ESMA Guidelines (ESMA35-36-1952) on certain aspects of the MiFID II compliance function requirements
The European Securities and Markets Authority (ESMA) has published the Guidelines on certain aspects of the MiFID II compliance function requirements (‘the Guidelines’), on 6 April 2021 translated in all official languages of the EU. These Guidelines, replace the previous ESMA guidelines on the same topic issued in 2012.
The Guidelines apply in relation to the requirement of the Regulated Entities who, as part of their obligations under the Investment Services and Activities and Regulated Markets Law of 2017 (‘the Law’), must ensure that the compliance function fulfils the requirements set out in Article 22 of MiFID II Delegated Regulation 565/2017 by maintaining an efficient compliance function in accordance with Article 17(2) of the Law.
The Guidelines’ objective is the establishment of consistent, efficient and effective supervisory practices and to ensure the common, uniform and consistent application of certain aspects of the MiFID II compliance function.
Therefore, these Guidelines aim at requiring the Regulated Entities to have a robust governance framework by implementing systems and controls, policies and procedures, establishing an independent and effective compliance function to manage risks and ensure compliance with their regulatory obligations.
In brief, the said Guidelines focus on the below areas:
- Guideline on the compliance risk assessment;
- Guideline on the monitoring obligations of the compliance function;
- Guideline on the reporting obligations of the compliance function;
- Guideline on the advisory and assistance obligations of the compliance function;
- Guideline on the effectiveness of the compliance function;
- Guideline on the skills, knowledge, expertise and authority of the compliance function;
- Guideline on the permanence of the compliance function;
- Guideline on the Independence of the compliance function;
- Guideline regarding the proportionality with regard to the effectiveness of the compliance function;
- Guidelines on combining the compliance function with other internal control functions;
- Guidelines on outsourcing of the compliance function;
- Guidelines on the review of the compliance function by competent authorities;
The Guidelines apply from two months of the date of publication of the guidelines on ESMA’s website in all EU official languages, i.e. 07 June 2021.
CySEC adopts these Guidelines by incorporating them into its supervisory practices and regulatory approach.
Regulated Entities must take the necessary actions in order to ensure their compliance with the Guidelines.
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