This paper looks specifically at the impact of European Benchmark Regulation (BMR) on benchmark administrators located outside of the European Union (EU).
Much has been written about the benchmark scandals that rocked benchmarks like LIBOR (London Inter-bank Offered Rate) and EURIBOR (the Euro Inter- Bank Offered Rate) and the steps that the global financial regulators have taken to prevent further manipulation of benchmarks.
In 2009 regulators and public authorities in a number of different jurisdictions, including the United States, Canada, Japan, Switzerland and the EU, began investigating a number of institutions for alleged misconduct relating to LIBOR and other benchmarks, including EURIBOR and TIBOR (the Tokyo Inter-Bank Offered Rate).
Since that time there have been a stream of reports and recommendations. It started with the Wheatley Report (September 2012) that analysed LIBOR from a governance perspective and presented a number of recommendations to the UK Government, primarily that the administration of LIBOR should be a regulated activity and secondly the need for new institutions to administer and oversee the production of LIBOR.
The UK Government moved quickly and in April 2013 new rules for benchmarks came into effect. The rules were published in a new section, MAR 8, of the UK’s Financial Conduct Authority’s (FCA) Handbook. The rules applied to UK based benchmarks and no impact upon the governance or operation of benchmarks operating outside of the UK.
Following Wheatley and the FCA’s MAR 8, the European Securities and Markets Authority (ESMA) in collaboration with the European Banking Authority (EBA) published the “ESMA-EBA Principles for Benchmark-Setting Processes in the EU June 2013”. Shortly after the International Organisation of Securities Commissions (IOSCO) published the “Principles for Financial Benchmarks July 2013”. These two sets of principles were closely aligned in content and message.
In June 2016 the Council of the EU published new EU Benchmark Regulations[1] (BMR) and in April 2017 ESMA published the associated Technical Standards. The major difference with BMR from other jurisdictional regulations is that BMR prohibits EU Supervised Entities from investing in benchmarks that aren’t listed on the ESMA Benchmarks Register. The prohibition extends to so called ‘Third Country’ benchmarks from 1st January 2020. In other words, a benchmark produced outside of the EU cannot be used by EU Supervised Entities post January 2020 unless that benchmark is listed on the ESMA Benchmarks Register.
Very little has been written in practical terms about the impact BMR will have on benchmark administrators outside of the EU who are required to implement BMR compliant measures. This paper looks at that impact and the challenges that third country benchmark administrators face in meeting the deadline of 1st January 2020.
Without being too alarmist, all third country benchmark administrators should already have a project plan in place to meet the BMR deadline. For any benchmark administrators starting now, there is a great deal of work to be done and the consequences of failure could be significant. To this extent, this paper identifies the likely timelines, hurdles and most importantly the decision making process that needs to be employed.
While BMR will prevent EU Supervised Entities, by law, from investing in benchmarks or indexes that are not on the ESMA Benchmark Register, after 1st January 2020, we believe that other investment firms and banks outside Europe will adopt the ESMA Benchmark Register to determine their future investment strategies. In effect, international investment flows could be severely compromised for benchmarks that are omitted from the ESMA Benchmarks Register.
BMR is European regulation, but its impact is resonating across all global benchmarks and investors.
So what does this mean for third country benchmark administrators outside Europe? The first question to answer is whether having EU Supervised Entities investing in your benchmark (or products that reference your benchmark) is important to you? Unfortunately for many benchmark administrators it is a difficult question to answer. Why? Because most benchmark administrators don’t know who uses their benchmarks and what exactly they use it for. The reason for this is purely historic and we will briefly look at this to provide some context on their position.
[1] Regulation (EU) 2016/1011 of the European Parliament and of the Council of 8 June 2016 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds and amending Directives 2008/48/EC and 2014/17/EU and Regulation (EU) No 596/2014.
