![Greg Kilminster](https://cube.global/uploads/2023/11/16/rMKN6VVVkcuWuZjnFNr5i55RycAYRLAcO4Flj4rT_default.jpg)
Greg Kilminster
Head of Product - Content
CUBE RegNews:
8th June
FCA clamps down on crypto marketing
Following the SEC’s charges against Binance and Coinbase, the UK authorities continue to keep the regulatory pressure on crypto with new advertising rules announced by the Financial Conduct Authority (FCA).
Under new advertising rules announced by the Financial Conduct Authority (FCA) entities marketing cryptoassets to UK consumers will need to introduce a cooling-off period for first-time investors, and publish clear risk warnings from 8 October 2023. Incentives such as friend referrals or new joiner bonuses are also banned.
Policy statement PS 23/6: Financial promotion rules for cryptoassets, summarises feedback from CP 22/2: Strengthening our financial promotion rules for high risk investments, including cryptoassets, and confirms the regulator’s view that cryptassets should be treated as restricted mass market investments. The PS outlines four legal routes to promoting cryptoassets:
- The promotion is communicated by an authorised person.
- The promotion is made by an unauthorised person but approved by an authorised person. Legislation is currently making its way through the UK Parliament which, if made, would introduce a regulatory gateway that authorised firms will need to pass through to approve financial promotions for unauthorised persons.
- The promotion is communicated by (or on behalf of) a cryptoasset business registered with the FCA under the MLRs in reliance on the exemption in Article 73ZA of the Financial Promotion Order.
- The promotion is otherwise communicated in compliance with the conditions of an exemption in the Financial Promotion Order.
The PS also outlines the changes to be made to the FCA Handbook including to PRIN and COBS. The FCA has also published its Guidance Consultation GC/23/1 on cryptoasset financial promotions to provide further clarification on the expectations of firms communicating cryptoasset financial promotions to ensure promotions are clear, fair and not misleading. Responses to the guidance are requested by 10th August.
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SEC final rules on security-based swaps and Reg M
The Securities and Exchange Commission (SEC) has adopted new rules to prevent fraud, manipulation, and deception in connection with security-based swap transactions. The rules are designed to protect investors and market integrity by preventing misconduct in the security-based swaps market.
The new rules include:
- An antifraud and anti-manipulation rule that prohibits misconduct in connection with effecting any transaction in, or attempting to effect any transaction in, or purchasing or selling, or inducing or attempting to induce the purchase or sale of, any security-based swap.
- A rule that prohibits personnel of security-based swap dealers and major security-based swap participants (SBS Entities) from taking any action to coerce, mislead or otherwise interfere with the SBS Entity’s chief compliance officer.
- A rule to protect the independence and objectivity of the chief compliance officer of a security-based swap dealer or major security-based swap participant.
“Any misconduct in the security-based swaps market not only harms direct counterparties but also can affect reference entities and investors in those reference entities,” said SEC Chair Gary Gensler. “Given these markets’ size, scale, and importance, it is critical that the Commission protect investors and market integrity through helping prevent fraud, manipulation, and deception relating to security-based swaps. Today’s set of rules will do just that.”
The SEC has also announced rule changes to remove and replace references to credit ratings from existing exceptions provided in Rule 101 and Rule 102 of Regulation M, a set of rules that prohibits activities that could artificially influence the market for an offered security.
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SFC CEO outlines four-prong plan to establish Hong Kong as asset management hub
In a speech at the 16th HKIFA Annual Conference, SFC CEO Julia Leung outlined her strategy to bring Hong Kong to the “next level” as an international asset management hub and private wealth centre. Leung covered four areas in particular:
Onshoring – Leung outlined two new fund structures: for open-ended fund (OEF) companies and limited partnership funds LPF) noting: “This year, we are making a significant legislative change in our ongoing efforts to build up Hong Kong as an onshore asset management hub. This is the introduction of Type 13 Regulated Activity (RA) covering fund depositary services. RA 13 will take effect in October 2024 after completing the legislative process.”
Platforms – Leung focused on connecting platforms to mainland China investors as key to the SFC strategy, stressing that building numerous conduits to reach mainland investors will be key to increasing sales
Products – Leung highlighted three areas for growth: ESG products, virtual assets and renminbi-denominated products.
Technology and Services – Leung touched on AI noting that “AI can be used responsibly to augment, rather than replace, asset managers in strategic decision making” but adding that “Firms should also have qualified staff managing their AI tools, as well as proper senior management oversight and a robust governance framework for AI applications. For any conduct breaches, the SFC would look to hold the licensed firm responsible—not the AI.”
Click here to read the full RegInsight on CUBE’s RegPlatform
CFTC confirms rule amend for DCOs
The Commodity Futures Trading Commission (CFTC) has unanimously approved a final rule that introduces amendments to existing regulations for derivatives clearing organisations (DCOs). The rule requires DCOs to establish risk management committees (RMCs) and consult with them on issues that could significantly impact the DCO’s risk profile. These committees will consist of members from clearing organisations and their customers.
Additionally, the rule sets minimum requirements for the composition and rotation of RMCs. DCOs will be required to establish and enforce fitness standards for RMC members. To ensure transparency and clarity, DCOs must maintain written policies and procedures outlining the RMC consultation process and the roles of RMC members.
Furthermore, the rule necessitates DCOs to establish one or more risk advisory working groups (RWGs) comprising market participants. These groups must convene at least twice per year and adopt written policies and procedures regarding their formation and role.
Click here to read the full RegInsight on CUBE’s RegPlatform
CUBE RegNews:
A selected summary of key developments for regulated financial institutions
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