Commission proposes new rules to protect and empower retail investors in the EU
The European Commission has adopted a Retail Investment Package that places the consumers’ interests at the centre of retail investing. The aim is to empower retail investors (“consumer” investors) to make investment decisions that are aligned with their needs and preferences, ensuring that they are treated fairly and duly protected. This will enhance retail investors’ trust and confidence to safely invest in their future and take full advantage of the EU’s Capital Markets Union.
The package aims to improve the investment experience for retail investors through a range of measures. It focuses on providing meaningful and standardized information to investors, increasing transparency and comparability of costs, and ensuring that retail clients receive clear information about the performance of their investments. The package also addresses conflicts of interest in the distribution of investment products, protects investors from misleading marketing practices, and maintains high standards for financial advisors’ qualifications. It encourages financial literacy measures, reduces administrative burdens, and enhances supervisory cooperation to ensure effective application of rules and combat fraud. Overall, the package seeks to empower retail investors, enhance their protection, and promote a fair and transparent investment environment.
SFC issues AML/CFT guidance
Hong Kong’s Securities and Futures Commission (SFC) has issued two AML / CFT circulars to licensed corporations and associated entities. The first informs entities of revisions to SFC’s anti-money laundering and counter-financing of terrorism (AML/CFT) guidelines to incorporate provisions and guidance related to the Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Ordinance 2022 (the Amendment Ordinance) which takes effect on 1st June 2023.
The second confirms the renewal of financial sanctions and a travel ban, reflecting the latest exemption arrangements in respect of asset freezing with regard to Yemen.
CFTC charges five with crypto fraud
The Commodity Futures Trading Commission (CFTC) has taken legal action against five individuals operating as a firm called Icomtech for fraudulent activities related to bitcoin and other digital asset commodities. The defendants are accused of soliciting hundreds of thousands of dollars from over 170 individuals across the United States and other countries, promising to trade on their behalf and generate substantial profits. The complaint further alleges that the defendants primarily targeted Spanish-speaking communities in their scheme. Instead of trading as promised, the defendants misappropriated the funds, leading to significant financial losses for some customers. The CFTC is seeking restitution, disgorgement, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against future violations of the Commodity Exchange Act (CEA) and CFTC regulations.
Fund manager convicted
Following an investigation by the Australian Securities & Investments Commission (ASIC), Holly Grofski, the former managing director of Global Merces Funds Management Ltd, has received a six month jail sentence for falsifying documents and providing false information to an auditor.
During her tenure at Global Merces, Ms. Grofski created a fake ‘loan agreement’ to falsely indicate that the company had received a $500,000 loan. She then transferred $500,000 from investor funds into the company’s operating account. Ms. Grofski provided the fabricated loan agreement and evidence of the inflated account balance to the auditors to prevent them from raising concerns about Global Merces’ solvency with ASIC.
However, Ms. Grofski was not authorised to use investor funds for this purpose. Shortly after providing the auditors with the false evidence, she transferred the $500,000 out of the operating account and invested it according to the investor’s instructions.
Ms. Grofski will face an automatic disqualification as a company director for five years.
A selected summary of key developments for regulated financial institutions
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