Greg Kilminster
Head of Product - Content
Enforcement
As the summer approaches, regulatory activity has understandably dipped a little – particularly in the UK, where the forthcoming election has meant limited activity across output.
Nonetheless, there were a handful of significant fines in June, not least the Commodity Futures Trading Commission’s (CFTC) order against Trafigura Trading LLC for misappropriating material non-public information, engaging in manipulative conduct affecting published benchmark rates, and impeding voluntary communications with the CFTC. Trafigura was fined $55 million.
During the month, the CFTC also notably confirmed that it gave more than $4.5 million to a whistleblower who provided detailed information that supported another enforcement action.
The Trafigura fine was meagre compared to the $4.5 billion imposed by the Securities and Exchange Commission (SEC) that Terraform Labs PTE, Ltd (Terraform), the entity behind the stablecoin TerraUSD, and its former CEO, Do Kwon, are required to pay in fines and disgorgement for orchestrating a fraud scheme in the cryptoasset securities market.
The SEC also fined RR Donnelley & Sons Company (RRD) more than $2.1 million to settle cybersecurity incidents and alerts charges. On the same day we also reported on the Consumer Financial Protection Bureau (CFPB) fining reverse mortgage servicing operation Sutherland Global $5 million for systematic failures to address the requests for assistance from thousands of homeowners.
Consultations
Starting in Europe, the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) released a discussion paper on potentially reviewing the prudential framework for investment firms. On the same day, the European Central Bank (ECB) launched a consultation regarding its new guide on outsourcing cloud services to cloud service providers. The EBA followed this up days later with a consultation on three sets of draft Regulatory Technical Standards (RTS) on data collection and governance of the loss data set as outlined in the Capital Requirements Regulation (CRR).
Later in the month the European Commission issued its consultation on a Draft Delegated Regulation specifying over-the-counter (OTC) derivatives identifying reference data to be used for the purposes of transparency requirements, as set out in the Markets in Financial Instruments Regulation (MiFIR).
In the United States, the US Treasury issued a request for information regarding the development and application of artificial intelligence (AI) in the financial sector and later in the month published a Notice of Proposed Rulemaking to tackle the national security risk presented to the United States by certain countries actively trying to develop sensitive technologies essential for military, intelligence, surveillance, or cyber-enabled capabilities.
In Australia, the Albanese government released a consultation on the draft Treasury Laws Amendment (Delivering Better Financial Outcomes) Regulations 2024.
Policies and Procedures
Staying in Australia, the government also announced new consumer protection legislation aimed at regulating Buy Now Pay Later (BNPL) operators under the National Consumer Credit Act (Credit Act).
On the same day we noted that the Australian Transaction Reports and Analysis Centre (AUSTRAC) published a Financial Crime Guide for financial service providers to help them understand and identify signs of criminal networks exploiting vulnerable members of the community as money mules. Finally, the Australian Prudential Regulation Authority (APRA) has introduced a new digital Prudential Handbook as part of its ongoing efforts to modernise the prudential architecture (MPA).
At the end of the month, we reported on the introduction of the revised Australian Banking Code of Practice.
In Europe, ESMA released the final draft RTS on conflicts of interest for cryptoasset service providers under the MiCAR (Markets in Cryptoassets Regulation). The EBA followed suit and, along with the other European Supervisory Authorities, also published its final report on greenwashing in the financial sector and, later in the month, the EBA also published its final draft amending the RTS on the standardised approach for counterparty credit risk.
In the UK, the Prudential Regulation Authority (PRA) issued a policy statement (PS) 10/24 on the reform of the Matching Adjustment (MA) as part of the review of Solvency II.
Over in the States, the Office of the Comptroller of the Currency (OCC) was one of several regulators adopting a new rule to implement the quality control standards mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) for the use of automated valuation models (AVMs) by mortgage originators and secondary market issuers in determining the collateral worth of a mortgage secured by a consumer’s principal dwelling. Finally, the Consumer Financial Protection Bureau (CFPB) confirmed a new regulation to establish a registry to detect and deter corporate offenders that have broken consumer laws and are subject to federal, state, or local government or court orders.
