Cyprus tops list of EU states falling short on market abuse rules

Cyprus fared worst in a “peer review” of national regulators in the European Union for failing to fully comply with rules to stamp out abuses in markets, the bloc’s securities watchdog said on Thursday.

Cyprus was the only EU member state found to be non-compliant with market abuse rules on two of six assessments by the European Securities and Markets Authority (ESMA).

ESMA looked at whether supervisors were making sure that certain financial firms meet requirements.

ESMA found that Austria, Bulgaria, Greece, Ireland, Latvia and Luxembourg were “partially-compliant” among EU member countries, while Cyprus and Romania were “non-compliant”.

The watchdog also looked at how national regulators responded to poor-quality or suspected non-reporting of suspicious trades and associated enforcement actions.

Croatia, Denmark, Estonia, Greece, Latvia, Lithuania, Malta, Poland, Romania and Slovakia were “partially-compliant”, while Cyprus was “non-compliant”.

Belgium, France, Italy, the Netherlands, Portugal and Britain fully complied in at least four of the six assessment areas.

“We as European regulators need to make further progress in ensuring firms’ compliance and in challenging poor-quality reporting,” ESMA Chair Steven Maijoor said in a statement.

Cyprus’ regulator CySEC said in the ESMA report that it disagrees with some of the findings and assessments in the review, which it said did not pay sufficient consideration to the specific characteristics of the Cyprus market.

Romania’s regulator told the review it disagreed with the non-compliance finding and it does not adequately reflect its approach to supervision.

The review saw a sharp rise in the number of suspicious transactions reported, mainly by investment firms in relation to stock trades, due to broader reporting criteria brought in by the new rules in 2016.

The review comes after the European Central Bank found that Bank of Valletta in Malta had not reported thousands of suspicious transactions to the authorities, in the latest of a string of money-laundering cases at EU banks over the last two years.

The EU is currently looking at how to improve supervision of suspicious transactions, including ways to standardise reporting and end a patchwork of differing national requirements.
ESMA said that due to Britain’s pending departure from the EU, there has been a significant number of re-locations of entities from the UK to the bloc, with many of them intending to outsource market surveillance to a UK entity.

“While outsourcing is possible as long as the outsourcing firm has appropriate systems… national competent authorities should maintain a focus on this area if post-Brexit regulatory regimes begin to diverge,” ESMA added.

[Reuters]