Greg Kilminster
Head of Product - Content
Enforcement
The big regulatory enforcement for the month was the joint Commodity Futures Trading Commission (CFTC) and US Securities and Exchange Commission (SEC) actions against 26 broker dealers for off-channel communication breaches. In total, fines approaching $400 million were imposed with reduced penalties for those firms that self-reported.
The CFTC in particular had a busy month, fining Nasdaq Futures, Inc $22 million for breaching several designated contract market (DCM) core principles, and TotalEnergies Trading SA (TOTSA) $48 million for attempting to manipulate the market for EBOB-linked futures contracts in order to benefit its derivatives positions.
The CFTC also secured a $12.7 billion judgement against crypto platform FTX Trading Ltd and its affiliated firm, Alameda Research LLC.
It also fined Get Money Tradez LLC (GMT) and its managing member, Jeffrey Carmon, Jr, over $520,000 for fraudulent conduct involving foreign exchange (forex) trading pools.
The SEC, meanwhile, fined Dileep Murthy $88,000 for insider trading in relation to Macquarie Infrastructure Corporation's (MIC) 2021 announcement about the sale of its Atlantic Aviation business. Finally, Carl C Icahn and his publicly traded company, Icahn Enterprises LP agreed to pay $500,000 and $1.5 million in civil penalties respectively for violating disclosure obligations and Cadaret, Grant & Co was fined $1,000,000 for breaching its fiduciary duty by receiving third-party revenue without fully disclosing conflicts of interest.
The UK’s Financial Conduct Authority (FCA) had an unusually busy month of enforcement penalties, including fining individuals associated with London Property Investments (UK) Limited (LPI) and NPI Holdings Limited (NPI) around £4,000,000 for unauthorised mortgage activities. The FCA also fined accounting and auditing giant PricewaterhouseCoopers LLP £15 million for failing to report their reasonable belief that a client might be engaged in fraudulent activity. In a not so good month for the auditing profession, Ernst & Young LLP (EY UK) was also fined £251,305 by the Financial Reporting Council (FRC) for breaching the FRC’s Revised Ethical Standard 2019.
In Australia, the Australian Securities and Investments Commission (ASIC) continued its focus on greenwashing by confirming a court-imposed $11,300,000 penalty on Mercer Superannuation (Australia) Limited after it admitted it made misleading statements about the sustainable nature and characteristics of some of its superannuation investment options.
Finally, we noted the Dubai Financial Services Authority’s (DFSA) fine of USD 980,020 (AED 3.6 million) on a former private banker for engaging in misleading and deceptive conduct during his tenure at Mirabaud (Middle East) Limited (MMEL).
Consultations
Starting in Europe, where the beginning of the month saw the European Insurance and Occupational Pensions Authority (EIOPA) consult on the capital requirement treatment of insurers’ direct exposure to qualified central counterparties (CCPs) and the European Banking Authority (EBA) consult on its draft Implementing Technical Standards (ITS) for standardised reporting templates regarding the level of charges for credit transfers and share of rejected transactions under the Single Euro Payments Area (SEPA) Regulation. Not to be outdone, European Insurance and Occupational Pensions Authority (EIOPA) launched a consultation on the forthcoming implementation of the new proportionality framework under Solvency II.
In the UK, the FCA published two consultations: CP 24/16 proposing rules and guidance for a new value for money framework for savers invested in default arrangements of workplace defined contribution (DC) pension schemes and CP 24/17, proposing changes to the submission requirements for regulated information to the National Storage Mechanism (NSM).
In Australia, the Treasury issued a consultation on proposals to amend the Competition and Consumer (Consumer Data Right) Rules 2020 and at the end of the month also consulted on merger notification thresholds.
ASIC consulted on extending three existing legislative instruments for a further five years and on the same day in Dubai the Dubai Financial Services Authority (DFSA) issued consultation paper 160, Updates to the Client Assets Regime. Still in the Middle East, the Abu Dhabi Global Market issued a consultation proposing a new regulatory framework for the issuance of fiat-referenced tokens (FRTs).
Finally, in Hong Kong, the Securities and Futures Commission (SFC) launched a consultation on proposed amendments to the Companies (Exemption of Companies and Prospectuses from Compliance with Provisions) Notice and the Stock Exchange of Hong Kong Limited (SEKH) released a consultation paper on proposals to expand its paperless listing regime.
Policies and Procedures
In Australia both ASIC and the Australian Prudential Regulation Authority (APRA) launched their Corporate Plans for the next period. APRA also finalised the new cross-industry Prudential Standard CPS 001 Defined Terms, merging five existing standards on definitions for authorised deposit-taking institutions and general, life, and private health insurers into one comprehensive standard.
Over in the US, various agencies approved, final guidance to assist certain large banks in further developing their resolution plans and the Federal Reserve Board confirmed the individual capital requirements for large banks, which will take effect on 1 October 2024. On the same day, we reported the individual capital requirements, we also noted that the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued two rules aimed at enhancing security measures within the residential real estate and investment adviser sectors with respect to illicit finance.
Finally, in the US, the SEC approved a series of updates to the Public Company Accounting Oversight Board's (PCAOB) audit standards and rules.
In Hong Kong, the Monetary Authority (HKMA) launched its new sandbox environment to encourage responsible innovation in generative artificial intelligence (AI) and published the conclusions of the consultation regarding the review of the three-tier banking system, which currently comprises licensed banks, restricted licence banks, and deposit-taking companies.
In the UK, the FCA published policy statement (PS) 24/10, which includes rules for the second phase of the expansion of the dormant assets scheme (DAS).
Key speeches
North America
- At a Beneficial Ownership Information Reporting event, FinCEN Deputy Director Jimmy Kirby spoke about the vital role of beneficial ownership information in protecting the United States from illicit financial activity.
- In a speech at the same event, FinCEN Director Andrea Gacki also outlined the critical role that new beneficial ownership reporting requirements will play in safeguarding the United States’ financial system.
United Kingdom
- In a speech at the FCA event: Consumer Duty: 1 year on, Sheldon Mills, executive director of consumers and competition at the FCA, revisited an analogy he made 18 months earlier when he encouraged firms to “eat the frog” - tackle the implementation of the Consumer Duty however unpalatable it may seem.
- In a speech to the Building Societies Association, Charles Randell, Chair of the FCA and the Payment Systems Regulator (PSR), discussed the importance of outcome-focused regulation in transforming the UK's financial services landscape.
Europe
- In a speech at the Banking and Payments Federation Ireland, Sharon Donnery, Deputy Governor of the Central Bank of Ireland, considered the significant progress made by the Irish banking sector since the financial crisis, while emphasising the urgent need for further transformation in response to ongoing digital and structural changes.
APAC
- In a speech at the Conexus Institute Retirement Conference, Simone Constant, ASIC Commissioner, delivered a stark message to the industry: “Our patience is running thin”.
- In a speech at the same event, Margaret Cole, Deputy Chair of APRA, joined her regulatory colleague in warning superannuation trustees that they must improve their performance.