CUBE RegNews: 15th May

Eva Dauberton

Eva Dauberton

News Editor

ESMA issues Guidelines on ESG and sustainability terms in funds' names 

The European Securities and Markets Authority (ESMA) has released the final report containing Guidelines on the use of ESG or sustainability-related terms in funds’ names. 

Some context 

This report follows a consultation paper published on 18 November 2022 requesting input on the provisions surrounding the use of ESG and sustainability-related terminology in funds’ names. 

ESMA received significant input from stakeholders and considering the feedback received, adjusted the Guidelines in several areas. ESMA has also monitored developments in the negotiations on the legislative review of the Alternative Investment Funds Directive (AIFMD), which has provided a direct legal mandate to ESMA to develop these Guidelines. 

Key takeaways 

The objective of the Guidelines is to ensure that investors are protected against unsubstantiated or exaggerated sustainability claims in fund names, and to provide asset managers with clear and measurable criteria to assess their ability to use ESG or sustainability-related terms in fund names. The Guidelines establish that to be able to use these terms, a minimum threshold of 80% of investments should be used to meet environmental, social characteristics, or sustainable investment objectives. The Guidelines also apply exclusion criteria for different terms used in fund names:  

  •  “Environmental”, “Impact” and “sustainability”-related terms: exclusions according to the rules applicable to Paris-aligned Benchmarks (PAB).  
  •  “Transition, “Social” and “Governance”-related terms: exclusions according to the rules applicable to Climate Transition Benchmarks (CTB).  

In cases of a combination of terms, use of transition, sustainability- and impact-related terms, and for funds designating an index as a reference benchmark, further criteria are specified in the Guidelines. The final report also summarises the responses ESMA received to its consultation paper and explains the approach taken to address the comments received. 

Next steps 

The Guidelines will be translated into all EU languages and will subsequently be published on ESMA’s website. They will start applying three months after that publication. Within two months of the publication, competent authorities to which these Guidelines apply must notify ESMA whether they comply, do not comply, but intend to comply, or do not comply and do not intend to comply with the Guidelines.  

The transitional period for funds existing before the application date will be six months after that date. Any new funds created after the application date should apply these Guidelines immediately in respect of those funds. 

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ESMA publishes consultation papers update 


The European Securities and Markets Authority (ESMA) has published an update on its consultation paper (CP) schedule for 2024. 


The update reports that ESMA has published seven CPs already in 2024 but has ambitious plans to publish up to a further 33 CPs during the year. Many of these focus on Central Securities Depositories Regulation, Markets in Crypto Assets Regulation, and European Market Infrastructure Regulation but towards the end of the year five CPs are currently scheduled to consider prospectus regulation under the Listing Act. 


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ECB announces successful DLT experiment for settlement in central bank money 

The European Central Bank (ECB) has announced that the Eurosystem has successfully completed its first experiment using new technologies for the settlement of wholesale transactions in central bank money. 

The experiment, conducted by Oesterreichische Nationalbank, involved tokenisation and simulated delivery-versus-payment (DvP) settlement of government bonds in a secondary market transaction using central bank money.  

Over the next six months, trials and experiments will be conducted on three proposed Eurosystem interoperability solutions for settling wholesale financial transactions recorded on Distributed Ledger Technology (DLT) platforms. Further trials and experiments are currently being prepared, covering various use cases such as DvP transactions in primary and secondary markets, securities lifecycle management, automated wholesale payments, and payment-versus-payment transactions.  

The results of the trials and experiments will be assessed using a set of key performance indicators in cooperation with the participating companies. 

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Wealth management firm settles SEC charges over hidden fees and unequal treatment of clients 

Investment advisor Hudson Valley Wealth Management Inc. and its founder Christopher Conover have agreed to pay more than $850,000 to settle charges brought by the Securities and Exchange Commission (SEC) for failing to disclose conflicts of interest and misleading clients. 

The SEC alleges that between 2017 and 2021, Hudson Valley and Conover recommended clients invest in films from a specific production company. However, Conover, through a separate company, received undisclosed payments of roughly $530,000 from the production company tied to these investments. The SEC says Hudson Valley initially failed to disclose these payments and later misled clients by claiming Conover earned the money as an executive producer on the films. 

The SEC also found that in May 2021, Hudson Valley honored a redemption request from one investor while leaving requests from other clients unfulfilled. This preferential treatment violated the firm's fiduciary duty to act in the best interests of all clients. 

The settlement includes civil penalties totaling $350,000, with Hudson Valley paying $200,000 and Conover $150,000. Conover must also disgorge hidden fees and pay prejudgment interest, amounting to over $600,000. Both parties agreed to cease-and-desist orders and censures. 

This case highlights the importance of transparency and fair treatment in the financial services industry. 

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FINRA proposes to amend the simplified arbitration rule 

The US Financial Industry Regulatory Authority (FINRA) has filed a proposed rule change with the US Securities and Exchange Commission (SEC) regarding FINRA Rule 12800 (Simplified Arbitration). 

