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ESMA identifies improvements in financial information enforcement

The European Securities and Markets Authority (ESMA) has identified three areas where national competent authorities (NCAs) can improve financial information enforcement.

The three areas of improvement and ESMA’s recommendations supporting these improvements are based on a peer review in the form of a questionnaire sent to all NCAs and on-site visits made to seven countries:  Germany, Italy, Malta, Norway, Portugal, Romania, and the UK.

The three key areas for improvement according to ESMA are how issuers are selected to examine their financial information, the depth of inquiries into financial statements going beyond correcting disclosure and the allocation of financial and human resources by NCAs to enforce financial information.

Five jurisdictions (Malta, Portugal, Romania, Sweden and the UK) have been identified as not fully compliant with ESMA Guideline 5 under which NCAs are required to use selection models where all issuers are eligible to be selected for scrutiny.

In some jurisdictions there is a risk that insufficient resources are allocated to enforcement, according to ESMA chair Steven Maijoor.

“Additionally, in some jurisdictions there is a tendency to focus on disclosure issues instead of in-depth inquiries into valuation issues,” he added.

ESMA made a number of recommendations to help NCAs tackle the issue and improve these key areas. These are accessible here.

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