Historical Perspective
Most current interest rate benchmarks or IBORs had their origins in the 1980s with the emergence of the Over-The-Counter (OTC) interest rate derivates markets. Financial market participants needed to have an agreed independently produced reference rate that could be used for settling financial obligations arising from these OTC derivatives. Working typically through fledgling OTC financial market associations the market participants agreed on the rules for the collection of input data from contributing member banks to create the IBOR benchmarks.
Back in the 1980’s the only financial market data infrastructure that linked OTC market participants together was information vendor screens. The industry associations lacked their own technology capability so it was to the information vendors that they went to get the input data collected, calculated and distributed, usually at no cost to the association. Information vendors were more than happy to assist the associations as the created benchmark data was a unique data set that helped them to sell screens. In a competitive environment the information vendors often took a proprietary view of the data to recover their costs and were reticent to share the benchmark data with other vendors, either at all, or on a timely basis. This lead to some market inequality amongst participants depending on which information vendor service they had access to. In some cases the vendors on sold the benchmark data to generate a revenue stream for the vendor. Generally the industry associations didn’t receive a share of the vendor revenue.
Despite the lack of funding to the associations the relationship between the vendors and associations worked well. It suited both parties as the benchmarks continued to be produced in this way for many years. The benchmarks were seen as a vital service to the market. The governance and production of the benchmarks were certainly not seen as a core competency for either the associations or vendors. The associations had some administrative costs to manage the market committees responsible for the benchmark methodology design but there were few other costs. The association did not receive any revenue, other than membership fees, to offset these costs.
Information vendors that were responsible for collecting the input data to calculate the benchmarks provided the systems and staff to produce the benchmarks.
The benchmarks were widely distributed by the vendors to their customers on a ‘free-to-air’ basis. For the associations there was very limited visibility as to who used the benchmark, where it was used, for what purpose it was used and whether the benchmark was being used as an input for the creation of other products such as bond indices.
Current Situation
To a great extent, the historical perspective is how many benchmark administrators still operate. They are producing benchmarks without a deep understanding of the benchmarks use.
There are some exceptions however. In Australia and New Zealand GRSS staff have helped the financial market associations to monetarise their benchmarks by moving their benchmarks to a data licensing model. Not only does a licensing model generate fee income for associations from the users of the benchmark, but the it also allows the benchmark administrator to know exactly who is using their benchmark and for what purpose. Importantly the benchmark administrators know the type of organisations that are using benchmarks including whether they are an EU Supervised Entity.
Many benchmarks were typically developed for local use but the reality is that over time more and more international transactions have been completed that reference these benchmarks.
For example, the huge growth of investment funds over the past 30 years has touched every financial market. Many indices are linked. Even benchmarks that might be considered small can have significance as a component of a larger index.
Interest rate swaps that can have very long lives – 50 years or more. The counterparts to such deals, often a local bank and an offshore counterparty require access to the settlement benchmark value for as long as the swap transaction is active.
In our experience there are many more overseas users of benchmarks than local users. For licensed benchmarks this means that the income generated from licensing is dominated by overseas income.
So, another key question for benchmark administrators who produce benchmarks outside of Europe, is whether the foreign investment flows that rely upon the benchmark are important for the smooth operation of financial markets and the wider economy. In nearly all cases the answer to this question will be in the affirmative. In fact, some emerging markets are in the process of developing their benchmarks for the very purpose of generating foreign investment flows.
This is not only the case for IBORs but for many other benchmarks including those linked to bonds, equities and other markets.
What To Do
Perhaps because of the perceived long lead time for all elements of BMR to be applicable and a lack of appreciation of the risks to investment flows it appears that some third country benchmark administrators have been slow to develop a readiness plan.
The reason for this is very clear. The impact of the regulation and the path needed to be taken by benchmark administrators outside of the EU is not clearly understood.
Many benchmark administrators have taken steps to implement aspects of the IOSCO Principles and felt that they had done enough to meet best practice. Furthermore, the BMR third country provisions mention that in some cases demonstrating compliance with the IOSCO Principles will be sufficient.
