Greg Kilminster
Head of Product - Content
Australia seeks feedback on AI consumer protection framework
The Australian Treasury has issued a discussion paper examining the implications of artificial intelligence (AI) for consumer protection, inviting comments until 12 November 2024. The paper highlights the rapid evolution of AI technologies and their potential to enhance productivity and economic activities across various sectors.
AI technologies, including chatbots and virtual assistants, are already providing significant benefits to Australian consumers and businesses. However, as demand for AI-enabled products and services grows, so too do the associated risks. The discussion paper emphasises the need to evaluate how Australia’s existing consumer protection framework, specifically the Australian Consumer Law (ACL), can effectively address these AI-related challenges.
The ACL, part of the Competition and Consumer Act 2010, is designed to regulate business practices in a technology-neutral manner. It employs a combination of general principles and specific provisions to govern behaviour across diverse industries. The discussion paper seeks to explore how well the ACL is equipped to handle the complexities introduced by AI-enabled goods and services.
Key areas for stakeholder input include:
- The adaptability of the ACL to manage consumer law risks associated with AI.
- The relevance of established ACL principles to AI technologies.
- Available remedies for consumers engaging with AI products and services under the ACL.
- Liability allocation among manufacturers and suppliers of AI-enabled goods.
The review is part of the government’s broader efforts to clarify and strengthen laws concerning AI-related risks. It will also inform future policies aimed at establishing safeguards for AI use, particularly in high-risk contexts.
Click here to read the full RegInsight on CUBE's RegPlatform
ESMA highlights key achievements for the past year
The European Securities and Markets Authority (ESMA) has released an overview of its key activities from October 2023 to September 2024, highlighting initiatives to enhance EU capital markets, promote financial stability, and bolster sustainable finance practices. ESMA’s latest deliverables reflect its strategic priorities in areas like supervisory convergence, investor protection, and technological innovation. The key highlights from the document are as follows.
Strengthening EU capital markets
- May 2024: ESMA released Position Paper with 20 recommendations to enhance EU capital markets.
- Focus: Improve access for citizens/companies and modernise the regulatory framework.
- Key proposals: Create basic long-term investment products and reduce market infrastructure barriers.
Tighter controls on ESG fund naming
- May 2024: ESMA issued Guidelines on using ESG terms in fund names to prevent greenwashing.
- Requirements: 80% of fund investments must meet environmental/social objectives.
- Goal: Protect investors and set clear standards for fund managers.
CCP default management drill
- November 2023: ESMA led a global fire drill for EU Central Counterparties (CCPs) to assess default management.
- Included: EU and non-EU authorities; identified best practices and improvement areas.
Market stability and supervisory convergence
- October 2023: ESMA published a Supervisory Briefing on circuit breakers to harmonise practices.
- August 2024: Report highlighted risks due to interest rates and geopolitical issues.
- Role: ESMA central authority for Credit Rating Agencies (CRAs), Trade Repositorys (TRs), and promotes convergence in national supervision.
Focus on retail investors and sustainable finance
- December 2023: Annual report noted retail investment costs have generally declined.
- Guidance on AI in investment services emphasised MiFID II compliance.
- July 2024: Report on sustainable finance recommended the EU Taxonomy as a reference.
Addressing technological innovation and cybersecurity
- October 2023: ESMA issued guidance on Markets in Crypto-Assets Regulation (MiCA) transition.
- November 2023: Cyber resilience set as a new supervisory priority under Digital Operational Resilience Act (DORA).
Updated stress tests for money market funds
- December 2023: New guidelines include stress test scenarios for asset sales under adverse conditions.
- Aim: Help funds manage risks in a low-growth, high-inflation environment.
Long-term investment fund standards
- December 2023: Revised standards for European Long-Term Investment Funds’ focus on liquidity and redemption terms.
- May 2024: Minimal amendments recommended for alignment with capital market objectives.
Enhancing liquidity risk management for AIFs and UCITS
- Mid-2024: Consultations on liquidity management for AIFMD and UCITS to align with global standards.
- Goal: Mitigate systemic risks in EU investment funds.
Focus on climate-related and macroeconomic disclosures
- October 2023: Issuer disclosures prioritise climate/environmental reporting for transparency.
- Scope: Reflects broader concerns over financial stability.
Continued oversight of Euribor and ESG benchmarks
- December 2023: Supervisory focus on ESG requirements for climate-related benchmarks.
- Objective: Build trust in sustainable investment products.
Credit rating agency reforms and ESG integration
- December 2023: Report on CRAs' conflict management; April 2024: ESG factors proposed in credit ratings.
Expansion of third-country CCP recognition
- Recognised PT Kliring (Indonesia) and CDS Clearing (Canada) as Tier 1 CCPs under European Market Infrastructure Regulation (EMIR) in 2023/2024.
- Established cooperation agreements with local regulators for alignment with EU standards.
Tiered CCP supervision and EU stress tests
- Tier 2 CCP supervision includes LCH Ltd and ICE Clear Europe Ltd (UK-based).
- July 2024: EU-wide Central Counterparty (clearing house) (CCP) stress test confirmed CCPs' resilience to severe scenarios.
Data reporting service providers under scrutiny
- October 2023: Annual assessment revealed two Data Reporting Service Providers (DRSPs) could fall under direct ESMA supervision by mid-2025.
- Focus on cybersecurity and operational resilience.
Trade repository reforms and EMIR refit
- April 2024: EMIR refit launch focused on TR operational resilience.