Some context  

To assist with the discovery process in customer arbitrations, FINRA Dispute Resolution Services (DRS) provides a Discovery Guide that supplements the discovery rules outlined in the Customer Code and provides guidance to both parties and arbitrators. One aspect of the Discovery Guide is the Document Production Lists, which are described in FINRA Rule 12506. These lists outline the documents that should be exchanged between the parties without the need for arbitrator or DRS staff intervention.  

Key takeaways  

The proposed amendments seek to clarify and, in certain cases, modify the applicability of the Document Production Lists to simplified customer arbitrations administered under FINRA Rule 12800. 

Next steps  

Interested parties can comment on the rule change up to 21 days from publication in the Federal Register. 

Click here to read the full RegInsight on CUBE’s RegPlatform   

CFPB and US Federal Reserve issue final rule on Regulation CC threshold adjustments 

The Board of Governors of the Federal Reserve System (Board) and the Consumer Financial Protection Bureau (CFPB) have issued a final rule amending Regulation CC (part 229), which implements the Expedited Funds Availability Act (EFA Act), to adjust for inflation dollar amounts relating to availability of funds. 

Some context  

Subpart B of Regulation CC implements the requirements outlined in the EFA Act regarding the availability schedules within which banks must make funds available for withdrawal, exceptions to those schedules, disclosure of funds availability policies, and payment of interest. The EFA Act and subpart B of Regulation CC contain specified dollar amounts. 

Key takeaways 

As a result of the 21.8 percent increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) between July 2018 and July 2023, the final rule includes amended amounts for the following: 

  • The minimum amount of deposited funds that banks must make available for withdrawal by opening of business on the next day for certain check deposits (“minimum amount”). 
  • The amount a bank must make available when using the EFA Act’s permissive adjustment to the funds availability rules for withdrawals by cash or other means (“cash withdrawal amount”). 
  • The amount of funds deposited by certain checks in a new account that are subject to next-day availability (“new-account amount”). 
  • The threshold for using an exception to the funds availability schedules if the aggregate amount of checks on any one banking day exceeds the threshold amount (“large-deposit threshold”). 
  • The threshold for determining whether an account has been repeatedly overdrawn (“repeatedly overdrawn threshold”). 
  • The civil liability amounts to failing to comply with the EFA Act’s requirements. 

Next steps  

The changes are effective from 1 July 2025. 

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BIS invites private financial institutions to join Project Agorá 

The Bank for International Settlements (BIS) is inviting the private sector to join its exploration of how tokenisation can enhance the functioning of wholesale cross-border payments through Project Agorá. 

The call for participation will be open until 31 May 2024. 

Some context  

In its 2023 Annual Economic Report, BIS introduced a blueprint for a future monetary system that leverages the potential of tokenisation. The blueprint includes the integration of elements such as CBDCs and tokenised deposits into a new type of financial market infrastructure (FMI) called a “unified ledger.”   

To further develop this blueprint, a partnership, known as Project Agorá, brings together the Bank of France (representing the Eurosystem), Bank of Japan, Bank of Korea, Bank of Mexico, Swiss National Bank, Bank of England, Federal Reserve Bank of New York, and private financial firms.  

The primary focus of the partnership is to explore how tokenised commercial bank deposits can be seamlessly integrated with tokenised wholesale central bank money. This integration will take place within a public-private programmable core financial platform and aims to address existing inefficiencies in payment systems, particularly those related to cross-border transactions, which involve different legal, regulatory, and technical requirements.  

The partnership also aims to address the growing complexity associated with financial integrity controls, including measures against money laundering and customer verification. 

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ASIC announces focus areas and expanded program to support financial reporting and audit quality 

The Australian Securities and Investments Commission (ASIC) has outlined a series of initiatives aimed at improving the quality and integrity of financial reporting and auditing. The program covers listed companies, public interest entities, and, starting from 30 June, superannuation funds. Key areas of focus include asset values, provision adequacy, subsequent events, and disclosures. 

Increased scrutiny 

  • ASIC is expanding its financial reporting and audit surveillance program to include superannuation funds for the first time. 
  • Previously exempt large proprietary companies will also be subject to review. 
  • Focus areas for the 30 of June 2024 reporting period have been announced, with emphasis on areas requiring significant judgment and estimations (for example asset values and provisions). 

Auditor independence and quality 

  • ASIC will conduct a review of how auditors comply with ethical and independence standards. 
  • Initial observations from previous audit firm evaluations highlight concerns around risk management, governance, and compliance practices. 
  • ASIC encourages a more comprehensive approach to quality control and discourages "tick-box" compliance. 

Climate-related disclosures 

  • ASIC urges directors to prepare for mandatory climate reporting requirements proposed by the Australian government. 
  • Voluntary climate disclosures aligned with the Task Force on Climate-related Financial Disclosures (TCFD) are encouraged for entities with material climate risks. 


In addition to the above points, the work program also emphasises the requirement that all listed and unlisted public companies now need to include a “consolidated entity disclosure statement” in their financial reports for accounting periods beginning 1 July 2023. 


Click here to read the full RegInsight on CUBE’s RegPlatform