmarks. These three pieces of regulation, when combined, mean that the buy-side will face compliance challenges unlike any it has faced before.

The buy-side must now have compliance monitoring as part of its core operational requirements. This requires taking a fresh look at transaction and order monitoring systems capable of handling the increasing scope of instruments.

Addressing a global audience at its recent EU Regulatory Seminar, RIMES called on compliance teams to acknowledge the complexity of the challenges ahead, including the ambiguities that still remain in the regulation, and start planning now.

Bruno Piers de Raveschoot (pictured), COO of RIMES’ new Regulatory Division, says: “These regulations demand nothing less than a complete change to the way in which market trades and transactions are monitored and reported. However, there is still a lack of clarity around aspects of the upcoming regulation, such as how the EU Benchmark Regulation defines a benchmark administrator and the role of ‘expert judgment’, as well as how it assigns the costs involved in regulating the benchmarks themselves.

“Without allowing time for proper analysis, many firms will struggle to correctly address the changes required. It is essential that firms start start planning now or risk falling foul of the regulator.”

Agathi Pafili, Senior Regulatory Policy Advisor, European Fund and Asset Management Association, (EFAMA), says: “We welcome the upcoming EU Benchmark Regulation as we feel it is important to create a robust credible and transparent framework for the benchmark setting processes that would create a level playing field across the industry. However, key aspects of the regulation, such as the transparency of the setting processes and the underlying data of benchmarks as well as particular cases of the use of indices remain unclear. This leads to legal unclarity and puts important burden on the investment managers as users of benchmarks and to the end-investors who will certainly carry part of the implementation costs.

“Careful assessment is now needed at the Level 2 phase, so that further legal clarity, level playing field for all market participants and transparency is guaranteed for users and end investors, in order to ensure no buy-side firm will carry an unjustified burden and struggle to adhere to the requirements of this regulation.”

Joanna Perkins, CEO of the Financial Markets Law Committee (FMLC), says: “The EU Benchmark regulation is the most ambitious attempt to regulate benchmarks we have seen to date. Consequently, it has the potential to change the market to a greater extent than many have yet realised.

“While the regulation does contain a number of drafting ambiguities that need to be addressed, it is clear that the regulation will require new practices from administrators, contributors and users. It is important that the industry works through these practices over the next 18 months so they are properly prepared for the regulation’s arrival.”

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