CUBE RegNews May 2023 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.

Enforcement

There were a handful of significant banking enforcements during May. The FCA fined Banque Havilland £10 million and banned three former employees from working in financial services. The individuals concerned had created and disseminated documents which contained manipulative trading strategies aimed at creating a false or misleading impression as to the market in, or the price of, Qatari bonds. In the US, the CFTC (Commodity Futures Trading Commission) fined HSBC Bank USA for engaging in manipulative and deceptive trading practices related to swaps with bond issuers and also fined the Bank of Nova Scotia (Scotiabank) and Scotia Capital USA Inc. (Scotia Capital) with failing to comply with recordkeeping requirements and proper supervision as CFTC registrants.

The banking fines came in the same month that the Federal Deposit Insurance Corporation (FDIC) announced that they plan to charge the largest US banks $16 billion in additional fees over two years to recover losses incurred from rescuing Silicon Valley Bank and Signature Bank in March. The fees will be calculated based on the uninsured deposits of banks, and banks with assets below $5 billion will be exempt.

The Federal Court of Australia concluded that companies associated with the AMP Group had broken the law by charging life insurance premiums and advice fees from the superannuation accounts of more than 2,000 deceased customers: they were fined AUS$24 million. Meanwhile, in Hong Kong, the Securities and Futures Commission (SFC) reprimanded and fined China On Securities Limited $6 million over its failures as the placing agent in a share placement.

Consultations

The Financial Conduct Authority (FCA) went into overdrive in May publishing five consultation papers:

• CP23/9, changing the scope of the baseline financial resilience regulatory return (FIN073) looks to change the scope of firms required to provide the new baseline financial resilience return, known as ‘FIN073 – Baseline Financial Resilience Report’.
• CP 23/10 includes proposals “to replace standard and premium listing share categories with a single listing category for commercial company issuers of equity shares.”
• CP23/11 Remuneration: Enhancing proportionality for dual‑regulated firms: proposes changes to the FCA’s proportionality thresholds, while also proposing to exempt dual-regulated firms meeting the updated proportionality thresholds from the requirements relating to malus and clawback.
• CP23/12: Expansion of the Dormant Assets scheme proposes expanding the FCA’s dormant assets scheme (DAS) to include dormant investment assets and client money to be made available to the scheme.
• CP23/13 Strengthening protections for borrowers in financial difficulty: consumer credit and mortgages: sets out how the FCA plans to incorporate aspects of the Tailored Support Guidance (TSG — which was introduced during the coronavirus pandemic to advise firms how they could help support customers struggling financially) into the Consumer Credit (CONC) and Mortgages and Home Finance: Conduct of Business (MCOB) sourcebooks and withdraw the TSG.

The Prudential Regulatory Authority (PRA) got in on the act too, issuing CPO9/23: The Bank of England’s approach to enforcement, which proposes changes and clarifications to the Bank of England and the PRA’s enforcement policies and procedure.

Also in the UK, HM Treasury issued a call for proposals to identify the most suitable metrics for regulators to publish as a consequence of the new secondary objectives for the FCA and PRA which have been proposed in the Financial Services and Markets Bill.

Elsewhere, the Monetary Authority of Singapore (MAS) proposed amendments to the Payment Services Act (PS Act) to extend the Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) requirements to newly scoped-in payment services. MAS also proposed changes to exempt major payment institutions from certain safeguarding requirements, and to extend data collection requirements and revise the scope of application for certain notices.

In the US, FINRA (the Financial Industry Regulatory Authority) published a consultation requesting comment on a proposal to facilitate centralised access to members’ order execution quality reports for National Market System (NMS) stocks that are required to be published by market centres under Rule 605 of Regulation NMS. And the Securities and Exchange Commission (SEC) approved a proposal aimed at strengthening the resiliency of covered clearing agencies (CCAs). CCAs function as central counterparties or central securities depositories in securities transactions. The proposal requires CCAs to enhance their risk management policies and procedures.

Finally, the Irish government issued a major new consultation on proposals to enhance the Companies Act 2014; and the Joint Money Laundering Steering Group (JMLSG) published proposed revisions to its guidance.

Policies and Procedures

The SEC announced changes to Form PF, a confidential reporting form for SEC-registered investment advisers to private funds. The amendments require large hedge fund advisers to report events that could indicate significant stress at a fund, quarterly event reporting for all private equity fund advisers, and enhanced reporting by large private equity fund advisers to improve the ability to monitor systemic risk and identify changes in market trends.

FINRA adopted amendments to Rule 8312 (FINRA BrokerCheck Disclosure) to release information on BrokerCheck as to whether a particular current or former member firm is currently designated as a Restricted Firm pursuant to FINRA Rules 4111 (Restricted Firm Obligations) and 9561 (Procedures for Regulating Activities Under Rule 4111).1.

In Europe finance ministers agreed new tax transparency rules for all service providers facilitating transactions in crypto assets for customers resident in the EU. The new rules will improve Member States’ ability to detect and counter tax fraud, tax evasion and tax avoidance, by requiring all crypto-asset providers based in the EU — irrespective of their size — to report transactions of clients residing in the EU. In a further significant crypto development, the EU also approved the Markets in Crypto-Assets (MiCA) regulation, a comprehensive set of rules governing the use of cryptocurrencies. At the same time, a UK cross-party committee suggested that investing in crypto was no better than gambling. 

Europe also adopted its new Retail Investment Package to empower retail investors to make investment decisions that are aligned with their needs and preferences, ensuring that they are treated fairly and duly protected.

And finally, the Australian Prudential Regulation Authority (APRA) finalised new requirements and guidance aimed at strengthening the preparedness of banks, insurers, and superannuation funds to respond to a crisis.

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