Greg Kilminster
Head of Product - Content
FCA releases Q4 2023 data on financial promotions
The Financial Conduct Authority (FCA) has released quarterly data for Q4 2023 on financial promotions, including actions taken against firms that have breached promotion rules, as well as referrals and investigations into unregulated activities.
This data is particularly interesting, given FCA recent enforcement action which led to the fine and ban of LCF’s director for disseminating misleading financial promotions. This action reinforces the responsibility of directors in controlled functions to ensure that financial promotions are fair, clear, and not misleading.
Key takeaways:
- FCA interventions resulted in 1,004 promotions being amended or withdrawn by authorised firms.
- The FCA issued 793 alerts on unauthorised firms and individuals, of which 6% were clone scams.
- The data includes actions relating to promoting crypto assets, and the FCA is currently conducting reviews to test compliance with related rules.
Click here to read the full RegInsight on CUBE’s RegPlatform
FCA publishes newsletter on insider dealing by organised crime groups
The Financial Conduct Authority (FCA) has released a Market Watch newsletter on market conduct and transaction reporting issues. The newsletter specifically covers insider dealing by Organised Crime Groups (OCGs), a criminal offence under Part V Section 52 of the Criminal Justice Act 1993.
The newsletter highlights the typical characteristics of such activities and provides guidance to firms on how to identify and guard against OCGs.
In a related development, the FCA has announced an enforcement action based on suspicion of insider dealing, conspiracy to insider deal, and money laundering linked to OGCs. This operation involved more than 38 FCA and NCA officers.
Steve Smart, Joint Executive Director of the FCA, responsible for delivering enforcement and market oversight, stated, “Insider dealing poses a significant threat to the integrity of financial markets both in the UK and overseas. The FCA is committed to combating organised criminal networks involved in this threat.” He added, “Working with our domestic and international enforcement partners, we will continue to use all the powers and tactics available to us to disrupt this threat.”
Click here to read the full RegInsight on CUBE’s RegPlatform
US Department of Treasury releases 2024 investment adviser risk assessment report
The US Department of Treasury has released the 2024 Investment Adviser Risk Assessment report. This report outlines the illicit finance risks that the investment adviser sector in the United States is currently facing. The assessment is based on an analysis of law enforcement cases, BSA reporting, and other relevant information available to the US government. The Treasury offices, bureaus, along with the Federal Bureau of Investigation (FBI), the Criminal Division of the Department of Justice, and the Securities and Exchange Commission (SEC) have collaborated to create this risk assessment.
The report identifies four primary sources of illicit finance activity that involve the investment adviser sector in the United States. These sources include laundering of illicit proceeds through investment advisers and private funds, Russian political and economic elites’ access to US investments, foreign state actors that could use investment funds to access critical infrastructure or sensitive technologies, and investment advisers defrauding their clients. The report also identifies the vulnerabilities that facilitate these threats to materialise, such as regulatory vulnerabilities, advisory activities built on segmentation and cross-border activity, and business practices that promote secrecy of client information.
Furthermore, the report suggests several mitigating measures that can help address these vulnerabilities, including tools that can be implemented by firms and observations on regulators’ actions.
Click here to read the full RegInsight on CUBE’s RegPlatform
Michelle Bowman on advancing cross-border payments and financial inclusion
In a speech given at the 19th BCBS-FSI High-Level Meeting for Africa, in Cape Town, Federal Reserve Governor Michelle Bowman discussed cross-border payments and financial inclusion.
Beginning by noting the ubiquitous nature of the payments landscape, Bowman outlined her views on the evolving cross-border payments landscape and how financial inclusion is framed within that context.
Complexity and challenges of the cross-border payments landscape
Bowman pointed out the complexity of cross-border payments because of multiple currencies, regulations, and parties involved. This complexity leads to frictions like high fees, slow processing, and lack of transparency. She added that the G20 is working to address these issues by collaborating on solutions to make these payments smoother and easier.
