On 10 March 2022, the European Securities and Markets Authority (ESMA) published its peer review report on the supervision of cross-border activities of investment firms. The peer review assessed how Member State competent authorities (NCAs) supervise the investment services that investment firms and credit institutions provide to retail clients on a cross-border basis using a MiFID II passport.

In its report, ESMA identifies the need for home NCAs to improve their approach in the authorisation, ongoing supervision and enforcement work, relating to investment firms’ cross border activities. In particular, NCAs did not sufficiently identify, assess and monitor the risks related to firms’ cross-border activities or take supervisory action to effectively address those risks. However, ESMA also identified that overall, home NCAs appear to have established adequate processes in relation to passport notifications and – with some areas for improvements – in the context of cooperation.

ESMA expects to carry out a follow-up assessment in two years to review the level of improvements achieved considering the findings and recommendations of the report.

Alongside the report, ESMA has published Article 16 recommendations to the Cyprus Securities and Exchange Commission (CySEC) which aim to increase the human resources dedicated to the supervision of cross-border services of Cypriot investment firms, and to strengthen CySEC’s supervisory activities to effectively monitor, promote and enforce compliance by authorised firms. Following these recommendations, CySEC has two months to inform ESMA whether it complies/intends to comply with the recommendations. In addition, the recommendations foresee ad-hoc and periodic updates that CySEC should provide to ESMA to assess that the recommendations are effectively addressed.