- March 2024: Updated guidelines to standardise TR data reporting.
Market integrity and post-trade transparency
- January 2024: Common supervisory action on algorithmic trading to ensure proper pre-trade controls.
- MiFIR transition and T+1 settlement cycle reviewed for market transparency.
Securitisation repositories and Central Securities Depositories Regulation (CSDR) adjustments
- December 2023: Consultations on streamlining securitisation disclosure templates.
- July 2024: CSDR Refit consultations on settlement discipline and standards.
Click here to read the full RegInsight on CUBE's RegPlatform
Norway announces new sustainability reporting rules for companies
The Norwegian Ministry of Finance has confirmed that new sustainability reporting requirements under the Accounting Act will come into effect on 1 November. Following the decision by the King in Council, the rules will be implemented gradually, beginning with large-listed enterprises for the 2024 fiscal year, and expanding to include around 3,000 additional companies eligible for simplified reporting requirements.
Under these amendments, approximately 1,200 large and listed firms will be required to comply with updated sustainability reporting standards as per the Accounting Act and the Securities Trading Act. Small enterprises will benefit from new size definitions and simplified reporting obligations, potentially saving them from preparing annual reports and cash-flow statements.
The Ministry has introduced transitional rules for these changes, aligning with the EU’s Corporate Sustainability Reporting Directive (CSRD). While larger companies will need to start reporting from 2024, smaller financial firms and captive reinsurance undertakings will follow from 2025. The electronic reporting format requirement will be delayed until fiscal year 2025, awaiting finalisation of the EU’s digital reporting standards.
The Ministry also intends to update related regulations, including audit and accounting laws, in consultation with the Financial Supervisory Authority.
Click here to read the full RegInsight on CUBE's RegPlaftorm
SFC announces new Chair
The Securities and Futures Commission (SFC) has appointed Dr Kelvin Wong Tin-yau as Chairman, effective 20 October 2024, following the departure of Tim Lui. Mr Lui, who led the SFC through six challenging years, including the impacts of COVID-19 and global economic tensions, praised Dr Wong’s experience in market regulation.
“Kelvin has a wealth of knowledge in the development and regulation of capital markets,” said Mr Lui. He expressed confidence that Dr Wong’s leadership will benefit the SFC’s ongoing mission to maintain the quality and integrity of Hong Kong’s financial markets.
Dr Wong, who previously served as an SFC Non-Executive Director, shared his commitment to the role. “I look forward to working cohesively with the Board and management to foster a sustainable and vibrant capital market that protects investors’ interests,” he stated.
SFC CEO Julia Leung also welcomed Dr Wong, expressing gratitude to Mr Lui for his leadership. “We now have a set of clear strategic priorities, and I look forward to working closely with Kelvin to continue safeguarding the integrity of our markets,” said Ms Leung.
Click here to read the full RegInsight on CUBE's RegPlaftorm
ESMA sets out timeline for sustainable finance regulation
The European Securities and Markets Authority (ESMA) has outlined a detailed timeline for implementing several major sustainable finance regulations, aimed at enhancing transparency and promoting sustainable investment across the EU. The timeline, which extends to 2029, highlights key compliance deadlines and new reporting requirements for financial and non-financial entities under the Sustainable Finance Disclosure Regulation (SFDR), the Taxonomy Regulation (TR), the Corporate Sustainability Reporting Directive (CSRD), and other relevant frameworks.
Early implementation: SFDR and Taxonomy Regulation
As of January 2023, non-financial entities have begun disclosing key performance indicators (KPIs) on climate-related taxonomy alignment under the Taxonomy Regulation. From January 2024, financial institutions must also disclose KPIs focusing on climate-related activities. By January 2025, the scope of reporting will expand, with financial and non-financial entities required to disclose additional environmental objectives, such as biodiversity protection and pollution prevention.
Transition to corporate sustainability reporting
January 2025 marks a significant date, as entities previously covered under the Non-Financial Reporting Directive (NFRD) will begin reporting under the new European Sustainability Reporting Standards (ESRS). This transition aims to standardise sustainability disclosures across the EU and will extend to larger entities not previously covered by NFRD by 2026. Notably, smaller listed entities and non-complex financial institutions can opt to report by 2027, with mandatory reporting for these groups starting in 2029.
EU Green Bond Regulation and benchmark transition
Another major milestone is the phased implementation of the EU Green Bond Regulation. A consultation on remaining technical standards is expected by mid-2025, as the EU aims to establish a standardised green bond market. Additionally, the transitional provisions for third-country benchmarks under the Benchmark Regulation (BMR) will expire at the end of 2025.
Evolving guidelines and voluntary disclosures
Throughout 2025 and 2026, ESMA will continue to refine guidelines and reporting requirements under the SFDR. By mid-2025, a review of Level 1 SFDR provisions will address the effectiveness of existing disclosures. By September 2026, all financial entities must align with the latest disclosure templates, as outlined in Annex I of the SFDR Delegated Regulation.
Future obligations for third-country firms
From 2029, non-EU companies with significant operations in the EU will need to adhere to ESRS under a third-country regime, aligning international reporting with the EU’s sustainable finance framework. The timeline underscores ESMA’s focus on integrating sustainability considerations within the regulatory landscape, enhancing transparency and investor confidence in sustainable finance across the EU.
As the timeline progresses, ESMA's continued guidance will be critical for financial and non-financial institutions alike, as they navigate the evolving regulatory landscape in sustainable finance.
Click here to read the full RegInsight on CUBE's RegPlatform