Eva Dauberton
News Editor
UK Government publishes Smart Data Roadmap
The UK government has released the Smart Data Roadmap, which outlines the actions from 2024 to 2025 to establish a Smart Data economy in the UK. This initiative covers seven sectors, including banking and finance.
Some context
Smart Data refers to the secure sharing of customer data with Authorised Third-party Providers (ATPs) upon customer request. These ATPs can then enhance the customer data with additional ‘business’ data, either received directly or from open sources. Customers can be individual consumers or businesses.
In its 2023 Autumn Statement, the government pledged to kick-start a Smart Data Big Bang and outlined its plans to utilise the new Smart Data powers introduced in the Data Protection and Digital Information (DPDI) Bill. The Chancellor identified seven sectors—energy, banking, finance, retail, transport, home buying, and telecommunications—that the government will focus on.
As part of this commitment, the roadmap presents a comprehensive vision for a Smart Data economy and a set of specific actions to accomplish it.
Key takeaways
Below are the next steps for the banking and finance sectors:
Banking: the HM Treasury has committed to utilising the Smart Data powers to establish a long-term regulatory framework for Open Banking, subject to parliamentary approval.
Finance: the Centre for Finance, Innovation, and Technology (CFIT) has recently published recommendations for implementing an Open Finance strategy in the UK. These recommendations include suggestions for both the industry and the government. HM Treasury will carefully consider CFIT’s recommendations, along with broader industry engagement, as they develop their strategy for Open Finance.
Next steps
The government aims to provide a progress update on the aforementioned actions in 12 months. This update will highlight the progress made in the priority sectors and acknowledge advancements made in the wider economy.
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SEC publishes observations on compliance with Marketing Rule
The US Securities and Exchange Commission (SEC) Division of Examinations has issued a risk alert notice to provide information on investment advisers’ compliance with the Marketing Rule.
Some context
On 22 December 2020, the SEC adopted amendments to Rule 206(4)-1 under the Investment Advisers Act of 1940 to modernise the regulation of investment adviser advertising and solicitation practices. Changes included replacing the current versions of Rule 206(4)-1 and Rule 206(4)-3 with a single “Marketing Rule,” amendments to Form ADV to provide the Commission with additional information about advisers’ marketing practices, and amendments to the books and records rule under the Advisers Act.
Key takeaways
The risk alert provides observations on investment adviser compliance with the Compliance Rule, the Books and Records Rule, Form ADV, and the General Prohibitions of the Marketing Rule. The staff noted that advisers typically complied with the rules but identified a range of deficiencies in compliance with the Marketing Rule’s General Prohibitions. This include:
- Untrue statements of material fact and unsubstantiated statements of material fact.
- Omission of material facts or misleading inference.
- Statements about the potential benefits not providing fair and balanced treatment of any material risks or material limitations associated with the potential benefits.
- References to specific investment advice that were not presented in a fair and balanced manner.
- Inclusion or exclusion of performance results or time period in matters that were not fair and balanced.
Next steps
The Division encourages advisers to reflect on their own practices, policies, and procedures and implement any necessary modifications to their training, supervisory, oversight, and compliance programs.
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FCA speech: promoting competitiveness is a juggling act
In a speech at the TheCityUK International Conference, Sarah Pritchard, Executive Director at the Financial Conduct Authority (FCA), addressed the balance between encouraging innovation and maintaining regulatory objectives. She emphasised the importance of supporting responsible innovation to benefit consumers and markets. Pritchard also welcomed international firms but stressed the need for them to operate responsibly to protect consumers and market integrity.
The speech highlighted the FCA's commitment to accountability, transparency, and engagement with stakeholders. Pritchard discussed the FCA's efforts to improve operational performance, with 97% of authorisation cases now assessed within statutory deadlines. She also addressed the challenges and considerations around regulating cryptoassets, emphasising the importance of trust and market integrity.
International cooperation was another key theme, with Pritchard highlighting the FCA's role in leading international discussions on financial stability and global standards. She mentioned collaborations with organisations like IOSCO and the Financial Stability Board (FSB) on various initiatives, including the transition away from LIBOR.
Pritchard also discussed the FCA's approach to 'rightsizing' regulation, supporting innovation, and enhancing the UK's international competitiveness. To illustrate her point, she highlighted the ongoing Digital Securities Sandbox consultation and the proposed changes to the UK's listing regime.
Pritchard concluded by reiterating the FCA's commitment to promoting growth while maintaining high standards and fostering international cooperation.
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US Federal reserve Michelle Bowman speech on banking supervision
In a speech at the 2024 New York Fed Regional and Community Banking Conference, Michelle Bowman, member of the Board of Governors of the Federal Reserve System spoke about supervisory expectations for the banking industry.
Bowman began by noting the challenges faced by banks in recent years:
- The pandemic
- A sharp rise in inflation with an associated rapid rise in interest rates
- CRE market uncertainties due to changing work and business preferences
- Increased third-party fintech engagement in the banking industry
- the 2023 bank failures
She added that banking is now at ‘an inflection point’ where traditional risks (liquidity, interest rate) are a higher concern whilst others (third-party, cybersecurity) are still evolving. Banks, therefore, must ensure their risk-management frameworks can cope with both existing and emerging risks. At the same time, “supervisors must be knowledgeable in how to appropriately identify, supervise, and regulate emerging risks [and] [r]egulators must encourage and support responsible innovation”.
Risk Management and contingency funding
Bowman encouraged banks to update and test their emergency plans regularly, considering the increasing number of economic challenges and shocks. She emphasised the importance of access to emergency funding sources, such as borrowing from the Federal Home Loan Banks or the discount window, to mitigate liquidity risks.
Supervisory changes
Gaps in regulation and supervision need to be addressed, but Bowman noted that “changes to supervisory expectations and processes, coupled with the sheer volume of recent regulatory and supervisory reforms and proposed reforms, will undoubtedly present additional challenges and risks for bank” and hence focusing on the biggest risks is critical. As with previous speeches, Bowman added that small and mid-sized banks need to be particularly protected to maintain their long-term viability.
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US Justice Department's first cryptocurrency open-market manipulation case
The US Justice Department has made its first conviction in a cryptocurrency open-market manipulation case.
A man residing in Puerto Rico was found guilty by a federal jury in New York of commodities fraud, commodities market manipulation, and wire fraud. The charges are related to the manipulation of the Mango Markets decentralised cryptocurrency exchange. According to court documents and evidence presented during the trial, Avraham Eisenberg orchestrated a fraudulent scheme to obtain approximately $110 million worth of cryptocurrency from Mango Markets and its customers. He achieved this by artificially manipulating the price of certain perpetual futures contracts.
Eisenberg is set to be sentenced on 29 July. If convicted, he could face a maximum penalty of 10 years in prison for commodities fraud and manipulation and a maximum penalty of 20 years for wire fraud.
A federal district court judge will determine the final sentence, taking into account the US Sentencing Guidelines and other statutory factors.
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OCC April enforcement actions
The Office of the Comptroller of the Currency (OCC) has issued a notice of enforcement actions for April 2024 against national banks, federal savings associations (banks), and individuals.
These actions consist of two formal agreements, one Cease and Desist Order, six orders of prohibition, and three civil money penalties ranging from $40,000 to $400,000.
The two highest civil penalties are related to the same case in which individuals were found guilty of participating in the operation of the Advantage Loan Program at Sterling Bank and Trust, FSB. This involvement contributed to a poor compliance culture within the bank and also involved pressuring bank employees to expedite the underwriting of Advantage Loan Program loans.
Click here to read the full RegInsight on CUBE’s RegPlatform