Who Handles EMIR Violation Enforcement for Online Brokers?

In a previous article we wrote that the €64,000 fine by ESMA of the DTCC appears to show that the EU regulatory body has begun to take an active role in ensuring that trade repositories are collecting EMIR reporting data correctly.

In today’s post we take a look at what the penalty risks are for corporations that fail to comply with EMIR reporting.

similar infractions may be treated differently in different countries

Unlike trade repositories, over which ESMA has jurisdiction of enforcement of their practices, penalties to individual financial and non-financial firms that are obligated to report under EMIR’s OTC derivatives and exchange traded derivatives (ETD) are handled by regulators of each member state. As such, the financial regulators of each European Economic Area (EEA) country that participate in EMIR have created their own frameworks for penalties. The result is that similar infractions may be treated differently in different countries.

For the purpose of this blog we’ll focus on the framework that has been put in place in jurisdictions where online brokers such as for binary options, Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term and CFDs operate (full list of regulatory statements for Article 12 of EMIR).

Cyprus

For Cypriot brokers, enforcement of EMIR derivative reporting falls under the auspices of CySEC CySEC The Cyprus Securities and Exchange Commission (CySEC) is a financial regulatory authority of Cyprus. CySEC is one of the key watchdog authorities for brokerages in Europe, whose financial regulations and operations comply with the European MiFID financial harmonization law.Founded in 2001, CySEC is instrumental in providing licensing and registration for forex brokers and previously binary options providers.CySEC is responsible for a variety of different functions, which includes the supervision The Cyprus Securities and Exchange Commission (CySEC) is a financial regulatory authority of Cyprus. CySEC is one of the key watchdog authorities for brokerages in Europe, whose financial regulations and operations comply with the European MiFID financial harmonization law.Founded in 2001, CySEC is instrumental in providing licensing and registration for forex brokers and previously binary options providers.CySEC is responsible for a variety of different functions, which includes the supervision Read this Term. For its part, the regulator has shown that compliance with EMIR is an immediate priority and it sent a circular to brokers in February for them to submit information about their reporting process.

In terms of potential penalties, CySEC established that it can impose an administrative fine of up to €350,000 for first time offenders. Firms that are repeat violators of the EMIR framework are vulnerable to a penalty of up to €700,000. In addition, CySEC added that if a firm profits from an EMIR violation, it has in its power to fine beyond the €700,000 figure, up to double the amount of illicit gain.

UK

Among regulators, the UK’s FCA has taken the liberty to have the most flexibility when it comes to enforcement. Unlike other regulators, the FCA stated that it will impose penalties “as it sees fit”. The result is that potential fines aren’t limited in their size with the FCA having the ability to apply multi-million penalties if it “sees fit”.

For reference, in the past, the FCA has applied large sized penalties when it comes to other transactional reporting frameworks. In 2015 alone, the FCA fined Deutsche Bank £4.7 million and Merrill Lynch £13.2 million for transaction reporting infractions related to market surveillance of market manipulation and insider trading. In both cases, the penalty was related to violations taking place over a multi-year timeframe.

Malta

While not a household name to many, Malta has been growing its reputation as a potential destination for brokers to gain EU regulation. The country also has one the lowest penalty structures that has been put in place for EMIR. As such, the MFSA is limited to imposing fines of up to €150,000.