The European Securities and Markets Authority (“ESMA”) has recently updated its Q&A on Regulation (EU) No. 2016/1011 of June 8th 2016 on indices used as benchmarks ("Benchmarks Regulation" or “BMR”).
One of the new questions considered by ESMA was whether prospectuses should include reference to the register of administrators and benchmarks (“the REGISTER”).
For prospectuses approved on or after January 1st 2018, the answer is two-pronged:
- Where the register already includes the relevant administrator by the time a prospectus under Directive 2003/71/EC (relating to prospectuses to be published when securities are offered to the public or admitted to trading) or Directive 2009/65/EC (“UCITS Directive”) is published, the prospectus should indicate that the administrator is listed in the register.
- Where the register does not include the relevant administrator by the time a prospectus is published, the prospectus should state so and prospectuses under the UCITS Directive should be updated at the first occasion once the relevant administrator is included in the register. However, prospectuses approved under Directive 2003/71/EC are not required under BMR to be systematically updated by means of a supplement once the relevant administrator is included in the register.
For prospectuses approved prior to January 1st 2018 the answer depends on which directive the prospectus was approved under:
- Prospectuses approved under the UCITS Directive should be updated at the first occasion or at the latest within 12 months after January 1st 2018. If by January 1st 2019 the relevant administrator is not included in the register, ESMA considers that these prospectuses should be updated to include a statement to that effect.
- Prospectuses approved under Directive 2003/71/EC are not required under BMR to be systematically updated by means of a supplement once the relevant administrator is included in the register.
ESMA also confirmed that a calculation agent is not to be considered a user of benchmarks if it is appointed by an issuer of securities.
The role of calculation agents is simply to calculate, on behalf of the issuer, the payment due on the basis of pre-determined terms (including the benchmark to be used). They cannot amend the amount and do not decide which benchmark is referred to by the instrument. For this reason, ESMA considers that calculation agents are not users of benchmarks under Article 3(1)(7) of the BMR if the issuer of securities has set the terms of the financial instrument that references the benchmark.
ESMA also considered whether a benchmark can qualify as a ‘regulated-data benchmark’ if a third party is involved in the process of obtaining the data.
Although Article 3(1)(24)(a) of BMR precludes, in principle, the involvement of any third party in the data collection process, ESMA clarified that, pursuant to Article 3(1)(24)(a)(vii), if an administrator obtains regulated data through a third party service provider (such as a data vendor) and has in place arrangements with such service provider that meet the outsourcing requirements in Article 10 of the BMR, the benchmark still qualifies as regulated data benchmark.
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