FCA to review securitisation rules
The Financial Conduct Authority has issued CP23/17: Rules relating to Securitisation, which sets out proposed rules to replace the firm-facing provisions from the UK Securitisation Regulation (UK SR) which are being transferred into the FCA Handbook as a result of the UK’s departure from the EU.
As well as the fundamental change in bringing securitisation regulations under the UK regulator, the consultation is also consulting on rules to:
- clarify what kind of information UK institutional investors require to fulfil their due diligence obligations;
- amend and clarify risk retention provisions, with reference to changes to facilitate non-performing exposures (NPE) securitisation; and
- make a number of clarificatory changes to other areas of the regulation based on market feedback, such as the geographical scope of the UK SR and the criteria for homogeneity in Simple Transparent and Standardised (STS) securitisations.
The paper also includes a discussion on the definitions of public and private securitisations, with a note that the FCA plans to consult on the proposed changes to the reporting regime particularly for private securitisations in a second consultation to be published later.
The deadline for comments is 30th October 2023.
CFTC settles fraud charges
The US Commodity Futures Trading Commission (CFTC) has announced it resolved charges against Bluprint LLC and Kalpana Patel.
Bluprint had violated the Commodity Exchange Act (CEA) and CFTC regulations by engaging in fraudulent activities, evading registration requirements for commodity pool operators, and failing to provide required disclosures and reporting. Kalpana Patel had received ill-gotten gains from Bluprint, whose owner Rajiv Patel has passed away.
Under the terms of the orders, Bluprint is required to pay $8,863,753.77 in restitution to defrauded victims, while Kalpana Patel is required to disgorge $2,334,467.25. These orders stem from the CFTC’s legal action, initially filed on January 18, 2022, later amended on November 3, 2022.
The case revealed that Bluprint and Rajiv Patel had amassed around $11.8 million from approximately 16 investors for trading activities involving commodity futures and options. These funds were misappropriated for personal expenses, including luxurious living and various financial obligations. The investigation also found that they had distributed over $2.9 million to certain participants in a manner resembling Ponzi payments.
Bluprint and Rajiv Patel engaged in personal trading, resulting in significant losses, and concealed their actions by providing fake account statements to the investors. Furthermore, they deliberately avoided complying with CFTC commodity pool registration requirements to escape detection.
AUSTRAC consults on AML rules amendment
Australia’s AML agency AUSTRAC (Australian Transaction Reports and Analysis Centre) has issued a consultation reviewing chapter 10 of the AML/CTF Rules. The proposed amendment repeals the current section 10.4 which details the special circumstances that justify carrying out applicable customer identification procedure after commencement of the provision of online gambling services. The proposed change will require businesses to carry out the applicable customer identification procedure before commencing any provision of online gambling services.
The deadline for any comments is 4 September.
ASIC speech outlines enforcement approach
Australian Securities and Investments Commission (ASIC) Deputy Chair Sarah Court recently discussed ASIC’s enforcement approach and priorities at the General Counsel Summit.
The speech covered several areas including:
ASIC’s approach to enforcement: Court emphasised ASIC’s proactive and strategic enforcement approach rather than being reactive. ASIC selects cases that have a broad impact and can act as a deterrent to the broader industry. It doesn’t shy away from cases that might have uncertain legal outcomes, aiming to ensure the laws it enforces maintain their protective integrity.
Enforcement priorities for 2023: The speech unveiled ASIC’s priorities for the current year, including issues such as
- “greenwashing” (misleading environmental claims),
- poor design and distribution of financial products,
- insurance pricing promises, protection of financially vulnerable consumers, and directors’ duties and governance failures.
EToro case study: Court presented a case study involving eToro, a company dealing with high-risk contracts for difference (CFDs). The regulator alleged that eToro failed to provide appropriate target market determinations for CFDs, breaching design and distribution obligations. This case was presented as a strategic enforcement move to deter similar misconduct in the industry.
The speech also touched on ASIC’s commitment to transparency through the public release of enforcement priorities. This transparency not only guides ASIC staff but also holds the regulator accountable for delivering on these priorities. The speech highlighted several ongoing enforcement actions, including Star Casino and GetSwift, demonstrating ASIC’s determination to fulfill its mandates.
Finally, the speech underscored the pivotal role of general counsel in regulatory matters. Effective communication and engagement between regulators and general counsel play a crucial role in resolving matters efficiently. The speech acknowledged that sometimes disagreements may persist, but having explored all possibilities facilitates a smoother litigation process.
EBA updates timeline for the implementation of the IRB roadmap
The European Banking Authority (EBA) has updated its roadmap for the implementation of internal ratings based (IRB) model requirements to limit compliance costs for institutions. The EBA also published its final supervisory handbook for the validation of internal ratings based (IRB) rating systems to clarify the role of the validation function as part of corporate governance.
A selected summary of key developments for regulated financial institutions
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