Greg Kilminster
Head of Product - Content
Enforcement
The year is well under way now and the regulatory calendar is adopting a familiar feel with its pattern of activity. There were lots of smaller fines during the month but one or two significant enforcements including just the second fine of the year from the Financial Conduct Authority (FCA): a not insignificant £6 million which has been referred to the upper tribunal.
In the US, the Commodity Futures Trading Commission (CFTC) slapped a hefty $200 million fine on the defendants involved in a fraudulent binary options scheme. On the same day we also reported that JPMorgan Chase & Co had been fined $348.2 million for deficiencies in its trade surveillance program.
The CFTC returned a few days later, fining US Bank, NA and Oppenheimer & Co Inc a combined sum of $7 million for failing to comply with recordkeeping and supervision failures regarding the firm-wide use of unapproved communication methods. The use of off-channel communication methods has been much in the news recently with regulators considering how to impose some discipline and, in a similar vein, the first “finfluencer” fine was issued this month against an entity for misleading social media posts: the Financial Industry Regulatory Authority (FINRA) fining M1 Finance LLC $850,000. (Later in the month the FCA in the UK would proffer guidance on social medial promotions, another indicator that this issue is definitely on regulatory radar.)
The CFTC also imposed a fine of $64 million on Empires Consulting for operating commodity pools without being registered, defrauding participants and commingling participant funds.
In Europe, relatively rare fines were issued by the European Securities and Markets Authority (ESMA) against Scope Ratings for violating the Credit Rating Agencies (CRA) regulation and by the European Central Bank against Confédération Nationale du Crédit Mutuel for breaching requirements outlined in two ECB decisions on internal models.
Consultations
There are still numerous consultations closing in the first few months of the year, but regulators are still with proposals and consultations. In the US the CFTC has proposed three recommendations aimed at promoting the resiliency and efficiency of US Treasury markets, providing resources on the upcoming transition to T+1 securities settlement, and publishing a first-ever digital asset taxonomy to support regulatory clarity in the United States and internationally.
Later in the month the busy CFTC proposed new rules and amendments to its current regulations for designated contract markets (DCMs) and swap execution facilities (SEFs). Elsewhere in the US the Federal Deposit Insurance Corporation (FDIC) released proposed amendments to its Statement of Policy on bank merger transactions.
In Europe, the European Banking Authority (EBA) issued a consultation paper on its draft Regulatory Technical Standards (RTS) under the Capital Requirements Regulation and ESMA consulted on additional sets of proposed rules and guidelines around the Markets in Crypto-Assets regulation. The Central Bank of Ireland (CBI) meanwhile published a new consultation paper proposing a set of updated consumer protections in the Consumer Protection Code.
Finally, in the UK where a couple of consultations were launched in March including a proposal for the development of the Private Intermittent Securities and Capital Exchange System, a new platform for private companies to trade their securities in a controlled environment on an intermittent basis. HM Treasury also announced a consultation aimed at improving the effectiveness of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. Towards the end of the month the FCA issued a consultation paper proposing the new regulatory framework for those firms looking to provide digital interfaces for their pension customers.
Policies and Procedures
In the UK, two new policy statements from the Prudential Regulation Authority (PRA): policy statement 3/24, which sets out the PRA’s near-final reporting and disclosure policy as part of the review of Solvency II and also 5/24: Solvent Exit Planning for Non-Systemic Banks and Building Societies which introduces a new Chapter 7 to the recovery Plans part of the PRA Rulebook. The FCA also issued a Dear CEO letter updating firms on priorities for its Asset Management & Alternatives Supervisory Strategy. A further Dear CEO letter expects firms to complete a gap analysis against common financial crime shortcomings that the FCA has identified.
On 7 March we covered two SEC rule adoptions: the significant final rules to disclose climate-related information and amendments to Rule 605, requiring disclosures for order executions in national market system (NMS) stocks.
Elsewhere in the US, the Consumer Financial Protection Bureau (CFPB) introduced a new rule to close a loophole that large credit card issuers have been exploiting to overcharge their customers for late payments. Also the Federal Reserve Board adopted a final rule to update the risk management requirements for certain systemically important financial market utilities (FMUs) under its supervision and the Financial Action Task Force (FATF) released an updated version of its guidance on Beneficial Ownership and Transparency of Legal Arrangements.
In Australia, new buy now pay later legislation was announced, and further guidance published for the Financial Accountability Regime (FAR) which partly came into force this month for authorised deposit-taking institutions.
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