Eva Dauberton
News Editor
FCA issues new guidance on financial promotions on social media
The Financial Conduct Authority (FCA) has released its final guidance on financial promotions on social media. This guidance aims to assist firms in adhering to Principle 7, “clear, fair and not misleading”, and Principle 12, which requires companies to act to deliver good outcomes for retail customers.
Some context
The previous final guidance on social media, FG15/4, was issued in 2015 and since then, social media has become an increasingly vital marketing tool for firms, allowing them to reach a wide audience quickly. While many of its key principles still applied, it primarily focused on character-limited platforms like Twitter and did not address the use of influencers in promoting financial products.
The FCA issued a consultation (GC23/2) in July 2023 to address those issues
Key takeaways
The new guidance incorporates new regulations in the financial promotions space, such as requirements related to high-risk investments (HRIs) and the Consumer Duty, and takes into account emerging trends. It specifically acknowledges the rise of “finfluencers.”
In line with this guidance, the FCA has issued a statement making it clear that they will take strict action against individuals and firms that unlawfully promote financial products. Finfluencers could face penalties of up to two years imprisonment, an unlimited fine, or both.
Lucy Castledine, the FCA’s Director of Consumer Investments, emphasised the importance of adhering to the law when it comes to financial promotions. She stated, “Promotions aren’t just about the likes, they’re about the law. We will take action against those touting financial products illegally.”
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New report outlines next steps for tokenisation in UK funds industry
The City Minister’s technology working group has released its second report examining how technology is impacting the UK’s investment management sector.
This report builds upon the previous one published in November 2023 and introduces additional considerations to the initial baseline model presented in the first report.
Together, these reports show that firms in the UK can adopt a baseline model of tokenisation and explore potential use cases for implementing this model into their business strategies.
Some context
The technology working group was established in 2023 with the aim of identifying the benefits and opportunities presented by technology. It comprises industry experts, government representatives, the Financial Conduct Authority (FCA), and other stakeholders outside of asset management.
During the first phase, the group focused on developing a blueprint and a baseline model that could be implemented within the existing legal and regulatory framework. This baseline model serves as the foundation for fund tokenisation in the UK funds market.
The November report also outlines an approach that firms can follow, within the current legal and regulatory framework, to develop and pilot models for fund tokenisation.
Content
The second report outlines the next steps for tokenisation in the UK funds industry. This report takes into account the feedback received from the November report and focuses on evolving the baseline model.
Specifically, the report:
- Details priorities for evolving the baseline model.
- Discusses recent developments, such as international standards, initiatives by the Bank of England and FCA, and emerging technical standards that will enable interoperability.
- Provides recommendations to enable the broader implementation of firms’ fund tokenisation strategies.
- Suggests a model fund prospectus disclosure for firms to use.
What’s next?
Firms are urged to execute their tokenisation strategies or collaborate with peers to advance the emerging use cases with the authorities collaboratively.
The group will now focus on phase three and the impact of artificial intelligence on the industry.
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ESMA issues EuGB Regulation consultation
The European Securities and Market Authority (ESMA) has released a consultation on the European Green Bonds Regulation (EuGB Regulation), published on 30 November 2023. This consultation is the first of two that ESMA plans to publish.
Some context
The EuGB Regulation introduces the “European Green Bond Standard” (EuGBS) as an optional designation for bond issuers. It also establishes a system for registering and overseeing external reviewers of European Green Bonds. The EuGBS aim to increase issuers’ and investors’ confidence in issuing and investing in green bonds.
What are the proposals?
The proposals in this initial consultation package include four draft Regulatory Technical Standards (RTS) and Implementing Technical Standards (ITS) covering:
- Criteria to be assessed at the time of registration relating to senior management, board members and analytical resources.
- Criteria to assess sound and prudent management and management of conflicts of interest.
- Criteria for assessing knowledge and experience of analysts.
- Criteria applicable to outsourcing of assessment activities.
