The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, has today launched a consultation on draft Guidelines related to the Internal Control Framework for some of its supervised entities.
The proposed draft Guidelines build on the Internal Control Guidelines currently in place for Credit Rating Agencies and extend them to include also Benchmark Administrators, and Market Transparency Infrastructures (Trade Repositories, Data Reporting Services Providers and Securitisation Repositories).
The draft Guidelines outline ESMA’s expectations for the components and characteristics of an effective internal control system, ensuring:
a strong framework, detailing the internal control environment and informational aspects; and
effective internal control functions, including compliance, risk management, and internal audit.
The draft Guidelines also explain in greater detail how ESMA applies proportionality in its expectations regarding the internal controls for a supervised entity.
In addition, the draft Guidelines reflect the growing impact of technology on supervised entities’ operations.
The consultation is primarily aimed at ESMA supervised entities and prospective applicants for ESMA supervision.