February 6, 2024 | Greg Kilminster
Estimated reading time: 4 minutes
CUBE RegNews January 2024 summary
Stay informed with our monthly regulatory and compliance recap, providing you with a comprehensive overview of the latest regulatory events. For daily updates, check out our RegNews summaries here.
January is already a bleak month, so the last thing regulated firms need is a huge fine from the regulator. For HSBC and Morgan Stanley then, a bad start to the year with a hefty £57m fine from the Prudential Regulation Authority (PRA) for failures in deposit protection identification and notification for the former, and a whopping $249 million imposed by the Securities and Exchange Commission (SEC) to settle fraud charges and for failing to enforce information barriers for the latter. Ex-head of the equity syndicate desk at Morgan Stanley, Pawan Passi, was also fined $250,000 as part of that settlement and fraud was also behind the SEC fine against Vincenzo Carnovale for unlawful stock sales. Another individual, this time in the UK, was fined nearly £120,000 for breaching PRA conduct rules.
JP Morgan Securities meanwhile was fined $18 million for violating the SEC’s whistleblower protection rule and accounting software provider SAP was fined $220 million for bribery offences. Meanwhile, failing to have in place an adequate anti-money laundering program was one reason why the Federal Reserve Board and the New York Department of Financial Services fined Industrial and Commercial Bank of China Ltd approximately $32.4 million.
Elsewhere, the Australian regulators kicked off the year with a spate of activity, The Federal Court imposed fines totalling $390,000 on four directors of Endeavour Securities for breaching directors’ duties; and later in the month fined ME Bank $820,000 for false and misleading behaviour. Completing its regulatory hat-trick, the same court fined Westpac bank $1.8 million for unconscionable conduct during a $12 billion interest rate swap transaction.
It’s looking like a busy year already with regulators immediately issuing consultations. First out of the blocks were the European Supervisory Authorities with their consultation on the draft implementing technical standards regarding the European Single Access Point. Separately, the European Banking Authority (EBA) published consultation papers proposing amendments to the Draft Regulatory Technical Standards on prudent valuation under the Capital Requirements Regulation, and draft guidelines on the management of Environmental, Social and Governance risks. The European Securities and Markets Authority also released two consultations papers on guidelines under the Markets in Crypto Assets Regulation, one on reverse solicitation and one on the classification of crypto-assets as financial instruments.
In the United States, the Consumer Financial Protection Bureau issued a proposed rule mandating large banks to apply consumer protections, including interest rate disclosures, to overdraft loans and later in the month a proposal to ban nonsufficient funds fees on transactions that are instantly refused after the customer initiates the transaction.
In the UK, the PRA issued three consultations during the month including one proposing new rules for PRA-regulated insurers to execute a solvent exit if needed with minimal disruption.
Finally in Australia, minor amends to the superannuation prudential framework were published and the Treasury issued a consultation to mandate climate-related financial disclosure requirements for large businesses and financial institution. On the same day, Treasury also issued a consultation to consider the proposed definition of ‘cash equities’ included in the Corporations and Competition (CS Services) Instrument 2024.
Policies and Procedures
A new year is always a suitable time to introduce change and several regulators made speeches or issued missives during the month which reminded their audiences of forthcoming priorities. The PRA and the Australian Prudential Regulation Authority issued letters; whilst other regulators, including the Federal Reserve, the UK’s Payment Systems Regulator and the EBA chose speeches to get their priorities across. Others, such as Hong Kong’s Securities and Futures Commission, simply published strategic priorities.
Other speeches undoubtedly gave an indication of specific issues that regulators will be looking to focus on in 2024. The Financial Conduct Authority’s CEO Nikhil Rathi spoke on consumer tech; acting Comptroller of the Currency Michael J Hsu spoke about liquidity risk and Rostin Behnman, chair of the Commodity Futures Trading Commission addressed his concerns over the regulatory approval given to bitcoin exchange-traded products..
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