Greg Kilminster
Head of Product - Content
Enforcement
February was a relatively quiet month – not just for enforcement but across most regulatory activity. The December rush to calendar year end saw significant activity and there are signs of a regulatory hangover as we move into the spring. Nevertheless, there was still enforcement activity taking place and Los Angeles based City National Bank incurred the largest fine of the month against a single entity, fined $65 million for various systemic deficiencies.
Californian regulator, the California Department of Financial Protection and Innovation acted against TradeStation Crypto for the unqualified offer and sale of securities, imposing a $1.5 million fine: a fine also duplicated by the Securities and Exchange Commission (SEC).
Another state regulator, the Justice Department and the State of North Carolina, announced that First National Bank was to be fined $13.5 million for discrimination in its lending practices. At a federal level, The SEC fined 16 firms $81 million for violating record-keeping requirements, particularly various off-channel communications. This issue has already been highlighted as one that regulators are keeping a very close eye on into 2024.
In the UK, the Financial Conduct Authority announced its first fine of the year imposing a fine of £31,800 on a former director of London Capital & Finance plc, for approving hundreds of financial promotions that contributed to thousands of investors being misled.
Consultations
As our coverage on 6th February suggested, there were numerous consultations closing this month yet more proposals and consultations have been announced to cover a variety of developments across the regulatory spectrum. In the US, the Office of the Comptroller of the Currency (OCC) issued a Notice of Rule Proposal (NPRM) aimed at improving transparency in the standards that oversee the review of business combinations; and the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a NPRM to prevent criminals and foreign adversaries from misusing the US financial system and assets through investment advisers.
In the APAC region, the Australian Securities and Investments Commission (ASIC) issued a consultation proposing amendments to its Derivative Transaction Reporting Rules, whilst in Hong Kong no less than three different regulators outlined crypto and virtual asset plans: the Financial Services and the Treasury Bureau’s considerations for virtual asset regulation; the government’s subsequent proposal for a licensing regime for OTC virtual assets and the Hong Kong Monetary Authority’s (HKMA) consultation on new regulations for the prudential treatment of crypto-asset exposures. Finally in Singapore the Monetary Authority (MAS) issued a consultation to simplify the requirements and facilitate access to simple and cost-effective insurance products.
The UK saw one consultation issued at the very end of January but reported here, with the Prudential Regulation Authority (PRA) proposing a new Statement of Policy (SoP) regarding section 138BA applications. Section 138B of the Financial Services and Markets Act allows the PRA, on the application or with the consent of a person who is subject to PRA rules, to give the person a permission that enables them to not apply rules, or to apply rules with a modification specified in the permission. At the end of the month the FCA issued a new enforcement procedures consultation aimed at setting out a new approach to “public interest” that will name firms under investigation to strengthen deterrence and encourage witnesses and whistleblowers to come forward.
Policies and Procedures
The PRA also released a policy statement (PS)4/24 to provide details on its approach to rule review whilst the FCA provided some useful practical guidance on the first few months of the consumer duty. The FCA also announced an end to Guaranteed Asset Protection (GAP) insurance by insurance firms, a further consequence of the consumer duty.
The APAC region was again busy publishing new policies and procedures. The HKMA issued new guidance on distribution and custody of digital assets and a new chapter of the Code of Practice for authorised institutions. The HKMA also advised all its authorised firms on the progress of the AML/CFT Surveillance Capability Enhancement Project. Meanwhile, in Singapore, MAS offered guidance on managing cybersecurity risks that could arise from the latest developments in quantum computing. In Australia, regulators announced the postponement of the new Financial Accountability Regime from 15 March 2024 to 30 June 2024.
Over in the US, the SEC and Commodity Futures Trading Commission (CFTC) adopted amendments to Form PF, the confidential reporting form for certain SEC-registered investment advisers to private funds. The SEC also adopted new rules to provide further clarity on the definition of “dealer” and “government securities dealer”.
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