The month also saw publication of several reviews of activity with FinCEN and the European Supervisory Authorities (ESAs) publishing annual reviews on the same day which were swiftly followed up by UK regulators co-publishing the second Wider Implications Framework Annual Report. Later in the month, ESMA and the European Insurance and Occupational Pensions Authority (EIOPA) published their annual reviews and on the same day we reported on how FINRA had spent its annual enforcement revenues.
Looking to the future, SEC and CFTC chiefs laid out their budget proposals and the Committee on Payments and Market Infrastructures (CPMI) of the Bank for International Settlements released its 2024/35 work programme.
Key speeches
North America
- In speeches made at the Financial Stability Oversight Council (FSOC) Conference on Artificial Intelligence and Financial Stability, Janet Yellen, US Secretary of the Treasury and Acting Comptroller of the Currency Michael J Hsu discussed AI in financial services.
- In a speech at the Piper Sandler Global Exchange and Trading Conference, Rostin Behnam, Chairman of the CFTC, highlighted the pivotal role of financial markets in facilitating the transition to a lower-carbon economy, and emphasised the CFTC's regulatory responsibilities, market resilience, and the need for continuous adaptation in the face of evolving market and technological landscapes.
- In a speech at the International Bar Association’s Asset Management Industry Conference on Global Challenges and Opportunities, SEC Commissioner Mark T Uyeda discussed the evolving landscape of investment research regulation and compliance.
- In a speech at the Accelerated Settlement in the UK Conference, Gary Gensler, Chair of the US Securities and Exchange Commission (SEC), spoke about the significant strides the US has made in shortening its securities settlement cycle and advocated for similar changes globally.
- In a speech in Toronto, Ben Gully, the Deputy Superintendent of the Canadian Office of the Superintendent of Financial Institution’s (OSFI) Supervision Sector, discussed the crucial role of effective risk governance within financial institutions and considered where best to focus efforts.
United Kingdom
- In a speech at the Investment Association Annual Conference, Nikhil Rathi, Chief Executive of the Financial Conduct Authority (FCA), spoke about the pivotal role of the UK asset management industry.
- In a speech at the City & Financial Global Financial Services Investigations and Enforcement Summit, Steve Smart, Joint Executive Director of Enforcement and Market Oversight at the Financial Conduct Authority (FCA), discussed the pivotal role of collaboration in combating financial crime.
Europe
- In a speech at the 2024 Annual ECB Banking Supervision Research Conference, Claudia Buch, Chair of the Supervisory Board of the European Central Bank (ECB), addressed the challenges faced by banking supervisors and how the work of researchers can help with those challenges.
- In a speech at the Bundesbank Symposium, Claudia Buch, Chair of the Supervisory Board of the European Central Bank (ECB), spoke of the necessity for supervisory practices to evolve in response to rapidly changing risks in the banking sector.
- In a speech at the Joint Conference of the European Commission and the European Central Bank (ECB) on European Financial Integration, Luis de Guindos, Vice-President of the ECB, outlined the urgent need for enhanced financial integration and stability to secure a resilient and prosperous future for Europe.
- In a speech at the Central Bank Payments Conference, Burkhard Balz, Member of the Executive Board of the Deutsche Bundesbank considered the future role of central bank digital currencies (CBDCs).
APAC
- In a speech at the National Security Legal Forum in Hong Kong, Eddie Yue, Chief Executive of the Hong Kong Monetary Authority (HKMA), emphasised the critical relationship between financial security and the development of the financial sector.
- In a speech at the Merchant Risk Council (MRC) Conference, Ellis Connolly, Head of Payments Policy, Reserve Bank of Australia (RBA) provided a useful summary of ongoing retail payments regulation evolution in Australia.