IOSCO Versus BMR – What’s The Difference?
BMR is a different beast to the IOSCO Principles. Firstly, BMR is law in the EU whereas IOSCO presents a set of principles. BMR is also a lot more prescriptive. The 19 IOSCO Principles are around 14 pages of text whereas the BMR and ESMA Technical Standards are substantial pieces of regulation, with the full text of BMR being 245 pages of text and the ESMA Technical Standards a further 194 pages.
The wording of BMR for third country benchmarks suggests that the overarching framework of IOSCO can be used, but the benchmark administrator needs to demonstrate equivalence with BMR within the framework.
In other words, just applying the IOSCO Principles without reference to specifics within BMR may prove insufficient when seeking entry to the ESMA Benchmarks Register.
The Reality
Put simply, if your benchmark is not on the ESMA Benchmarks Register by 1st January 2020, then legally EU Supervised Entities cannot invest in any products that reference that benchmark past this time.
So, the big question you’ve probably been asking is “how do I get our benchmark onto the ESMA Benchmarks Register?”
Getting On The ESMA Benchmark’s Register
In the following section we are going to describe the three routes by which you can get your benchmark on the ESMA Benchmarks Register. But before we do that, there is one key issue:
Irrespective of what route you choose the benchmark will need to meet BMR standards and be able to demonstrate this before any equivalence status can be determined.
Three Routes
BMR Articles 30, 32 and 33 describe the three available routes to getting a benchmark and its administrator included in the ESMA Benchmarks Register – Equivalence, Recognition and Endorsement.
Third country benchmark administrators have found it difficult to understand more about each option to enable them to take the right route. The legal phrasing within BMR can be challenging, even more when it’s a foreign language.
As the broader financial industry debates the practical implementation of BMR it is becoming clearer as to the nuances of route and the associated complexities. One thing is for sure though. Time is running out.
Looking at each of the routes in more detail.
Equivalence
Under this path there is a requirement that the legal framework and supervisory practice must be in place in the third country so that the European Commission can adopt an equivalence decision to BMR.
Not only does a third country need to pass new laws and give regulatory powers, the entire regime needs to be in place before the EU Commission will undertake its assessment.
Some countries that have introduced their own benchmark legislation, like Australia, have stipulated that only certain benchmarks are deemed significant. Benchmark administrators of significant benchmarks (unless exempted) have a mandatory obligation to hold a benchmark administration license. Benchmark administrators of other benchmarks have the option to apply for a license if they choose to.
Many countries are now scrambling to get new legislation passed, but the wheels of government can be slow. Once the legislation is passed benchmark administrators can apply for a benchmark license, or similar, while the EU Commission is undertaking its equivalence assessment of the legislative regime. It will all take time with no guarantee that the EU Commission will adopt a decision of equivalence. Once the equivalence decision is taken any benchmarks in the third country that are authorised within the third country’s legislative regime will automatically be placed on the ESMA Benchmarks Register (unless the third country benchmark administrator chooses for its benchmark not to be included on the register).
It is becoming clear that a number of countries will not have a benchmark legislative regime in place in time. For example, it is unlikely that the United States of America will have any such regulation in place by the 1st January 2020. So, all USA based benchmarks will not be able to take advantage of the equivalence route.
Challenges: Dependent on local legislation. Benchmark administrators still need to meet the IOSCO Principles and the requirements of the local regulations which are required to be at least equivalent to BMR.
Timeframe: Delays in legislation may make this an unsuitable route
Recognition
This route is designed to be an interim arrangement while the legislative framework discussed above is implemented. It carries its own challenges. Under the recognition route, a benchmark administrator must look to be “recognised” by a National Competent Authority (NCA) within the EU. BMR states that third country benchmark administrators must apply for recognition with the NCA in its EU Member State of Reference. There are specific criteria for choosing the Member state of Reference centred around the usage of the benchmark by EU Supervised Entities.
