Chairman Rostin Behnam outlines key CFTC themes
Commodity Futures Trading Commission (CFTC) chairman Rostin Behnam has outlined some key themes for the CFTC’s strategic agenda during a speech at the International Futures Industry Conference. He noted the following:
- enhancing risk management and resilience across intermediaries, exchanges, and derivatives clearing organizations;
- fostering sound and responsive practices regarding cybersecurity and the use of third-party vendors across all registrants;
- strengthening customer protections;
- promoting efficiency and innovation;
- improving reporting and data policy; and addressing any duplicative regulatory requirements and amplifying international comity.
Behnman said: “Underlying all of these themes is the need for our ruleset to address the derivatives industry’s current trajectory. Our regulations historically developed according to activities as they related to an individual registrant. However, we are continuing to observe a desire to shift to structures that combine unique activities into a single entity, raising important questions about conflicts of interest, the strength of capital, margin, and segregation requirements, the role and responsibilities of self-regulatory organizations, affiliate risk management, and of course, customer protections. Indeed, what we are seeing also raises questions as to whether certain service providers should fall within our traditional registration categories.”
SEC plans to expand Regulation SCI
The Securities and Exchange Commission (SEC) is proposing amendments to expand and update Regulation Systems Compliance and Integrity (SCI), the set of rules adopted in 2014 to help address technological vulnerabilities in the US securities markets and improve Commission oversight of the core technology of key US securities markets entities (SCI entities).
“I am pleased to support this proposal because, consistent with maintaining orderly markets, these amendments would help promote the capacity, integrity, resiliency, availability, and security of critical intermediaries,” said SEC Chair Gary Gensler. “Technology plays an expansive and expanding role supporting our market systems, and our markets would benefit if we updated Reg SCI to reflect those changes. I think it’s important also to broaden Reg SCI to include a number of key market participants and enhance the standards those market participants must meet. Taken together, these amendments would make key market participants more robust, resilient, and secure. That benefits our markets.”
The proposed amendments would expand the scope of SCI entities to include registered security-based swap data repositories; all clearing agencies that are exempt from registration; and certain large broker-dealers, in particular, those that exceed a total assets threshold or a transaction activity threshold in national market system stocks, exchange-listed options contracts, US Treasury securities, or Agency securities.
SEC proposes new crypto rules
The Securities and Exchange Commission (SEC) has also proposed new requirements for broker-dealers, clearing agencies, major security-based swap participants, the Municipal Securities Rulemaking Board, national securities associations, national securities exchanges, security-based swap data repositories, security-based swap dealers, and transfer agents (collectively, “Market Entities”) to address their cybersecurity risks.
“I am pleased to support this proposal because, if adopted, it would set standards for Market Entities’ cybersecurity practices,” said SEC Chair Gary Gensler. “The nature, scale, and impact of cybersecurity risks have grown significantly in recent decades. Investors, issuers, and market participants alike would benefit from knowing that these entities have in place protections fit for a digital age. This proposal would help promote every part of our mission, particularly regarding investor protection and orderly markets.”
The proposal would require all Market Entities to implement policies and procedures that are reasonably designed to address their cybersecurity risks and, at least annually, review and assess the design and effectiveness of their cybersecurity policies and procedures, including whether they reflect changes in cybersecurity risk over the time period covered by the review.
SEC charges individuals in separate fraud cases
The Securities and Exchange Commission has charged exiled Chinese businessman, Miles Guo, and his financial advisor, William Je, for their involvement in unregistered and fraudulent offerings that raised more than $850 million.
According to the SEC’s complaint, since April 2020, Guo and Je misappropriated a large portion of the funds raised from investors to enrich themselves and their family members, who are named as relief defendants. For example, in connection with a private placement offering of common stock in GTV Media Group, Inc (GTV), Guo and Je allegedly diverted $100 million of investor funds to a hedge fund for the sole benefit of a company that is owned by Guo’s son.
“We allege that Guo was a serial fraudster, who raised more than $850 million by promising investors outsized returns on purported crypto, technology and luxury good investment opportunities,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “In reality, Guo took advantage of the hype and allure surrounding crypto and other investments to victimize thousands and fund his and his family’s lavish lifestyle.”
Elsewhere, the SEC has charged Darius Karpavicius, of Lithuania, with coordinating an offering fraud that raised more than $4 million from approximately 64 retail investors. Karpavicius used most of the gains for personal benefit such as cash withdrawals and investments in crypto assets.
ISO 20022: new guidance
The BoE has published new guidance and key date for the introduction of ISO 20022.
Existing CHAPS Direct participants in the UK are transitioning to ISO 20022 in June 2023. ISO 20022 is a new internations standard to enable communication interoperability between financial institutions, their market infrastructures and their end-user communities.
A selected summary of key developments for regulated financial institutions
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