Greg Kilminster
Head of Product - Content
CFPB announces new rule creating registry of repeat offenders
The Consumer Financial Protection Bureau (CFPB) has confirmed a new regulation to establish a registry to detect and deter corporate offenders that have broken consumer laws and are subject to federal, state, or local government or court orders.
The initiative seeks to hold companies accountable for violations of consumer laws and to restrict repeat offences.
CFPB Director Rohit Chopra emphasised the need for this measure, stating, "Too often, financial firms treat penalties for illegal activity as the cost of doing business. The CFPB’s new rule will help law enforcement across the country detect and stop repeat offenders."
The registry will track companies subject to enforcement actions by federal, state, or local agencies. It will aid the CFPB and other regulatory bodies in spotting recidivist trends and taking necessary action. This tool is expected to benefit state attorneys general, regulators, investors, creditors, business partners, and the public in conducting due diligence.
Key requirements for nonbank companies under the new rule include:
- Registration: companies must report final agency and court orders related to consumer law violations to the CFPB.
- Executive attestation: a senior executive must confirm compliance with any relevant orders.
The rule will be implemented on a rolling basis, with adjustments made in response to public feedback to streamline the process for certain registrants. It comes into effect on 16 September 2024 with registration for covered nonbanks beginning on 16 October 2024.
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US regulator rewards whistleblower $4.5 million
The Commodity Futures Trading Commission (CFTC), has confirmed it gave more than $4.5 million to a whistleblower who provided detailed information that supported an enforcement action. The whistleblower's industry expertise and the quality of the information provided were highlighted by the CFTC, emphasising the significant contribution to the case.
"This award appropriately rewards a whistleblower who gave valuable information during multiple contacts with DOE staff," stated Ian McGinley, Director of Enforcement at the CFTC. He further acknowledged the vital role whistleblowers play in uncovering wrongdoing and expressed appreciation for their courage in coming forward.
The CFTC established its whistleblower program in 2010 under the Dodd-Frank Wall Street Reform and Consumer Protection Act. Since then, the program has awarded around $370 million, linked to enforcement actions resulting in $3.2 billion in financial penalties.
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ECB consults on outsourcing cloud services guide
The European Central Bank (ECB) has launched a public consultation regarding its new guide on outsourcing cloud services to cloud service providers. The primary goal of this guide is to offer a clear understanding of the legal requirements and expectations for supervised banks in this area. It provides a comprehensive outline of supervisory expectations, taking into consideration the risks identified during ongoing supervision and on-site inspections conducted by Joint Supervisory Teams. Additionally, the guide includes examples of effective practices observed during supervisory activities to support these expectations where relevant.
It is important to note that the guide is not legally binding and should be read alongside the Digital Operational Resilience Act (DORA) regulatory framework and the EBA Guidelines on outsourcing arrangements.
Key topics covered include the governance, availability and resilience of cloud services, ICT security, data confidentiality and integrity, exit strategy and termination rights, as well as oversight, monitoring, and internal audits.
Next steps
The public consultation period will conclude on 15 July 2024. Following this, the ECB will release the comments received during the consultation, along with a feedback statement and the final version of the guide.
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EBA and ESMA release discussion paper on IFD/IFR
The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) have released a discussion paper on potentially reviewing the prudential framework for investment firms. The EBA has also initiated a voluntary data collection exercise to assess the impact of potential changes outlined in the paper.
Some context
The Investment Firms Regulation (IFR) and the Investment Firms Directive (IFD) came into force in 2019, introducing significant changes to the prudential framework for MiFID investment firms. Both texts include review clauses requiring the European Commission (EC) to submit a report and, if necessary, a legislative proposal to the European Council and the European Parliament on the functioning of the new framework. Based on this, the EC submitted a call for advice (CfA) on 1 February 2023 to the EBA and ESMA, seeking advice on the investment firms’ prudential framework and related topics. It is important to note that the EBA believes the current framework generally meets the original objectives.
Key takeaways
The discussion paper touches upon a broad range of topics, including:
- Categorisation of investment firms, including the conditions to qualify as small and non-interconnected investment firms and the conditions to qualify as credit institutions.
- The adequacy of the IFR/IFD prudential requirements, including the scope of K-factors, on prudential consolidation and liquidity requirements.
- Interactions with the CRR/CRD, implications of the adoption of the banking package, especially on the application of the market risk framework, variable remuneration.
- Future-proofing the IFR/IFD regime, in particular with reference to the impact of cryptoassets on investment firms' activities and UCITS/AIF.
The discussion paper also summarises other elements, including reporting as well as references to topics that are already covered by other EBA publications, such as risks related to ESG factors and investment policy disclosure for investment firms.
Specific considerations on commodity and emission allowance dealers and on energy firms will be developed at a later stage.
Next steps
The consultation runs until 3 September 2024. Following the public consultation, the EBA and ESMA plan to publish the final report in response to the EC’s call for advice by December 2024.
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