This brings us back to the earlier dilemma that arises when benchmark administrators are uncertain about who is actually using their benchmark, what type of organisation they are and where are they located. Without the information benchmark administrators cannot provide evidence for their choice of Member State of Reference.
The whole recognition route is further complicated by Brexit. Given the importance of London as a financial centre many third country benchmarks may determine the UK as their Member State of Reference. Post March 2019, when Brexit is planned to be effective, third country benchmark administrators will need to choose a new EU Member State of Reference with the most users of their benchmark. This is because that post Brexit the UK’s FCA will no longer be an NCA within the EU and therefore it will not be able to process third country applications. It is likely that the benchmark regulatory regime in the UK will be adopted as being equivalent to BMR by the EU Commission post Brexit. This will allow those benchmarks in the UK that have been authorised by the FCA to be listed on the ESMA Benchmarks Register through the equivalence route. What is less clear is what will happen to those third country benchmarks already on the ESMA Benchmarks Register that achieved their registered status via a third country route through the FCA. If no streamlined solution can be developed, then those third country benchmarks will need to make a new application through the NCA of the Member State of Reference at that time.
Let us assume that as a third country benchmark administrator you do know the NCA to approach. Under BMR you need a natural or legal person within the EU to liaise with the NCA regarding your recognition application. When you think about it, this makes sense, as the authority wants that person to take responsibility in Europe for the oversight function of the benchmark and to be accountable to the NCA in the Member State of Reference.
Prior to a third country benchmark administrator seeking recognition it will have to have in place the policies, procedures and governance ready for authorisation. This is a complicated and time-consuming task that will require a great deal of effort and swift decision making from all stakeholders.
In order to demonstrate to the NCA considering a recognition application that the third country benchmark administrator complies with the IOSCO Principles an external audit is required to provide this evidence to the NCA.
Many third country benchmark administrators have little or no policies and procedures written in an EU member language. This is likely to be problematic, as an EU language version will be required. It is likely most NCA’s will accept applications in English.
Challenges: Having the information to determine the right NCA to approach and a representative within the EU. We believe that the majority of third country benchmark administrators will choose the recognition route.
Timeframe: Many different components require implementation in a short timeframe. If, as a third country benchmark administrator, you haven’t started the process of meeting the IOSCO Principles and BMR compliance yet then time will be against you.
Endorsement
This route was primarily designed for benchmarks or families of benchmarks where the endorsing benchmark administrator has a clear and well-defined role within the control or accountability framework of a third country administrator. Let’s say for example that you are a major bank producing many benchmarks or indices around the globe and you have a branch operating in Europe.
The concept of endorsement is that the branch in Europe would become an authorised benchmark administrator and then endorse other inter-company benchmarks as long as they all meet the BMR standard. The endorsement route is not available to benchmark administrators that have no basis for providing endorsement. In other words BMR doesn’t support an authorised benchmark administrator in Europe endorsing (or “guaranteeing”) a benchmark unless there is an objective reason for the benchmark to be produced in the third country and for the benchmark to be endorsed for use within the EU.
Again, if you think about it, it also makes sense. Why would you take on the risk of your own authorisation for a benchmark in a third country if you didn’t have full control over its processes? For inter-company benchmarks this makes perfect sense, as the company retains control of the benchmark.
This route could be available to third country benchmark administrator without a presence in the EU if the incentive for the EU authorised benchmark administrator was there. This could be achieved through the divestment of the third country benchmark to the endorsing benchmark administrator or a partnership arrangement with the authorised benchmark administrator in the EU. A partnership would create a model more akin to the inter-company model.
Challenges: The third country benchmark administrator needs to give up some control of its benchmark (if it is not an intercompany benchmark). The benchmark needs to be compliant with requirements that are at least as stringent as BMR.
Timeframe: Could be the fastest route if appropriate arrangements are made.
