Greg Kilminster
Head of Product - Content
CUBE RegNews:
1st June
Singapore’s Monetary Authority issues prohibition orders for tax evasion convictions
The Monetary Authority of Singapore (MAS) has imposed five-year prohibition orders (POs) against six former agents of Great Eastern Financial Advisers Private Limited (GEFA) following their convictions for tax evasion. Mr. Chan Jun Yi, Ms. Chanel Quah Hui Wen, Mr. Lim Zhan Yi, Ms. Sherlin Chia Hee Ping, Mr. Tang Hong Kong Jackie, and Ms. Yvonne Quah are now prohibited from providing financial advisory services and participating in the management of financial advisory firms under the Financial Advisers Act 2001. They are also barred from conducting business as insurance intermediaries under the Insurance Act 1966. The former agents had engaged in falsely inflating their business expenses to reduce their income tax liability by $124,648 for the 2018 and 2019 tax years. MAS took action based on their convictions and the belief that they would not perform financial advisory services honestly.
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Former Wells Fargo executive settles with SEC for $3 million penalty
The Securities and Exchange Commission (SEC) has announced a settlement with Carrie L Tolstedt, the former head of Wells Fargo & Co.’s Community Bank, in connection with charges brought in 2020. Tolstedt has agreed to pay a $3 million penalty related to allegations of misleading investors about the success of Wells Fargo’s Community Bank, the core business of the company. The SEC had previously settled charges against Wells Fargo and its former CEO and Chairman, John Stumpf.
According to the SEC’s complaint, Tolstedt endorsed and publicly described Wells Fargo’s “cross-sell metric” between mid-2014 and mid-2016. The metric was presented as a measure of the bank’s financial success, but it was inflated by accounts and services that were unused, unneeded, or unauthorised. The complaint alleges that Tolstedt knew the metric did not accurately track accounts or products that customers needed or used, as she was aware of misconduct at the Community Bank. Bank employees were found to have pushed unnecessary products on customers, including the unauthorised opening of accounts. The SEC claims that Tolstedt made misleading statements to investors at Wells Fargo’s investor conferences in 2014 and 2016 and signed misleading sub-certifications regarding the accuracy of Wells Fargo’s public disclosures.
As part of the settlement, Tolstedt neither admits nor denies the SEC’s allegations. However, she has agreed to a final judgment that permanently enjoins her from violating or aiding and abetting violations of antifraud and other provisions of federal securities laws. She will also face a permanent officer-and-director bar. In addition to the $3 million civil penalty, Tolstedt will pay disgorgement of $1,459,076 plus prejudgment interest of $447,874. This sum, combined with the $500 million paid by Wells Fargo and the $2.5 million penalty paid by Stumpf in previous settlements, will be distributed to harmed investors. The settlement is subject to court approval.
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SEC charges in fraudulent Ponzi scheme
The Securities and Exchange Commission (SEC) has filed a complaint charging Outstanding Real Estate Solutions, Inc. (ORES), its CEO Chimene Van Gundy, and salespeople Michael Trofimoff, Santos Kidd, and Maria Tosta for their involvement in a fraudulent mobile home investment scheme. The scheme allegedly raised approximately $18.5 million from at least 600 investors.
According to the SEC’s complaint, between June 2018 and November 2021, Van Gundy and ORES solicited investments from individuals, promising to utilise the funds to acquire, renovate, and resell mobile homes. However, the SEC claims that Van Gundy and ORES did not actually possess the hundreds of mobile homes they claimed to have purchased with investor funds. Instead, the complaint alleges that they operated a Ponzi-like scheme, using new investments to make payments to existing investors, paying undisclosed sales commissions, and funding Van Gundy’s personal expenses.
The complaint further alleges that Van Gundy, Trofimoff, Kidd, and Tosta acted as unregistered brokers, making false and misleading statements or omissions to investors while promoting and selling ORES mobile home investments.
