ESMA peer review: strengthening of MiFID supervision of the compliance function
The supervision of the compliance function in investment firms and banks has improved over the last 5 years. The European Securities and Markets Authority (ESMA) has noted that, compared to 2017, national supervisory authorities are making progress by undertaking investigations and thematic reviews as well as implementing enforcement measures. This was demonstrated through the follow-up peer review. The Dutch Authority for the Financial Markets (AFM) was also commended for their progress since 2017.
In brief
• Shortcomings that were identified in 2017 have been improved
• Appreciation for best practises demonstrated by the AFM
ESMA investigated how the national authorities carried out their supervision with regard to the compliance function at companies falling under the scope of MiFID I. The 2022 assessment was a follow-up to the peer review conducted in 2017.For example, ESMA looked at how the AFM monitors the performance of the compliance function, by carrying out supervisory reviews.
Shortcomings from 2017 have improved
ESMA concluded that since 2017, progress has been made on addressing aspects which at that time were judged to be partly or completely inadequate. Generally speaking, most of the national competent authorities (NCAs) have strengthened their supervisory practice and the supervisory framework, conducted investigations, introduced random checks and/or taken enforcement measures. ESMA stressed that NCAs must continue to ensure that companies that are subject to supervision have strong and effective compliance functions.Appreciation for the AFM
ESMA concluded that the AFM has made progress since the initial peer review. ESMA expressed appreciation among other things for the AFM's investigation and in relation to the design and impact of the compliance function: ‘Points of reference for improvement of the compliance function’ (Dutch)’ (pdf, 500 kB).It also advised the AFM to keep monitoring the compliance function of investment firms and to ensure that they observe the ESMA guidelines. Moreover, they advised the AFM to continue to reflect on the effectiveness of the supervisory measures developed for the purpose of evaluating the compliance functions.
The peer review concerned an assessment of 5 NCAs: in Iceland, Greece, Cyprus, Sweden and the Netherlands.
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