Project Plan
With less than 18 months to go before the 1st January 2020 deadline, third country benchmark administrators need to have a project plan in place to ensure they can be listed on the ESMA Benchmarks Register in time. This really should be in place already, and if not, serious steps need to be taken quickly to do so.
The amount of work to be undertaken is significant, with many of the tasks being linear in nature. If help is required, then it should be sought. In some cases, divestment or a joint venture with another party that can make the deadline may be the best option.
Money And Expertise
With less than 18 months to go before the 1st January 2020 deadline, third country benchmark administrators need to have a project plan in place to ensure they can be listed on the ESMA Benchmarks Register in time. This really should be in place already, and if not, serious steps need to be taken quickly to do so.
The amount of work to be undertaken is significant, with many of the tasks being linear in nature. If help is required, then it should be sought. In some cases, divestment or a joint venture with another party that can make the deadline may be the best option.
- IOSCO Principles and BMR focusses heavily on the submissions of input data to a benchmark administrator governed by a Code of Conduct
- Submitters will need time to absorb the new requirements and may need to implement wide ranging and costly changes inside their organisations from a compliance, process, system and people perspective
- Conflicts of Interest need to be managed, and if you have an IBOR benchmark then control can no longer be in the hands of those that predominantly submit the input data
- An effective Oversight Committee needs to be set up with appropriate skills sets to oversee the operations of the benchmark administrator. It can be challenging to find the right people to populate the committee
- All policies and procedures, Codes of Conduct and other documents need to be aligned and cross referenced
So, who will pay for all of this work and the associated costs? If your benchmark is not self-funding through a licensing model the cost burden will fall on the benchmark administrator. These costs should not be underestimated and for an IBOR could be anywhere from $500,000 to $2.5 million per annum depending on the significance of the benchmark and its complexity.
Dealing With A National Competent Authority
Whatever route is chosen for demonstrating equivalence an application will have to be lodged for authorisation, either locally under the equivalence route or through an NCA for recognition or endorsement.
BMR is a learning curve for everyone, including the NCAs. All documents that you submit as part of your registration process will need to be cross referenced against the IOSCO Principles and BMR. There may be as many as 50 documents. The NCA will review your documents during an initial process to establish the completeness of the application. Only when the application is considered complete will the application assessment process begin. The NCA may ask questions or request additional material. They may place conditions on your authorisation, perhaps asking for the benchmark to be anchored in transactions or that all submitters need to show compliance with the Code of Conduct.
The point here is that this process of engaging with the authority will take time. In BMR it stipulates that they need to address each registration/authorisation within specific timeframes. However, in the regulation they can stop the clock and ask for more information. This step may take longer than six months to complete.
Code Of Conduct
The submitter’s Code of Conduct is a key document for any benchmark that uses submitted input data and under BMR there are many specific requirements that the code needs to meet.
A benchmark administrator will, most likely, need to develop a new Code of Conduct to meet the regulations, and more importantly have it agreed by all submitters. The code may well impose more costs and time burdens on submitters. Submitters will need to adjust internal processes including segregation of duties, training for submitters and reviewers, recording of all tasks associated with submissions, compliance supervision etc.
It will take time for the submitters to complete all adjustments and to be in a position to declare compliance with all requirements. Any further adjustments to the code will need to be considered and approved by the Oversight Committee, the administrator board and of course the submitters themselves.
Submitters will most likely need to engage an external auditor to confirm that they meet all the requirements.
Alternate Benchmarks
BMR requires benchmark administrators to take steps to seek alternate benchmarks that could be used as substitutes should the benchmark cease to be produced. As has been seen with jurisdictions establishing the Risk-Free Rate (RFR) committees to investigate alternative options to their IBOR benchmarks it is a significant initiative. It requires broad stakeholder engagement, consultations, academic analysis and considerable additional work. For example, determining the spread adjustment from the existing benchmark to the alternate benchmark. Some form of roadmap would appear necessary.
