FINRA fines BoA Securities $24m for spoofing breaches
The Financial Industry Regulatory Authority (FINRA) has fined Bank of America Securities (BofA Securities) $24 million for spoofing breaches. BofA Securities neither admitted nor denied the charges but allegedly engaged in more than 700 instances of spoofing. Spoofing involves placing deceptive orders to create a false impression of market activity.
The Letter of Acceptance, Waiver, and Consent states that BofA Securities engaged in the practice between October 2014 and February 2021 and that up to September 2022 there was a failure to establish and maintain a supervisory system reasonably designed to detect spoofing. The Letter explains further that:
- BofA Securities did not have any surveillance or supervisory systems in place to detect spoofing in the US Treasury markets prior to November 2015.
- BofA Securities’ surveillance system for spoofing was only designed to detect algorithmic spoofing, not manual spoofing.
- BofA Securities’ surveillance system did not monitor orders placed by its traders into external trading systems.
- BofA Securities did not have any surveillance or supervisory systems in place to detect cross-product spoofing prior to October 2022.
FINRA’s analysis of BofA Securities’s trading additionally identified almost 280 further instances of trading activity in US Treasury securities that bore some signs of potential spoofing during the period in question.
Basel Committee proposes new framework for climate-related financial risk disclosures
The Basel Committee on Banking Supervision (Committee) has released a consultation paper proposing a new framework for climate-related financial risk disclosures. The framework would require banks to disclose information about their exposure to climate-related risks, such as physical risks from climate change and transition risks from the shift to a low-carbon economy.
The Committee has already published two analytical reports on CRFRs and has also issued principles for the effective management and supervision of CRFRs. This latest consultation explores how a Pillar 3 disclosure framework for climate related financial risks would further its mandate to strengthen the regulation, supervision and practices of banks worldwide with the purpose of enhancing financial stability.
The Committee is seeking feedback from stakeholders on all aspects of the consultation paper, including draft disclosure tables and templates, the importance, feasibility, and features of a Pillar 3 framework for CRFRs, and prudential metrics that would most effectively support the Committee’s mandate.
The deadline for submissions is 29 February 2024.
FCA imposes £150,000 fine on three money transfer companies
The Financial Conduct Authority (FCA) has imposed fines totaling over £150,000 on three money transfer companies for violating competition law. The companies are Dollar East (International Travel & Money Transfer) Ltd, Hafiz Bros Travel & Money Transfer Limited, and LCC Trans-Sending Limited (including its parent company, Small World Financial Services Group Limited), which trades as Small World.
According to the FCA:
- The three firms coordinated their exchange rates for converting UK pounds into Pakistani Rupees between 18 February 2017 and 31 May 2017 for customers in Glasgow.
- They were also found guilty of fixing the transaction fee charged to customers when making certain money transfers from the UK to Pakistan via Small World’s services. This illegal price fixing affected transfers made by customers at Dollar East and Small World branches in Glasgow.
Hafiz Bros, while not operating a branch in Glasgow, was found to have facilitated this conduct.
The FCA has reminded other money transfer firms in Glasgow of their obligations under competition law in a written statement.
Central Bank of Ireland imposes first monetary penalty on investment fund
The Central Bank of Ireland has reprimanded and fined GlobalReach Multi-Strategy ICAV for breaching its reporting obligation under Article 9(1) of the European Markets Infrastructure Regulation (EMIR). The ICAV was fined €192,500 for failing to report 200,640 derivative trades entered into by one of its sub-funds to a trade repository between January 2018 and May 2020. These should have been reported no later than the working day following the contract conclusion.
This is the first monetary penalty imposed on an investment fund by the Central Bank to date.
The ICAV admitted that the failure to report was due to a series of delegations that led to confusion between the delegates regarding their respective reporting responsibilities.
The Central Bank initially imposed a fine of €275,000, which was reduced by 30% to €192,500 due to the settlement discount scheme provided for in the EMIR Regulations Settlement Scheme.
HK Dear CEO letter shares good green practice
The Hong Kong Monetary Authority (HKMA) has written to all of its registered institutions (RIs) which sets out expected standards for the sale and distribution of green and sustainable investment products. The circular follows a thematic review conducted by the HKMA on the sale and distribution of green and sustainable investment products by RIs.
