In July 2021, the first Maltese entity was registered as a benchmark administrator by the MFSA and added to the ESMA register of benchmark administrators in accordance with the EU Benchmarks Regulation (EU Regulation 2016/1101).
The Benchmarks Regulation, which came into force in June 2016, forms part of the post-financial crisis reforms and was aimed at closing the gaps in the financial sector reform agenda, through staggered steps, which were exposed following the LIBOR scandal. It, therefore, comes as no surprise that the underlying objective of this European instrument was that of ensuring the accuracy and integrity of indices in order to instil market confidence. To achieve this, the Benchmark Regulation emphasises the:
- implementation of strong governance arrangements, including robust conflicts of interest policies;
- establishment of oversight functions;
- use of effective controls to ensure the integrity of data and accountability;
- publication of benchmark statements in order to keep users informed;
- record-keeping; and
- complaints handling.
Market operators, including EU fund managers managing non-EU funds, should assess the import of the Benchmarks Regulation vis-à-vis their operations. This is particularly in view of the fact that with effect from January 2022, entities established in the EU will be prohibited from the (i) new use of existing non-EU indices, and (ii) the use of new non-EU indices, subject to the provisions in the Benchmarks Regulation on equivalence, endorsement, or recognition. This means that supervised entities referring to indexes when issuing financial instruments or when determining amounts payable under financial instruments or financial contracts or when measuring the performance of an investment fund must ensure that the benchmarks are provided by administrators included on the ESMA Register.
The ESMA Register can be found here.
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