The European Securities and Markets Authority (ESMA) regulates securities financing activities by setting out verification, aggregation, comparison and publication of data on securities financing transaction reporting requirements, data access and collection (SFT) by trade repositories (TRs). The Securities Financing Transactions Regulation (SFTR) is the main piece of EU legislation in this area.
The SFTR regulates transactions which refer to the build-up of leverage, pro-cyclicality, liquidity and maturity transformation, and interconnectedness in the financial markets. These include repurchase transactions, securities or commodities lending and securities or commodities borrowing, a buy-sell back transaction or sell-buy back transactions.
Regulations have recently been issued in order to implement the SFTR.
Competent Authority Powers
Under the new regulations, the Malta Financial Services Authority (MFSA) has been given the power to impose administrative penalties and administrative measures for breaches of the SFTR such as for instance:
- an order requiring the person responsible for the breach to cease the conduct and to desist from a repetition of that conduct
- public statement which indicates the identity of the person responsible and the nature of the breach
- withdrawal or suspension of the authorisation
- temporary ban against any person discharging managerial responsibilities, or any natural person who is held responsible for such a breach, from exercising management function
- maximum administrative penalties of three times the amount of the profits gained or losses avoided because of the breach
- with respect to natural persons, maximum administrative penalties of five million euro
- with respect to legal persons, maximum administrative penalties of: (i) five million euro (€5,000,000) or up to ten per cent (10%) of the total annual turnover of the legal person for failure to follow the SFTR's reporting and supervisory obligations or (ii) fifteen million euro (€15,000,000) or up to ten per cent (10%) of the total annual turnover of the legal person for a failure to observe the conditions regarding the reuse of financial instruments received under a collateral arrangement.
When determining the type and level of administrative penalties and other administrative measures, the MFSA as the local competent authority shall take into account all relevant circumstances including the gravity and duration of the breach and the degree of responsibility of the person concerned. The MFSA shall publish any decision imposing an administrative penalty or other administrative measure in relation to breaches under the SFTR. All decisions shall be subject to appeal from the Financial Services Tribunal.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.