ESMA asks for NCAs to improve suspicious transaction reporting

The European Securities and Markets Authority (ESMA) has called for national competent authorities (NCA) to do more on suspicious transaction reporting.

After conducting a peer review of NCAs on their handling of suspicious transactions and order reports (STOR) under the Market Abuse Regulation (MAR), it identified that NCAs could go further in ensuring all financial institutions do their best in combatting market abuse. It also found there has been a significant increase in STOR.

Anyone professionally arranging or executing transactions, investment firms and trading venues must report STORs to their NCA. This enables suspicious behaviour analysis and investigations of insider dealing and market manipulation.

Last year, 11,130 STORs were received by NCAs, up from 10,653 in 2017.

During ESMA’s review it assessed all 31 NCAs in six key areas. Overall, the regulator believed NCAs were performing well in their analysis of suspected market abuse; however, there is room for improvement.

The regulator suggested NCAs ensure all financial players subject to STOR requirements, including wholesale market participants, are meeting compliance.

It also believes they should enhance their focus on suspected non-reporting/poor-reporting of STORs including where appropriate, enforcing and sanctioning non-compliance.

ESMA found six NCAs were fully compliant in at least four of the six assessments. These countries were Belgium, France, Italy, the Netherlands, Portugal and the United Kingdom.

Any countries not at full compliance will be given bespoke improvements from ESMA.

Austria, Bulgaria, Greece, Iceland, Ireland, Latvia, Liechtenstein and Luxembourg were seen to have partial compliance in their supervision of the STOR requirements by certain financial players, while Cyprus, Norway and Romania were considered as non-compliant.

Croatia, Denmark, Estonia, Greece, Iceland, Latvia, Lithuania, Malta, Poland, Romania and Slovakia were identified as being partially compliant in their response to poor-quality or suspected non-reporting of STORs and associated enforcement actions. Cyprus and Liechtenstein were not compliant at all in this process.

ESMA chair Steven Maijoor said, “Suspicious transactions and orders reporting is an important tool to fight market abuse. Both regulators and market participants need to play their role when it comes to detecting and reporting suspicious activity to support the prevention or investigation of market abuse.

“Our review highlights good examples of NCAs’ supervision and enforcement of STOR requirements. However, we as European regulators need to make further progress in ensuring firms’ compliance and in challenging poor-quality reporting.”

Moving forward, the regulator will follow up with NCAs on individual findings.

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