The SEC’s complaint charges ORES and Van Gundy with violating the securities-registration provisions of the Securities Act of 1933. Additionally, ORES, Van Gundy, Trofimoff, and Kidd are charged with violating the antifraud provisions of the Securities Act and the Securities Exchange Act of 1934. Tosta is charged with violating specific sections of the Securities Act, while Van Gundy, Trofimoff, Kidd, and Tosta are charged with violating the broker-registration provisions of the Exchange Act.
The SEC is seeking permanent injunctions, disgorgement with prejudgment interest, and civil penalties against all defendants. In addition, an officer-and-director bar is being sought against Van Gundy. Maria Tosta has agreed to settle the charges against her, without admitting or denying the SEC’s allegations. The settlement, subject to court approval, includes permanent injunctions, disgorgement with pre-judgment interest totaling $117,917.57, and a civil penalty of $60,000.
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ESMA launches fifth stress test exercise for central counterparties
The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, today launched its fifth Stress Test Exercise for Central Counterparties (CCPs) under the European Markets Infrastructure Regulation (EMIR). The CCP Stress Test framework is complemented by an adverse market scenario provided by the European Systemic Risk Board (ESRB).
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SFC issues new guidelines for VA trading platform operators
The new guidelines are applicable to all platform operators (whether they are licensed under the SFO and/or the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) when they carry on relevant activities. Relevant activities include:
providing services through means of electronic facilities whereby:
- offers to sell or purchase virtual assets are regularly made or accepted in a way that forms or results in a binding transaction; or
- persons are regularly introduced, or identified to other persons in order that they may negotiate or conclude, or with the reasonable expectation that they will negotiate or conclude 5 sales or purchases of virtual assets in a way that forms or results in a binding transaction; and
- where client money or client virtual assets comes into direct or indirect possession of the person providing such service; and
any off-platform virtual asset trading activities and incidental services provided by the Platform Operator to its clients, and any activities conducted in relation to off-platform virtual asset trading activities.
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FINRA consults on proposal to require members to provide Rule 605 order execution quality reports to FINRA for centralised publication
FINRA has 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.
Under the proposal, FINRA members includingexchange market makers, over-the-counter (OTC) market makers, alternative trading systems (ATS), national securities exchanges, or national securities associations would be required to provide their Rule 605 reports to FINRA, which FINRA would publish in a centralised location on the FINRA website.
Comments must be received by July 31, 2023
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EBA launches consultation on guidelines to address money laundering risks in CASPs
The European Banking Authority (EBA) has initiated a public consultation on proposed amendments to its Guidelines on money laundering and terrorist financing (ML/TF) risk factors. The revisions aim to extend the scope of the guidelines to include crypto-asset service providers (CASPs). The consultation period will run until August 31, 2023.
CASPs, along with other credit and financial institutions, face significant ML/TF risks. However, CASPs encounter unique challenges due to factors such as the use of innovative technologies, instant global transfers of crypto assets, and services with privacy-enhancing features.
The EBA proposes to update its guidelines to establish consistent regulatory expectations for CASPs in identifying and effectively mitigating these risks.
The proposed amendments introduce sector-specific guidance for CASPs, highlighting indicators that may signify their exposure to higher or lower ML/TF risks. CASPs should consider these factors when conducting ML/TF risk assessments for their business and customers, both initially and throughout the business relationship. The guidelines also outline how CASPs should adapt their customer due diligence (CDD) procedures based on these risks. Additionally, the amendments provide guidance to other credit and financial institutions on the risks associated with engaging in a business relationship with CASPs or exposure to crypto assets.
Further guidance specific to Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) supervisors of CASPs will be provided through amendments to the EBA’s risk-based supervision guidelines, currently open for consultation until June 29, 2023. These amendments will be complemented by guidelines addressing the prevention of fund transfer abuse for ML/TF purposes, as well as new guidelines on policies and procedures for compliance with restrictive measures. Through these initiatives, the EBA aims to enhance the European Union’s AML/CFT defences.
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A selected summary of key developments for regulated financial institutions
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