FINRA November fines summary
FINRA has published its latest disciplinary summary for November 2023 covering a range of enforcement actions. Amongst the firms fined for violations are TP ICAP Global Markets; Citigroup Global Markets; Goldman Sachs and Santander US Capital Markets. The briefing also details the numerous individuals fined or barred by the regulator.
SEC adopts new rule for clearing agencies
The Securities and Exchange Commission has confirmed a new rule under the Securities Exchange Act of 1934 to establish governance standards for registered clearing agencies. The rule also requires registered clearing agencies to take specified measures to mitigate or eliminate conflicts of interest.
Key provisions of the new rules include:
- Governance requirements: Establishing guidelines for board composition, independent directors, nominating committees, and risk management committees.
- Conflict of interest policies: Implementing procedures to identify, mitigate, or eliminate conflicts of interest.
- Risk management: Addressing risks arising from relationships with service providers and requiring board consideration of stakeholder viewpoints.
The rule will become effective 60 days following Federal register publication.
Five management challenges for CFTC
In its Statement on the CFTC’s Management and Performance challenges, the Office of the Inspector General has identified five challenges that potentially hinder the CFTC’s ability to fulfill its mission effectively.
The report states that: “for FY 2023 we focused on areas where the CFTC must adapt its regulatory framework to keep pace with technological advancements for risk intelligence and capitalizing on existing resources. In particular:
- Maturing Enterprise Risk Management Practices.
- The Customer Protection Fund (CPF).
- Lease Space Savings.
- Maintaining Cyber Security Successes.
- Preparing for its Role for Regulating Digital Assets.
The report notes that for point 1, the Commission has opportunities to mature its ERM program through skilled staff acquisition, developing policies and procedures, employing data-driven metrics, and integrating risk management practices CFTC-wide.
For point 2, the report notes that the CFTC could assert its use of the CPF for increased educational initiatives, such as education of registrants and market professionals, and could interpret existing legislation to permit the CPF to fund education activities beyond fraud avoidance for customers.
Regarding lease space savings the report notes that the opportunity to re-evaluate leased space remains and should be taken advantage of.
Cyber security was noted as being effective but that an improvement opportunity existed to mitigate or accept the risk of aging critical and high vulnerabilities associated with its network servers and workstations.
Finally, point 5 where the report notes that “gaps in regulatory authority” contribute to uncertainty but that the CFTC has a “significant opportunity to coordinate responsibilities for spot markets, for example, as well as a significant management challenge to bolster capacity for data capture, analysis, monitoring, supervision, and regulation of crypto-asset activities.”
MAS managing director speech on the financial ecosystem of the future
On 16 November, Ravi Menon, Managing Director of the Monetary Authority of Singapore, delivered an address during the eighth edition of the Singapore FinTech Festival (SFF), which kicked off this week from 14 to 17 November 2023.
Focusing on the growth and adoption of AI technology and its potential use in financial services, the conference had several keynote speakers, including Menon, representatives from the International Monetary Fund, the World Bank, and the President of the Republic of Singapore, as well as various leaders in the financial sector.
Menon shared the MAS’s vision of Singapore as a Smart Financial Center with a global reach that addresses real-world issues, including improving people’s lives, promoting inclusivity, and ensuring a sustainable future.
He also provided valuable insights into the Monetary Authority of Singapore’s initiatives related to creating an instant payment system, seamless financial transactions, and a trusted sustainability ecosystem.
Menon revealed that MAS is working to create multilateral real-time payment networks to build a global public good payment utility that will enable users to send money across borders securely, efficiently, and affordably.
Seamless financial transactions
Menon announced that Project Guardian, a partnership with MAS, regulators in Japan, Switzerland, the United Kingdom, and the IMF, is looking into tokenising different asset classes. For example, the tokenisation of foreign exchange for a 24/7 global liquidity pool, bonds for seamless cross-border distribution and settlement and funds for efficient issuance and trading.
He also announced that MAS and a group of industry players have come together to launch the Global Layer One (GL1) initiative as a foundational digital infrastructure across multiple Distributed ledger technology (DLT) networks. He welcomes interested financial institutions and international policymakers to join this initiative.
MAS will also soon partner with local banks to pilot the use of Wholesale central bank digital currencies (CBDCs) as a common settlement asset in domestic payments to settle payments across commercial banks instantaneously. He added that MAS has granted in-principle approval under the Payment Services Act to three entities that will issue stablecoins that substantively comply with MAS’s upcoming stablecoin regulatory framework.
Trusted sustainability ecosystem
Menon mentioned the launch of the next phase of Project Greenprint. For background, Project Greenprint is a collaborative effort with the financial industry to build a trusted data ecosystem to support sustainable finance. The next phase is the launch of a new Greenprint integrated platform titled “Gprnt.ai”, which will go live next February and progressively scale over the year. Beyond Singapore, Greenprint will also look to partner and collect data from countries and sectors where financial institutions have pressing needs to better support their climate risk management and net zero transition efforts.
ASIC consults on banking code
The Australian Securities & Investments Commission has announced it is consulting on proposed changes to the Australian Banking Association’s Banking Code of Practice (Code).
The Code is an industry code developed by the Australian Banking Association (ABA). It has been in place, in various forms, since 1993.
The consultation also focuses on whether the proposed Code provides for effective administrative systems for monitoring compliance and whether the obligations can be enforced; it also considers whether any Code review recommendations that the ABA has not supported should be included in the proposed Code; whether the recommendations accepted by the ABA are appropriately reflected in the proposed Code and proposed Charter; and the role of industry guidelines.
The deadline for comments is 15 January 2024.
FCA highlights need for more work on Guiding Principles for ESG and sustainable investment funds
The Financial Conduct Authority (FCA) has conducted a review of the efforts made by Authorized Fund Managers (AFMs) in complying with the FCA’s expectations on the design, delivery, and disclosure of their ESG and sustainable funds.
The review found that while progress has been made, further improvement is needed, particularly around the disclosure and clarity of information being given to retail investors and consumers.
The FCA has found other examples of poor practice, including:
- Products were inconsistently aligned with their ESG and sustainability goals, even if they referenced them in their name.
- In some instances, fund holdings appeared inconsistent with a fund’s ESG or sustainability objectives, and some AFMs weren’t able to explain how these investments fit with their goals.
- Key ESG and sustainability information was often not explained, put into context or included in disclosures, meaning relevant information was not immediately or clearly accessible to investors.
- The design of AFMs’ stewardship approaches did not meet the FCA’s expectations. It was often challenging to identify the exact aim of the stewardship activities, how the activities were aligned to fund objectives, and examples of the progress they made against those aims.
The FCA expects boards to take the lead in monitoring and ensuring firms make any changes required to further enhance sustainability disclosures and practices. They will continue to monitor the market to ensure that firms and the investment products they provide meet the regulator’s expectations.
A selected summary of key developments for regulated financial institutions
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