Outsourcing
If aspects of the benchmark determination process are outsourced then the IOSCO Principles and BMR require the outsourcing arrangement to be documented. As discussed earlier, many benchmark administrators outsource the calculation and publication of their benchmarks to third parties. These relationships now need to be formalised and documented, with a contract and associated Service Level Agreement. Specific clauses need to be added so that in the case of failure by the third party, the benchmark administrator can take back this function.
Ultimately, the benchmark administrator is responsible for all outsourced functions, and needs to have in place people and policies to manage these relationships.
The challenge here is developing this documentation and more importantly coming to a commercial agreement. These agreements can take time, and it can often be difficult for an administrator to define requirements for systems that are not their own.
This is why it is preferable if there is limited outsourcing taking place and the benchmark administrator has their own technology and other key capability.
How GRSS Can Help
Global Rate Set Systems was set up in 2009 to help benchmark administrators with technology, funding and compliance. GRSS is in a unique position as it has direct, practical experience with BMR and its implementation – both in providing services to benchmark administrators in Europe, and also being a benchmark administrator for a significant IBOR in Europe.
We are able to help third country benchmark administrators outside Europe to meet the 1st January 2020 deadline, irrespective of the route that is taken.
Please see more details below of each route and the steps that can be taken for each one. In some cases, the benchmark administrator may seek to divest its benchmark administration activities to GRSS or choose to enter into a supply agreement while retaining the intellectual property rights to their benchmark or enter into a joint venture agreement with GRSS.
GRSS Assistance – Equivalence
For third country benchmark administrators that need to become authorised under their own country’s benchmark regulation (such regulation being deemed equivalent to BMR by the EU Commission) GRSS can assist in your preparatory steps.
We would recommend a starting step is to perform a gap analysis between what is being done now and what is required under the IOSCO Principles and BMR. This step will allow GRSS to map out the work required to be compliant.
To complete the gap analysis GRSS representatives would visit your premises and review your current processes, policies, governance and documentation. We would produce a project plan for how the gaps could be remediated. The gap analysis and report production would take approximately one month.
GRSS will also be able to assist you with creating funding through data licensing. This may be a necessary component of the project to fund the activities that are foreseen in the future.
GRSS can provide Calculating Agent systems which currently operate for critical and significant benchmarks in Europe.
We can provide costing on all services based on your requirements.
GRSS Assistance – Endorsement
The GRSS subsidiary, Czech Financial Benchmark Facility s.r.o., is in the process of authorisation and once authorised will be able to endorse benchmarks from third countries.
There are special conditions under which GRSS would endorse a benchmark and we would be happy to discuss these conditions and the road map for this option.
GRSS Assistance – Recognition
For many third country benchmark administrators this will be the preferred route and GRSS can certainly help, in fact, fast- track this route. Some benchmark administrators intend to use this route as a stop-gap until a benchmark licensing regime is enacted in their own country.
Under the recognition route, you will be required to understand the right Member State of Reference within the EU so that GRSS could represent you through the authorisation process and on an ongoing basis as the natural or legal person representative. If you don’t have the information to determine your Member State of Reference we would recommend a strategy for obtaining the information. If you have any records of users who use the benchmark and their location it would be very helpful. The most effective method to understand the use of the data is to introduce a fee for use, or a system of licensing possibly without fee.
This process would need to be done quickly because of the time constraints. The most likely achievable date for implementing a fee or license would be 1st January or 1st March 2019. As stated earlier a licensing regime serves two purposes a) to understand users and uses of the benchmark and b) to provide funding to undertake benchmark administrator activities.
Once the right Member State of Reference is known GRSS would need to make sure that the benchmark(s) meet the IOSCO Principles and were considered equivalent to BMR (taking into account any exceptions under the third country provisions).
Stage 1 – Gap Analysis And Project Plan (Timeframe 1 Month)
We would recommend that the first step to the whole process is for GRSS to perform a gap analysis to determine what is being done now and what is required to meet the IOSCO Principles and BMR. This first step will allow us to develop a project plan for the work to be completed to be ready for an application for recognition within the EU.
