Greg Kilminster
Head of Product - Content
ICO imposes £50,000 fine on financial services firm for spam messages
LADH Limited, a financial services company, has been fined £50,000 by the Information Commissioner’s Office (ICO) for violating the Privacy and Electronic Communications Regulations (PECR) by sending over 31,000 spam text messages without valid consent over six weeks from March to April 2022.
Despite LADH Limited’s claim that it had received a verbal assurance that the data it had received from a third party contained details of people who had consented to being contacted, it did not have any written confirmation of that consent. Furthermore, most messages did not allow recipients to opt-out, which is also against the law.
Andy Curry, Head of Investigations of the ICO, stated:
“All organisations using direct marketing messages are responsible for ensuring they have valid consent to contact every recipient. Relying on third-party claims of consent, without undertaking checks, leaves organisations open to our enforcement action if it turns out that people have, in actual fact, not given valid consent to be contacted.”
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Industrial and Commercial Bank of China faces penalties totalling $32.4 million for regulatory violations
In a joint action, the Federal Reserve Board (Board) and the New York Department of Financial Services (NYDFS) have fined Industrial and Commercial Bank of China Ltd. (ICBC), including its New York Branch (the New York Branch) (together, the Bank) approximately $32.4 million.
According to the notice, the Bank:
- Failed to maintain an effective and compliant anti-money laundering program at the New York Branch, violating NYCRR § 116.2.
- Failed to maintain appropriate books, accounts, and records at the New York Branch, violating New York Banking Law § 200-c.
The New York Branch specifically:
- Failed to submit a report to the Superintendent immediately upon discovering the occurrence of “embezzlement, misapplication, larceny, forgery, fraud, dishonesty, making of false entries and omission of true entries, or other misconduct,” in violation of NYCRR § 300.1.
- Shared confidential supervisory information, violating New York Banking Law § 36(10) and NYCRR § 7.2.
The NYDFS has imposed a fine of $30 million, while the Board has imposed a fine of around $2.4 million for the improper use and disclosure of CSI. As part of the penalty, the Board has further mandated the submission of a written plan to improve the branch’s internal controls and compliance functions regarding the identification, monitoring, and control of CSI.
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AMF unveils its action plan and supervisory priorities for 2024
The French Financial Markets Authority (AMF) has recently released its action plan and supervisory priorities for 2024. The plan includes a number of objectives aimed at improving the attractiveness of the Paris financial centre while also implementing a rigorous supervision program.
– Action plan
The key elements covered are:
ELTIF regulation: strict application of legislation, without gold-plating
Capital Markets Union: driving proposals to relaunch
Investor protection: focus on developing a financial education strategy for new investors and extend oversight to influencers and social networks.
Sustainable finance: lead transformation programs towards sustainable finance and help firms prepare their first sustainability reports under the Corporate Sustainability Reporting Directive (CSRD)
Markets in Crypto-Assets Regulation (MICA): roll out a plan for the transition towards the more stringent authorisation framework for digital asset service providers (DASPs) and contribute to discussions on the regulation of global platforms (MiCA2).
– Supervisory priorities
The key elements covered are:
Asset management companies:
- Investment restrictions and related claims and compensations
- Employees’ qualifications and knowledge.
- Voting and shareholder engagement policies in line with ESG approach.
- Governance and the role of senior management.
- Valuation of non-listed assets and real estate assets.
Intermediaries and market infrastructures:
- Quality of MiFIR, EMIR, SFTR, and CSDR reporting data.
- Involvement of the compliance function in processes relating to employee conduct.
- Market abuses prevention
- Governance and control of outsourced activities.
Investment services providers:
- Investors Sustainability preferences
- Innovative digital offers, cross-border offers, offers on complex instruments
- Investment advice delivered on an automated basis to retail clients
- Costs and charges
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Michael J Hsu speech on liquidity risk
In a speech at Columbia Law School, acting Comptroller of the Currency Michael J Hsu addressed the issue of liquidity risk.
Noting the changing characteristics of bank runs, particularly in light of the large bank failures from the previous year, Hsu began by considering the failures of Silicon Valley Bank (SVB) and Signature Bank, highlighting three underappreciated vulnerabilities:
- Uninsured deposits: he emphasised the rapid withdrawal of uninsured deposits and the substantial growth in uninsured domestic deposits since 2009, necessitating a reevaluation of risk management practices.
- Monetising assets: he stressed the need for banks not only to hold liquid assets but also to have the operational capacity to monetise them quickly during liquidity stress.
- Contagion risk: he discussed the risk of contagion, particularly the “guilt by association” phenomenon, where uncertainty about similar risk profiles contributes to systemic threats.
Recognising the speed and severity
The speech addressed the speed and severity of certain outflows from the 2023 crisis, citing the example of SVB experiencing a $40 billion outflow in a single day. Hsu advocated for prudently categorising deposits and applying stress outflow rates, emphasising the importance of better classifying higher-risk deposits.
Ensuring the ability to monetise
Hsu outlined the faster pace of bank runs and the challenges banks face in monetising assets during acute stress scenarios. He proposes a solution to the hurdles (stigma and operational issues) that the current discount window scheme has, which involves giving banks credit for discount window borrowing capacity to cover ultra-short-term outflows, aiming to de-stigmatise discount window usage. He noted: “I believe a new targeted regulatory requirement for midsize and large banks to have sufficient liquidity to cover stress outflows over a five-day period warrants serious consideration” adding “the adoption of a new, well-crafted regulatory requirement could help de-stigmatise the discount window while maintaining the anti-bailout conservatism of existing liquidity regulations”.
Limiting guilt by association
Hsu said discussing contagion risk from the failures of SVB and Signature was helpful as it differed from previous events: the contagion risk from the failures of SVB and Signature was not due to interconnectedness, but rather a fear that uninsured depositors at any bank could be at risk. This led to there being guilt by association casting doubt on the uninsured deposits held by a wide swath of banks. Hsu suggested that the long-term solution to this issue is to credibly contain the scope of association.
Preparing for an even faster future
Looking ahead, Hsu addressed the future challenges associated with faster payments and tokenisation, and emphasised the need for enhanced liquidity risk management capabilities to cope with the evolving banking landscape.
Hsu concluded by reiterating the changing characteristics of bank runs and the necessity for banks and regulators to adapt. He proposes a targeted regulatory approach to address the lessons learned from SVB and Signature failures, highlighting the importance of collaboration among interagency peers, banks, academics, and other stakeholders.
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ASIC orders Penta Capital to pay $AUD 53,280
Penta Capital Pty Ltd, a company based in Queensland (Asutralia), has agreed to pay $AUD 53,280 to comply with four infringement notices issued by the Australian Securities & Investments Commission (ASIC).
According to ASIC, Penta Capital made misleading statements on its website, including claims to have received sponsorship or approval, or being affiliated with industry bodies.
ASIC reminds firms that Regulatory Guide 234 (RG 234) provides general guidance to the financial services industry on misleading promotional material.
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