The European Securities and Markets Authority (Esma) has carried out a review of several national financial regulators on their procedures for reviewing and approving fund prospectuses. Among the regulators assessed, the Luxembourg Financial Sector Supervisory Commission (CSSF) came out with a positive rating.
Esma regularly carries out assessments of national financial regulators, in the form of peer reviews, where it calls on both its staff and experts from national regulators. Such exercises aim to harmonise financial supervisory practices between member states, an approach that is part of the “supervisory convergence”.
The committee in charge of this peer review, this time on compliance with prospectus approval rules, “found that the CSSF met expectations with regard to the review and approval process, its compliance with Esma’s guidelines on risk factors, its resources, its independence and its accountability,” the authority said on 21 July.
505 prospectuses approved in 2020
The CSSF told Paperjam that it welcomed the conclusions: “As underlined in the published report, the CSSF can be very satisfied with the result… which demonstrates the robustness and the quality of the work of its teams… with regard to the number of files to be processed and the short deadlines imposed by the regulation.”
The volume of applications handled by the CSSF is indeed an element noted by the report, which identified the CSSF as the supervisory authority with the highest number of prospectus approvals in the EU. The document indicated that the CSSF approved 505 prospectuses in 2020. The CSSF stated: “Traditionally, the CSSF is the European authority that approves the most securities prospectuses under the Prospectus Regulation…. It has therefore also attached particular importance to this peer review.”
In addition, Esma found that Luxembourg transfers “a considerable number” of prospectuses to other member states, including 236 in 2020. This therefore has some impact on the level of supervision in other member states.
A point of improvement mitigated by the CSSF
However, the report pointed to one area for improvement regarding the prospectus approval process. “The [peer review committee] believes that the CSSF should consider the possibility of providing additional support to the heads of divisions in order to help them during busy periods, especially considering that they perform management tasks in addition to their direct responsibilities in the supervision of prospectuses.”
In response to this recommendation, the CSSF noted a particular element of context linked to its structure: “For the CSSF, its internal organisation allows it to adequately face peaks of activity…. including the theoretical case envisaged by the report”. Thus, the Luxembourg regulator is able to absorb “a critical situation in terms of volumes to be processed” by calling upon the “support of the department’s hierarchy and the most experienced members of the teams in question”.
This is not the first time that the CSSF has been subject to a peer review report published in 2022. Last March, a similar evaluation exercise concluded that the CSSF “partially meets expectations” in terms of cross-border supervision of investment firms and credit institutions. However, this was a rather satisfactory score given the shortcomings of the Cypriot regulator, the Cyprus Securities and Exchange Commission, which was given a special recommendation by Esma, the first time the European regulator had used this mechanism.
Read the original French version of this article on the Paperjam site.