Memo #
27139

FSA Policy Statement on the Regulation and Supervision of Benchmarks
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[27139]

March 28, 2013

TO: ICI GLOBAL REGULATED FUNDS COMMITTEE No. 7-13 RE: FSA POLICY STATEMENT ON THE REGULATION AND SUPERVISION OF BENCHMARKS

 

The UK Financial Services Authority (FSA) has published Policy Statement 13/6 outlining the changes it will bring about in respect of the regulation and supervision of benchmarks. [1] The policy changes stem from the proposals contained within the FSA’s earlier Consultation Paper 12/36 [2] brought about following the Wheatley Review into LIBOR [3]. The policy changes come into force on 2 April.

The policy statement introduces requirements for benchmark administrators and for benchmark submitters which are summarised below.

Benchmark administrators must:

  • implement credible governance and oversight measures, including an oversight committee and the establishment of practice standards;
  • monitor and survey benchmark submissions, to identify breaches of practice standards and/or potentially manipulative behaviour;
  • maintain sufficient financial resources to ensure it can cover operating costs of six months, plus a buffer period of three months; and
  • appoint an individual, who is FCA-approved, to oversee the firm’s compliance with the FCA’s requirements for benchmark administration.

Benchmark submitters must:

  • maintain effective internal governance and oversight procedures for providing information to benchmarks they submit to;
  • put in place organisational arrangements for managing conflicts of interest within their firm;
  • have an effective methodology, based on objective criteria, for determining their submissions to benchmarks;
  • keep all relevant records for five years and appoint an external auditor on an annual basis to report to the FCA on the submitter’s compliance with the submission requirements;
  • notify the FCA of any suspicions in relation to manipulation, attempts to manipulate, or potential collusion to manipulate the benchmark; and
  • appoint an individual, who is FCA-approved, to oversee the firm’s compliance with the FCA’s requirements for benchmark submission.

 

Giles Swan
Director of Global Funds Policy - ICI Global

endnotes

[1] http://www.fsa.gov.uk/static/pubs/policy/ps13-06.pdf

[2] http://www.fsa.gov.uk/static/pubs/cp/cp12-36.pdf

[3] http://cdn.hm-treasury.gov.uk/wheatley_review_libor_finalreport_280912.pdf