ASIC publishes greenwashing report
The Australian Securities & Investments Commission has published Report 763 looking at the regulator’s interventions on greenwashing.
The report’s aim is to provide transparency to the market on the nature of the matters where ASIC has recently intervened. It notes that between 1st July 2022 and 31st March 2023 ASIC achieved the following:
- 23 total corrective disclosure outcomes.
- 11 infringement notices issued.
- 1 civil penalty proceeding commenced.
The report sets out examples of regulatory interventions across a number of themes noting too that: “We will continue to work towards achieving ASIC’s strategic priorities over the course of 2023, focusing on identifying and preventing harm arising from misleading marketing and greenwashing. We will be progressing our surveillance on the superannuation fund sector and the wholesale green bond market, and will continue our surveillance of the managed fund and corporate sectors. We are continuing to investigate a number of entities in relation to suspected greenwashing and anticipate further enforcement action.”
SEC charges two for facilitating multi-million dollar offering
The Securities and Exchange Commission (SEC) has brought charges against Wayne McLean and Joan Powell for their involvement in a fraudulent scheme related to the sale of Eastern Metal Securities (EMS) shares. Roger Nils-Karlsson had previously been charged by the SEC for his role in the same scheme, which affected numerous retail investors worldwide.
According to the SEC’s complaint, Karlsson, using various aliases, orchestrated a fraudulent scheme from approximately November 2012 to June 2019. He claimed to offer and sell EMS shares backed by a supposed “Pre Funded Reversed Pension Plan,” which he presented as the world’s first online investment of its kind. McLean and Powell allegedly assisted Karlsson in carrying out the scheme. McLean is accused of selling EMS securities to investors through podcasts, making false and misleading statements. Powell is alleged to have collected and forwarded investor funds to accounts controlled by Karlsson. Both McLean and Powell retained a portion of the investment funds for personal use, despite claiming they were not being compensated for their involvement.
FINRA issues request for comment on capital formation
In 2017, FINRA requested comment on ways to increase efficiency and reduce unnecessary burdens on the capital raising process. Since then, FINRA has taken steps to improve the capital raising process, including making rule changes and undertaking additional actions.
Now FINRA has published Regulatory Notice 23-09, which is seeking further comment on whether additional changes to its rules, operations, or administrative processes would further enhance the capital raising process without compromising protections for investors and issuers.
Comments are requested by 7th August.
FINRA issues private placement guidance
FINRA has also published Regulatory Notice (RN) 23-08 on private placements, reminding members of their obligations when selling private placements. RN 23-08 does not create new legal or regulatory requirements or new interpretations of existing requirements, nor does it relieve firms of any existing obligations under federal securities laws and regulations. However it does provide FINRA members with updated guidance and supplements to previous RNs. The RN is in three parts:
- Part I provides a general overview of developments in the unregistered offering market.
- Part II focuses on the regulatory requirements for members participating in private placements. It emphasizes the important role of members in conducting reasonable investigations when recommending private placements. The obligations discussed include the reasonable basis obligations of Reg BI, the suitability rule, and relevant legal interpretations of antifraud provisions. Part II also covers key obligations that apply to private placement activity regardless of recommendations, such as filing requirements for private placement memoranda (PPMs) and related documents, communication rules, and supervision rules. These rules include the duty to investigate and take action when “red flags” indicating irregularities or potential misconduct are discovered.
- Part III discusses the practices that the Financial Industry Regulatory Authority (FINRA) has observed since the publication of Regulatory Notice 10-22. These practices are adopted by members to fulfill their reasonable investigation and supervisory obligations when recommending private placements. The notice highlights these practices as potentially effective measures for complying with regulatory requirements, based on private placement examinations conducted by FINRA and feedback received from members in a recent private placement survey. These practices build upon those highlighted in Regulatory Notice 10-22.
FMSB announces new Chair
The Financial Markets Standards Board (FMSB) has confirmed that Jonathan Moulds, CBE will be its new Chair from 1 June 2023. Moulds replaces Mark Yallop who chose to step down as Chair in May 2023 after seven years.
Moulds said: “Taking on the Chair of FMSB gives me further opportunity to contribute to many aspects of financial markets as participants continue to grapple with age-old imperfections and new challenges; be those from the advanced application of machine learning in trading to the markets’ transition to net zero. Trust, transparency and coalescence across the financial sector matter more now than ever. I look forward to building on Mark’s stewardship of FMSB and working with Members, key stakeholders, as well as the Secretariat, in pursuit of this.”
HMT issues call for proposals
The UK’s Financial Services and Markets Bill proposes new secondary objectives for the Financial Conduct Authority (FCA) and Prudential Regulatory Authority (PRA) aimed at enhancing the UK’s international competitiveness and promoting long-term economic growth. As a result, a call for proposals has been initiated by UK Treasury to identify the most suitable metrics for regulators to publish. The objective is to ensure that the reporting on these new objectives is comprehensive enough to enable effective monitoring of the regulators’ efforts to embed and advance their new goals.
The consultation closes on 4th July.
A selected summary of key developments for regulated financial institutions
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