This would require us to visit to your premises and to review your current processes, policies, governance and documentation.
Once this is completed and we will have a clear road map of what needed to be done. Please note that documentation for consideration in Europe will be required in a European language and this should be taken into consideration at this stage of the process.
Stage 2 – Preparing IOSCO Principles and BMR Compliance (Timeframe 3-6 Months)
This stage is a combination of two streams of work.
Stream 1
GRSS has a full library of documentation (approximately 50 documents) which can be used by a benchmark administrator for the authorisation process. Our documents are written in English and are cross referenced to BMR and the ESMA Technical Standards. From our own experience with authorisation the NCA of the Member State of Reference will require this as part of the application. Using these documents will fast track this next step, however they will all need to be adapted to the particular benchmark and how they operate. The gap analysis will help us to focus on key areas that need attention.
Stream 2
The more complicated, and more time-consuming aspect of this stage, is the potential need to implement a new governance framework. It is likely this will include:
- A Code of Conduct for submitters
- an Oversight Committee
- Outsourcing arrangements for external providers
- Internal procedures, policies and governance
This stream of work will require a collaborative effort from all parties (GRSS, benchmark administrator board, Oversight Committee and any submitters) to review and agree these new processes.
Stage 3 – External Audit
It is a requirement of EU BMR for the recognition pathway that compliance with the IOSCO Principles be demonstrated through the assessment by an independent external auditor. The audit would be conducted after the Stage 2 work has been completed to ensure the benchmarks meet IOSCO/EU BMR requirements.
GRSS would be happy to recommend potential auditors with experience in this type of work to undertake the audit. It should be noted that audit companies should be approached well in advance to ensure their availability as we anticipate a great demand for these audits in 2019 as third country benchmark administrators prepare for EU BMR.
Stage 4 – Finding The Right Member State
When approaching an NCA within an EU Member State of Reference they will want to see documented evidence as to why their Member State has been chosen for the recognition application.
Unless the benchmark administrator can provide enough evidence, GRSS will have to develop a strategy to obtain this information. There are a number of approaches that can used, but in any case obtaining the information will take time, possibly months.
Stage 5 – Appointing GRSS As Legal Representative In Europe
Another requirement of EU BMR for recognition is for the third country administrator to have a natural or legal representative established in its Member State of Reference. That representative is accountable to the competent authority in the Member State of Reference for benchmark oversight.
GRSS would be comfortable to act as the legal representative (subject to the external audit demonstrating compliance with the IOSCO Principles/EU BMR).
There would be three elements to this stage:
Legal work
There will be a considerable amount of legal work required to establish the legal representative. The bulk of the expense related to Stage 5.1 will be external lawyer costs.
GRSS as representative seeks authorisation with the competent authority in the EU Member State of Reference
GRSS would use the documentation already produced in Stage 2 to prepare the application for recognition and lodgement with the NCA. The external audit would have been completed to demonstrate compliance with IOSCO/EU BMR but from our experience the competent authority may require further clarifications and even modifications to documentation. In fact, we believe this is likely.
GRSS representative ongoing liaison and participation on Oversight Committee
Once the status of registration on ESMA’s register has been achieved there will be ongoing liaison with the NCA in the EU Member State of Reference that grants recognition. GRSS as the legal representative would need to participate on the third country benchmark Oversight Committee going forward to ensure that the BMR third country authorisation conditions were maintained.
Contact Us
For more information about how GRSS can help you, please contact us.
Mark Beaumont – Europe, Middle East and Africa – mark.beaumont@globalrateset.com
Neil Donaldson – Americas – neil.donaldson@globalrateset.com
Clive Bennett – Asia Pacific – clive.bennett@globalrateset.com
Craig McIvor – CEO and Director – craig.mcivor@globalrateset.com