She cautioned that not all proposed solutions to cross-border frictions may be necessary and must be considered within a broader context. Turning to compliance of cross-border systems, she highlighted the balancing act banks face between complying with regulations and protecting customer privacy. While regulations add complexity due to differing interpretations across jurisdictions, consistent international standards and automation technologies could, she argued, benefit everyone.
Bowman went on to note that while technology is often seen as the solution for enhancing payments innovation, it is not solely responsible for achieving the desired benefits. However, assessing technological opportunities within the broader framework of a robust global banking and payments system is still required and she confirmed her support for responsible innovation aimed at addressing specific issues and facilitating safe financial services for consumers and businesses.
Payments and financial inclusion
Bowman pointed out in the speech that many payment system features, for example access, cost and speed, have implications for financial inclusion adding that: “In my view, the payment system and the broader economy are most efficient and effective when there is broad participation, when unnecessary frictions are minimised, and when banks, especially smaller financial institutions, can provide services to meet consumer demand in a safe and sound manner.”
Noting that gaps in financial inclusion differ across regions, she added that local regulators and policy makers are best suited to provide tailored solutions, but that regulators should also be “willing to collaborate and assess opportunities for systemic improvements that could provide widespread benefits.” One aspect she mentions is the G20 effort to try to reduce average remittance fees to below 3% by 2030.
Bowman argued that both the public and private sector can contribute to more efficient payment systems. Private sector initiatives expanding digital payments and exploring technological enhancements can complement ongoing public sector cross-border initiatives. She highlighted two Federal Reserve interagency statements on supporting banks engaging in small-dollar lending and on using alternative data in credit underwriting as examples of facilitating financial inclusion within a framework of responsible innovation.
Bowman also highlighted further Federal Reserve efforts in payment system improvement and international collaboration including the introduction of FedNow® Service for instant payments and the adoption of ISO 20022 messaging standard. Longer-term plans involve researching innovative technologies and collaborating with international counterparties, aiming for a more inclusive and efficient cross-border payments system. She concluded by noting that progress in these areas will be gradual and cautious adding: “The safety of our financial system requires that we get this right, and our pursuit of improvements in the payments system must avoid the temptation to rely on new technology alone.”
Click here to read the full RegInsight on CUBE’s RegPlatform
HKMA issues new chapter of Code of Practice for AIs
The Hong Kong Monetary Authority (HKMA) has issued a new chapter of the Code of Practice for authorised institutions (AIs) pursuant to section 196 of the Financial Institutions (Resolution) Ordinance (FIRO). This new chapter, FMI-1: “Resolution Planning – Continuity of Access to Financial Market Infrastructure Services,” outlines the HKMA’s expectations for an AI’s ex-ante capabilities and arrangements to maintain continuity of access (CoA) to critical financial market infrastructure (FMI) services in a resolution scenario.
The HKMA has also updated other relevant Hong Kong FMI scheme rules to ensure that resolution is not an event of default, provided that the applicable substantive obligations continue to be performed. Additionally, Hong Kong Interbank Clearing Limited, as Clearing House Automated Transfer System (CHATS) operator, has published its response to the Financial Stability Board’s questionnaire on CoA to FMIs for firms in resolution, which should help AIs understand the requirements and conditions for maintaining CoA to relevant Hong Kong FMIs.
Click here to read the full RegInsight on CUBE’s RegPlatform
AFCA approach to compensation
The Australian Financial Complaints Authority (AFCA) has issued new guidance outlining its approach to determining compensation in the event of the insolvency of an investment scheme.
The new guidance should be read in conjunction with AFCA’s Approach to caclulating loss in financial advice complaints but is specifically for those situations where the Responsible Entity (RE) of one or more Managed Investment Schemes (MISs) that the complainant invested in have subsequently become insolvent. The guidance only covers how AFCA determines and allocates loss and does not cover how AFCA approaches a dispute where the financial advice firm and the RE of a MIS are joined, nor where an adviser shifts from one advice firm to another, or multi-party complaints in other areas of AFCA’s jurisdiction es loss where a consumer brings a complaint against a financial advice firm.
The guidance includes a useful case study to put the advice into context.
Click here to read the full RegInsight on CUBE’s RegPlatform