CUBE RegNews:
May 3^rd

The Securities and Exchange Commission (SEC) has charged Brett M Bartlett, Scott A Miller, and their companies for fraudulent securities offerings that raised more than $20.5 million. The SEC alleges that Bartlett and Miller solicited funds from more than 1,000 investors through various securities offerings and used their Christian faith to win investor trust. Bartlett and Miller allegedly misled investors, made Ponzi-like payments, and sent $21 million in bad checks to investors. They also misappropriated over $1.2 million for personal use. The SEC has charged the defendants with violating the antifraud and registration provisions of federal securities laws and is seeking permanent injunctions, disgorgement, civil penalties, and officer and director bars.

The European Banking Authority has released a new interactive tool to identify the reporting requirements and templates that are relevant for particular credit institutions considering their type and the scope of activities. 

The tool provides an overview of the following reporting requirements:  

• ITS (Implementing Technical Standards) on Supervisory Reporting.
• ITS on Supervisory Benchmarking (of internal models).
• ITS on specific reporting requirements for market risk (FRTB reporting).
• ITS on MREL/TLAC (minimum requirement for own funds and eligible liabilities/ total loss absorbing capacity) reporting (TLAC parts).

The tool generates information that the reporting institution is expected to supply to its competent authority to comply with the above regulations.

The UK’s Prudential Regulation Authority (PRA) has published its 2023/24 Business Plan. 

The plan has four main themes:  

• Maintain and build on the safety and soundness of the banking and insurance sectors, and ensure continuing resilience. 
• Be at the forefront of identifying new and emerging risks, and developing international policy 
• Support competitive and dynamic markets, alongside facilitating international competitiveness and growth, in the sectors the PRA regulate.
• Run an inclusive, efficient and modern regulator within the central bank. 

In his foreword to the plan, PRA CEO Sam Wood acknowledges there is a lot to do and the plan notes that the PRA’s budget has been reduced by £8.9m (3%) from the 2022/23 budget. 

Prison sentence for market manipulation

Gabriel Govinda, who ges by the online name ‘Fibonarchery’, has been sentenced to two and a half years imprisonment with immediate release on a five-year recognizance bond and fined AUD 42,840 after pleading guilty to 23 charges of share market manipulation on the Australian Securities Exchange and 19 charges of illegal dissemination of information relating to the manipulation.  

Mr Govinda used HotCopper, a social media forum, to promote certain shares that he had manipulated and had an undisclosed interest in, with a view to selling at a higher price. He was found to have used 13 different share trading accounts to manipulate the market between September 2014 and July 2015, trading between accounts he controlled (wash trading) and using fake bids to falsely increase the perceived demand, and ultimate price, for listed stocks. He was also found to have illegally disseminated information about his wash trades and dummy bids on HotCopper using a “pump and dump” approach to manipulate smaller companies listed on the ASX. This is the first time a person has been sentenced under s1041D of the Corporations Act. 

ASIC Deputy Chair Sarah Court said: “Individuals who look to social media to promote stocks or financial products, should take notice of today’s court decision. Finfluencer conduct, whether by using social media to manipulate the market, using a platform to profit from promoting manipulation done by others, or to promote financial products you are not licensed to promote, can result in serious consequences.”

FCA consults on changing the scope of the baseline financial resilience regulatory return

The Financial Conduct Authority has issued CP23/9, Changing the scope of the baseline financial resilience regulatory return (FIN073).

The consultation looks to change the scope of firms required to provide the new baseline financial resilience return, known as ‘FIN073 – Baseline Financial Resilience Report’. The new return will allow the FCA to identify swiftly any failing firm and minimize the effect on consumers.

The CP is aimed at bringing all regulated full permission firms into the scope of FIN073 to ensure that those firms with just limited permission and lower risk thresholds (eg dentists and motor dealers) are excluded from the reporting requirement.  

Comments and feedback are required by 6^th June.

FCA publishes CP 23/10: Primary Markets Effectiveness Review

The Financial Conduct Authority (FCA) has issued CP 23/10 with proposals to make rule changes to create a single listing category for shares in commercial companies. 

The consultation proposal is: “to replace standard and premium listing share categories with a single listing category for commercial company issuers of equity shares. The proposed framework aims to be more straightforward with a clear purpose. It would be sufficiently flexible to cater for a diverse range of companies, while maintaining transparency for investors to support market integrity and oversight.” 

The consultation deadline is June 8th with the intention being that a further, wider listing rules consultation will then be issued in the autumn. This broader review is expected to cover:  

• Feedback received and any adjustments made based on the CP 23/10.
• Plans for addressing issuers of equity shares who are not commercial companies.
• Proposals for minor issues that need clarification.
• Transitional arrangements for any proposed changes.
• Consequential changes related to the proposals in the consultation paper or due to changes in company law.
• Proposed changes to the FCA process and supervisory approach.
• A complete draft of the legal instrument.
• A CBA (cost-benefit analysis) and compatibility statement. 

FCA publishes PS 23/4 on improving equity markets

The Financial Conduct Authority (FCA) has issued PS 23/4 proposing changes that are expected to enhance the quality of execution for investors and improve the content of post-trade transparency. The PS also supports the establishment of industry good practices during trading venue outages to enhance the resilience of UK markets. The PS also introduces a new Designated Reporter Regime, clarifying who holds the obligation of making sure that a trade is made public.

The changes will be relevant to: 

• trading venues; 
• investment firms; and 
• UK branches of overseas firms undertaking investment services and activities.

The changes are expected to help with 

• improved market liquidity; 
• more efficient prices;  
• greater competition, choice and access between trading venues, SIs and investment firms;  
• lower operating costs for firms;  
• lower costs of trading; and  
• greater activity on UK trading venues.

The new post-trade transparency requirements will enter into force in April 2024. 

HKMA Dear CEO letter

The Hong Kong Monetary Authority has written to CEO’s of all authorized institutions (AIs) to remind them that by 1st June 2023, all AIs that conduct trust business need to comply with the Supervisory Policy Manual module TB-1 “Regulation and Supervision of Trust Business” (SPM TB-1), including the Code of Practice for Trust Business (the Code).

The letter outlines several forms that AIs carrying out trust business need to complete before 15th May to confirm their trust business status.