EBA publishes retail risk
The European Banking Authority (EBA) has published a new set of indicators, aimed at identifying detriment to consumers arising from the misconduct of financial institutions offering retail banking products in the EU. The indicators show consumers’ experience with financial services and are intended to complement other sources of information that the EBA already uses to decide on its consumer protection priorities.
CEO of Titanium Blockchain sentenced for $21M cryptocurrency fraud
Michael Stollery, the CEO and founder of Titanium Blockchain Infrastructure Services Inc (TBIS), has been sentenced to four years and three months in prison for his role in a cryptocurrency fraud scheme involving TBIS’s initial coin offering (ICO), which raised approximately $21 million from investors in the United States and overseas.
According to court documents, Stollery falsely touted TBIS as a cryptocurrency investment platform, luring investors to purchase “BARs,” the cryptocurrency token or coin offered by TBIS’s ICO, through a series of false and misleading statements. Stollery did not register the ICO with the Securities and Exchange Commission (SEC), nor did he have a valid exemption from the SEC’s registration requirements.
Stollery falsified aspects of TBIS’s white papers to entice investors, including fake client testimonials and false claims of business relationships with the Federal Reserve and prominent companies. He combined the ICO investors’ funds with his personal funds and used at least a portion of the offering proceeds for expenses unrelated to TBIS.
ASIC issues new regulatory guide
The new Directors’ Solvency Declaration guide has been produced for directors and auditors, and their advisers. ASIC states that the objectives of this guide are to:
- explain the requirements for the directors’ solvency declaration under s295(4)(c) and s303(4)(c) of the Corporations Act;
- outline the obligations of directors when making the declaration on the solvency of an entity; and
- outline the obligations of the auditor in relation to the directors’ solvency declaration.
Final judgment against rogue investment adviser
The US District Court for the District of Massachusetts has entered a final judgment against investment adviser James K Couture in connection with the SEC’s allegations that he engaged in a deceptive scheme to misappropriate approximately $2.9 million from his clients. Couture fraudulently prompted his advisory clients to sell portions of their securities holdings to fund large money transfers to an entity that he owned and controlled. Couture obtained client authorization by falsely claiming that the proceeds would be reinvested for the clients’ financial benefit. However, the money was diverted for his own benefit, and he misappropriated money from one client to replace funds he had previously stolen from another. As a result, he was permanently enjoined from future violations of the antifraud provisions of the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940. Couture also pleaded guilty to ten criminal counts, including one count of investment adviser fraud, and was sentenced to 100 months in prison, followed by three years of supervised release, and has been ordered to pay restitution and forfeiture.
CFTC orders advisor to pay $400,000 penalty for supervision failures
The Commodity Futures Trading Commission (CFTC) has issued an order simultaneously filing and settling charges against BBL Commodities LP (BBL), a New York-based CFTC-registered commodity trading advisor (CTA) and commodity pool operator (CPO). The order finds that BBL failed to establish and implement an adequate supervisory system to detect whether its employees were engaging in disruptive trading or for deterring its employees from such conduct.
The CFTC order requires BBL to pay a $400,000 civil monetary penalty and to cease and desist from further supervision violations, as charged. The order highlights the importance of firms having adequate policies and procedures in place to identify and deter disruptive trading, and of ensuring that their employees are adequately trained to assess the potential impact of their trading activities.
“Urgent and vitally important”: ECB on Climate-related and environmental (C&E) financial risks
Frank Elderson, Member of the Executive Board of the European Central Bank (ECB) and Vice-Chair of the Supervisory Board of the ECB, spoke about the urgency of dealing with C&E financial risks at the Foreign Bankers’ Association. Concluding his speech, Elderson noted that the ECB expects all banks under its supervision to fully align with their expectations on C&E risks by the end of 2024. The ECB has set intermediate deadlines to ensure a smooth transition for banks, including requiring all banks to have a comprehensive materiality assessment and business environment scan in place by the end of March 2023. The ECB has also identified good practices in areas such as governance and transition planning and encourages banks to accelerate progress by implementing these practices. The ECB will closely monitor banks’ progress and may use measures such as penalty payments and Pillar 2 capital requirements to ensure compliance with expectations.
Implementing DORA – achieving enhanced digital operational resilience in European financial services
Gerry Cross, Chair of the ESAs’ Joint Sub-Committee on DORA Implementation, spoke at an event organized by Amazon Web Services, Insurance Ireland, and the European Fintech Association in Brussels. In the speech, Cross reminded listeners that DORA, or the Digital Operational Resilience Directive, is a new regulatory framework that aims to mitigate technology and cyber risk by enhancing firms’ technology and cyber risk management and resilience. It creates a regulatory framework whereby all firms need to make sure they can withstand, respond to and recover from ICT-related disruptions and threats, including of course cyber attacks. And it will bring within a new “oversight” framework critical third party providers of ICT-related services – such as cloud services – to financial firms.
The European Supervisory Authorities (ESAs) are tasked with jointly delivering the regulatory standards implementing the new DORA framework. The Joint Committee of the three ESAs has established the Joint Sub-Committee on Digital Operational Resilience to deliver those standards.
The Joint Sub-Committee is working on the following principles:
- Momentum: The Joint Sub-Committee is committed to maintaining the forward momentum of the DORA implementation process.
- Pragmatism: The Joint Sub-Committee is taking a pragmatic approach to the implementation of DORA, recognizing that it is a complex field and that there is enormous potential to get deeply ensnared in technical detail.
- Coherent approach: The Joint Sub-Committee is committed to delivering a coherent and consistent DORA implementation framework.
- Effective implementation: The Joint Sub-Committee is committed to delivering an effective DORA implementation framework that will help to mitigate technology and cyber risk in the financial sector.
The Joint Sub-Committee is working on the following tasks:
- Developing the regulatory standards implementing the DORA framework.
- Oversight of the implementation of DORA by firms and third party providers of ICT-related services.
- Monitoring the effectiveness of the DORA implementation framework.
A selected summary of key developments for regulated financial institutions
Access all of our daily regulatory content by using the login button below.
To find out more about how CUBE can help your business click here.