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ESMA recommends improvements in financial information enforcement

The European Securities and Markets Authority (ESMA) has published the results of a peer review conducted into how national competent authorities (NCAs) supervise financial information (IFRS) according to the Guidelines on Enforcement of Financial Information (Guidelines). The report identifies areas where NCAs can improve their enforcement and makes recommendations to support these improvements.

The peer review was carried out on the basis of a questionnaire to all NCAs, as well as on-site visits to seven jurisdictions: Germany, Italy, Malta, Norway, Portugal, Romania, and the UK.

The report identifies that further improvements are needed in relation to:

  • how issuers are selected to examine their financial information;
  • the depth of inquiries into financial statements going beyond correcting disclosure; and
  • the financial and human resources allocated by NCAs to the enforcement of financial information.

In particular, five of the jurisdictions – Malta, Portugal, Romania, Sweden and UK – do not fully comply with Guideline 5, which requires that NCAs use selection models in which all issuers are eligible to be selected for scrutiny.

Steven Maijoor, ESMA Chair, said:

“The peer review’s findings show that in some jurisdictions there is a risk that insufficient resources are allocated to enforcement, and that some issuers are not eligible to be selected for scrutiny. Additionally, in some jurisdictions there is a tendency to focus on disclosure issues instead of in-depth inquiries into valuation issues. ESMA will work with the national competent authorities to implement the recommendations of the peer review, in order to promote more convergent supervisory practices throughout Europe.”

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