RegTech Intelligence 
On 10 October, the ESMA released its 2014 work programme and budget for the next fiscal year. Emphasising six key areas of focus for the regulator over the next year, priorities on the whole have not diverged much from the 2013 plan, but a larger budget projection and more personnel have expanded their capacity to tackle new obstacles on the international markets regulation, including MiFID II, the Alternative Investments Fund Managers Directive (AIFMD), Packaged Retail Investment Products (PRIPs) reforms, and IT upgrades. The ESMA Board of Supervisors approved a larger budget for the regulator this year, increasing expenditures from €27.95 million to a projected €32.5 million, as well as a three-year plan for continuous personnel expansion.
Many of the ESMA reforms planned touch on key contemporary hot topics, with parts of convergence, single rulebook (securities regulation) standards, and operational setup within ESMA highlighted for focus. Within the convergence focus, ESMA has directed resources to promoting international cooperation and collaboration to both make ‘third party’ countries ESMA-rule compliant as well as created a more harmonised legislative framework for securities markets. The 4th Anti-Money Laundering Directive (AMLD IV) proposal, credit rating agency (CRA) reform, trade repository (EMIR) reform, and retail investment reform (PRIPs in the UK) have garnered attention and budget allocation here as well.
While there have been minimal new adjustments to consumer financial protection and financial stability focuses from 2013 to 2014, concerns have emerged surrounding crowdfunding, collateral transformation, and financial innovations in the marketplace as well as persistent global issues with benchmarking. ESMA will be putting an even heavier emphasis on the MiFID II reforms from last year, confirming the market’s suspicions that the new Directive will likely be with us within the next year.
Perhaps the biggest changes for the next year touch upon the single rulebook initiatives, supervision, and internal structure focus areas. The European Investment Fund Legislation is a key priority for the next year as it covers legislation like AIFMD, Undertakings for Collective Investment in Transferable Securities (UCITS), money market fund reform and venture capital funds reform. Progress is to be made on the CRA III legislation – including a regulatory technical standard passage by June 2014 and new IOSCO rules by 2014/2015 – as well as progress on the Central Securities Depository Regulation (CSDR), on which ESMA aims to consult for the thirty technical standards they are expecting to produce at some point next year. ESMA will also add more staff to its audit team, prepare for exchange traded derivatives (ETD) reform, spend time on getting more registered participants for CRA III reforms, and continue to monitor TR compliance with EMIR. Lastly, ESMA is spending close to €6.5 million to upgrade its IT infrastructure in order to implement better governance standards and enable better AIFMD enforcement, as well as working closer with the European Data Protection Supervisor (EDPS).
ESMA’s work initiatives for the upcoming year means European financial firms have a few things to keep an eye out for in 2014. Expect MiFID/MiFIR review, compliance reporting, and enforcement to be key issues, particularly with TR reporting and counterparty compliance. UCITS, AIFMD, funds management reforms, and CSDR will be key pipeline developments for ESMA, and as Europe continues to work toward implementing these new regulations, firms need to be kept abreast of how they will affect the industry. Other developments like CRA III will cause ripples in the rating systems for financial products, which ESMA is keen to enforce, and long-term planning with initiatives like PRIPs should be on firms’ radar moving into the New Year.