Index providers are staring down the barrel of further regulation after the Securities and Exchange Commission (SEC) announced in June 2022 it is considering reclassifying them as “investment advisers” instead of “information providers”.  The move would mean index providers such as MSCI, S&P Dow Jones Indices and FTSE Russell would be treated the same way as fund managers under the Investment Advisers Act 1940.  The SEC’s potential reclassification would have profound implications for index providers which will now have a fiduciary responsibility to the clients and investors adopting their products.

The EU Benchmarks Regulation (BMR) was triggered by the manipulation scandals of major interest rates such as LIBOR and EURIBOR uncovered back in 2012.  The result is a comprehensive regulatory framework applicable to a broad definition of benchmark providers, benchmark contributors/submitters and users of benchmarks. Furthermore, the Regulation’s reach goes beyond the EU given that all benchmarks used in the EU must be approved, regardless of their origin. Even if outside the EU (known as a ‘third country administrator’), those administrators must seek approval by the EU in order to be able to continue serving their EU customers. 

In the UK, a UK entity looking to carry out benchmark administrator activity in the UK, will need apply for authorization or registration, and be approved by the FCA. Approved administrators will be added to the UK Benchmarks Register.

Third country benchmark administrators operating in the UK will need to be approved through the recognition or endorsement regimes, where a BMR equivalence decision does not apply to them, before the end of 2025.