The FCA has published Consultation Paper 14/32: Bringing additional financial benchmarks into its regulatory and supervisory regime (CP14/32).
HM Treasury intends that all 7 benchmarks recommended by the Fair and Effective Markets Review (FEMR) will be brought within the FCA’s regulatory scope from 1 April 2015. Additionally, the final draft of the Order to effect the FEMR recommendations ensures that the criminal offence of manipulating a “relevant benchmark”, in Section 91 of the Financial Services Act 2012, applies to the additional benchmarks.
CP14/32 seeks views on how the FCA’s generic approach to regulating benchmarks could be applied beyond the currently regulated benchmark, LIBOR, to other benchmark administrators (and benchmark submitters as appropriate). As some of the 7 benchmarks do not have benchmark submitters, the FCA is proposing to amend the existing rules in Chapter 8 of the Market Conduct Sourcebook so that benchmark administrators that either do not have submitters or, in addition to submissions, rely on other information, will be required to treat as a ‘submission’ “any data or information made available by any person other than a benchmark submitter that is processed, considered or used by a benchmark administrator for the purpose of determining the specified benchmark it administers.”
Overall CP14/32 proposes that all benchmark administrators will be required to:
- implement credible governance and oversight measures;
- monitor, scrutinise and keep records of benchmark submissions;
- maintain sufficient financial resources to ensure they can cover operating costs for six months; and
- appoint an individual, approved by the FCA, to oversee and ensure the firm’s compliance with the FCA’s requirements for benchmark administration.
The deadline for responses to CP14/32 is 30 January 2015. The FCA intends to publish a Policy Statement and final Handbook text in Q1 2015, with the relevant provisions coming into force once the secondary legislation takes effect.