Additionally, the consultation package includes standard forms, templates, and procedures for submitting registration information.
What’s next?
The deadline for comments is 14 June 2024. ESMA will consider the feedback received and expects to publish a final report in Q4. The draft technical standards will be submitted to the European Commission for endorsement by 21 December 2024.
ESMA intends to publish the second consultation package in Q1 2025.
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ESMA releases 2023 Corporate reporting enforcement and regulatory activities report
The European Securities and Markets Authority (ESMA) has released its 2023 Corporate reporting enforcement and regulatory activities report. This report focuses on the actions taken by national enforcers and ESMA (enforcers), highlighting their findings, key messages, and good practices.
Specifically, the report provides a comprehensive overview of the supervision and enforcement activities related to financial information, non-financial information, and European Single Electronic Format (ESEF) reporting. It covers the period from 1 January 2023 to 31 December 2023. It also addresses the implementation of ESMA’s recommendations, such as the European Common Enforcement Priorities (ECEP).
Issuers are encouraged to consider these when preparing future financial statements.
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HKMA urges AIs to use its GHG emissions calculation and estimation tools
The Hong Kong Monetary Authority (HKMA) has issued a Dear CEO letter to all authorised institutions (AIs), urging them to utilise the newly available greenhouse gas (GHG) emissions calculation and estimation tools (“Tools”) on their website.
The Tools serve as a user-friendly starting point for AIs and their clients, offering both calculation and estimation tools. The calculation tool allows users to determine GHG emissions based on actual activity levels, while the estimation tool enables users to estimate the GHG emissions of their investees or borrowers when data on underlying companies is limited.
Interestingly, the Tools are easily accessible on the website even without registration.
HKMA acknowledges the existence of other tools and methodologies for quantifying GHG emissions in the market. AIs that already use or plan to use alternative tools and methodologies are free to do so. However, HKMA reminds firms that adherence to the requirements outlined in the Supervisory Policy Manual module GS-1 on “Climate Risk Management” is essential regardless of the chosen tools or methodologies.
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US Federal and State Agencies unveil plans to enhance tech capacity
The US Federal and State Agencies have released a coordinated statement on Tech and Enforcement, outlining their plans to enhance tech capacity.
One of the key actions mentioned is the active recruitment of technologists who will help enforce existing laws and develop effective remedies for consumers, workers, small businesses, and others. In the rapidly evolving tech ecosystem, technologists can collaborate with experienced agency staff to identify new tech developments, opportunities, and threats. They will also analyse behaviour, evaluate solutions, and take law enforcement actions more rigorously.
The federal agencies involved in this initiative include the US Federal Trade Commission, US Consumer Financial Protection Bureau (CFPB), US Federal Communications Commission, US Equal Employment Opportunity Commission, US National Labor Relations Board, California Privacy Protection Agency, and the US Census Bureau.
The CFPB, for instance, has outlined several short-term goals, such as embedding more technologists across its core functions, conducting research on emerging technologies, and promoting competition while supporting compliant firms.
CFPB Director, Rohit Chopra, said, “From cracking down on data abuses and shoddy AI to tracking Big Tech’s movement into financial services, technology is fundamental to the CFPB’s work. Our technologists help the agency enforce existing laws and track emerging risks to consumers to ensure that American families are protected through whatever technological changes the market encounters.”
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FATF: US ‘largely compliant’ with beneficial ownership requirements
The Financial Action Task Force (FATF) has published its 7th Follow-Up Report & Technical Compliance Re-rating for the United States. The report looks at US progress in addressing some of the technical compliance deficiencies identified in the mutual evaluation report (MER) published in September 2016.
In particular, the report focuses on technical compliance deficiencies identified in the MER regarding recommendation 24, guidance on beneficial ownership. The report notes that the US has made progress in addressing some of its technical compliance deficiencies and has been re-rated on Recommendation 24 as ‘largely compliant’.
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