The review found that RIs have offered a variety of green and sustainable investment products, including funds, bonds, and structured products. The HKMA also identified some good practices in areas such as product due diligence, classification frameworks, disclosure, governance and controls, staff training, and bookbuilding activities.
The HKMA’s expected standards are designed to ensure that RIs have adequate controls in place to manage potential risks arising from the sale and distribution of green and sustainable investment products. The standards cover the following areas:
- Product due diligence: RIs should conduct thorough due diligence on green and sustainable investment products before recommending them to customers.
- Classification framework: RIs should use a clear and consistent classification framework for green and sustainable investment products.
- Disclosure: RIs should provide clear and accurate disclosures about the environmental, social, and governance (ESG) risks of green and sustainable investment products.
- Governance and controls: RIs should have robust governance and control systems in place to manage ESG risks.
- Staff training: RIs should provide their staff with adequate training on green and sustainable investment products.
- Bookbuilding activities: RIs should have clear procedures in place for bookbuilding of green and sustainable investment products.
The HKMA has set a deadline of 12 months from the date of issuance of the circular for RIs to comply with the expected standards. The HKMA will continue to monitor the market and may revise the expected standards in the future.
FCA issues forbearance statement on costs and charges disclosures
The Financial Conduct Authority (FCA) has released a statement of forbearance to give investment companies more flexibility in disclosing costs and charges. The statement aims to help clarify inconsistencies in disclosures, making it easier for investors to make informed investment decisions.
With this forbearance, listed closed-ended funds, funds that invest in them, or manufacturers of such funds can provide additional information, such as a breakdown of costs, along with the aggregated figure to put the numbers in context. The FCA has confirmed that it will not take enforcement action in such cases.
In considering the presentation of such information, firms should take into account their Consumer Duty obligations, as well as comply with other relevant rules and requirements.
The forbearance will remain valid until retained EU law is replaced with new rules set by the FCA. This statement also gives trade bodies the ability to modify or issue guidance that will support a meaningful approach to calculating component charges.
APRA issues DP on its superannuation data transformation
APRA has released a discussion paper to seek deeper insights into the superannuation industry under the latest phase of its superannuation data transformation. The proposed changes would strengthen data collection in areas including trustee board governance, investment liquidity, and valuations.
The multi-year data transformation project was launched in November 2019 to upgrade the breadth, depth, and quality of superannuation data collection.
Under the first phase of the project, “Breadth”, APRA addressed the most urgent data gaps in its collection, leading to greater transparency of the choice product sector, insurance outcomes, and how trustees are using members’ monies.
In Phase 2 of the project, “Depth,” APRA plans to collect data needed to further support its supervision of the industry in areas including trustee profile, superannuation fund profile, investments, indirect investment costs, and financial statements.
Deputy Chair Margaret Cole stated: “In developing these proposals, APRA has tried to minimize the regulatory burden on the industry by requesting data that trustees have already collected. We have also worked closely with peer agencies with the goal of ‘collect once and share’ where feasible. We look forward to consulting with the industry on the proposed collection,” Cole said.
APRA will hold industry workshops to refine the collection design further before finalization and will invite a sample of trustees to participate in a pilot study.
Basel Committee issues a progress report on the application of BCBS 239
The Basel Committee (Commitee) has issued a report outlining banks’ progress on implementing the BCBS 239 “Principles for effective risk data aggregation and reporting”. The report provides an overview of assessment results, recommendations, and case studies.
In the report, the Committee notes that even seven years after the expected compliance date, only two of the 31 banks assessed fully comply with all the principles. Moreover, there is not a single principle that has been fully implemented across all banks.
Therefore, the Committee recommends that supervisors consider using more intensive targeted activities, such as onsite inspections, deep-dive reviews, or fire drills, to address long-standing risk data aggregation and reporting deficiencies. They also suggest applying more forceful measures like capital add-ons, restrictions on capital distributions, penalties/fines, and encouraging the application of the principles in a broader context.
The Committee will continue to monitor G-SIBs’ progress in adopting the principles.
A selected summary of key developments for regulated financial institutions
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