Greg Kilminster
Head of Product - Content
Clare Cole, FCA Director of Market Oversight, discusses UK listing rules developments
In a speech at the Westminster Business Forum, Clare Cole, Director of Market Oversight at the Financial Conduct Authority (FCA), spoke about the regulator’s recent consultation paper on revisions to the UK’s listing rules (CP23/31). Cole noted that feedback to an earlier consultation paper, on which much of CP23/31 is based, indicated: “a need for a reset of the UK’s listing regime”.
In light of a number of businesses in recent months choosing the US to list rather than the UK, the proposed reforms to encourage a: “more diverse range of companies to list and grow on UK markets” are timely and, as Cole pointed out: “the most wide-ranging and consequential reforms to the UK’s capital markets in over three decades”.
Cole noted that the final rules should be published in the summer, with implementation date following shortly afterwards. She moved on to noting some of the snags with the current regime including:
- processes that increase issuer and shareholder costs;
- stifling of innovation; and
- little evidence of valuation premiums on the UK market despite additional standards.
Cole summarised CP23/31’s proposals, including
- Consolidating ‘Premium’ and ‘Standard’ listing segments for commercial companies.
- Simplifying the significant transactions regime.
- Streamlining the related party transaction regime.
- Removing sunset clauses on dual class shares.
The proposed changes, Cole noted, aim to put the “choice back to issuers, investors, and markets, rather than the regulator” adding that proposed changes to the UK’s prospectus and public offer infrastructure are also under way.
The deadline for proposals regarding sponsor competence as outlined in CP23/31 closes on 16 February 2024, and the consultation period for the remainder of our proposed reforms closes on 22 March 2024.
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EBA releases technical package for reporting framework 3.4
The European Banking Authority (EBA) has released a technical package for version 3.4 of its reporting framework.
The new framework introduces updated reporting requirements, including:
- Amendments to the ITS on supervisory reporting, which now includes reporting on Interest Rate Risk in the Banking Book (IRRBB), applicable from September 2024.
- Amendment to the ITS on disclosure and reporting on MREL and TLAC to reflect the prior permission regime and changes to the daisy chain framework applicable from June 2024.
The recently issued technical package provides standard specifications, including validation rules, Data Point Model (DPM), and XBRL taxonomies to support the changes to the reporting and disclosure technical standards on minimum requirement for own funds and eligible liabilities and total loss absorbing capacity (MREL/TLAC), along with some minor corrections to the technical package on IRRBB. The DPM Query Tool has also been updated to reflect the current release.
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HKMA updates firms on digitalisation of AML / CFT supervision
The Hong Kong Monetary Authority (HKMA) has updated All Authorised Institutions (AIs) on the progress of the AML/CFT Surveillance Capability Enhancement Project (AMLS Project). The letter shared with AIs also includes a report highlighting the HKMA’s achievements over the last four years.
In the update, the HKMA outlines its next steps, including implementing advanced analytics, such as natural language processing (NLP), to further improve its horizon scanning efforts. The HKMA also intends to collect more detailed data from AIs and ensure the necessary infrastructure is in place across the ecosystem.
To help AIs keep pace with these developments and to enhance their AML Regtech adoption, the HKMA:
- Will provide practical industry guidance on the latest supervisory insights.
- Introduce a new round of Regtech support, including further AMLabs, to assist AIs in deploying and optimising high-value Regtech solutions, especially in the fight against fraud.
- Roll out the next phase in its Macro Analytics capability.
The HKMA encourages AIs to review the report and evaluate the implications for their ML/TF risk management systems, especially with respect to data strategies in AML, ongoing efforts to combat mule account networks, and the adoption of Regtech solutions in their AML programs. The HKMA will continue to engage AIs individually and collectively on follow-up actions in line with the risk-based supervisory approach.
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US regulators launch review of outdated or unnecessary regulations
The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation (the agencies) have published in the Federal Register the first notice of requests for comment to reduce regulatory burden.
This exercise is carried out under The Economic Growth and Regulatory Paperwork Reduction Act of 1996. It mandates that the Federal Financial Institutions Examination Council and federal bank regulatory agencies review their regulations every ten years to identify outdated or unnecessary regulatory requirements for their supervised institutions.
To facilitate the review, the agencies have divided their regulations into twelve categories and are now asking for comments on three categories: Applications and Reporting, Powers and Activities, and International Operations. Interested parties can submit their comments on these rules by 6 May 2024.
Over the next two years, the agencies will publish three more Federal Register notices, each addressing one or more categories.
The agencies will also hold a series of outreach meetings to allow interested parties to comment on regulatory burden reduction directly to staff members and senior management of the agencies.
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ASIC issues interim stop order for defective PDSs
The Australian Securities and Investment Commission (ASIC) has issued interim stop orders on four product disclosure statements (PDSs) for units in a managed fund promoted by Keystone Asset Management Ltd (Keystone). ASIC has found that the PDSs may be defective and not worded and presented in a clear, concise, and effective manner.
ASIC’s assessment revealed that the PDSs:
- Contain misleading statements regarding Keystone’s legal role in unregistered schemes the fund has invested in.
- Do not adequately disclose the nature, quantum, and risks associated with the fund’s investments in unregistered funds relating to Keystone.
- Contain misleading statements about the level of diversification of the fund’s assets.
- Do not adequately disclose the performance fees that may apply.
- Use inappropriate asset classifications to describe the investments in the underlying funds and the investments within those funds.
- Give the impression that investors can make weekly withdrawals from the fund when redemptions are at the absolute discretion of Keystone and may be subject to a two-year redemption lock-up period.
- Do not adequately disclose the conflicts of interest associated with investments in funds related to Keystone or how Keystone managed those conflicts.
- Fail to disclose a change in the directors of Keystone or any information about the new director, their skills, experience, and role.
- Fail to disclose the fund’s investment approach to ethical considerations in a clear, concise, and effective manner.
ASIC has warned that it may issue final stop orders if Keystone fails to address the concerns in a timely manner. Keystone will have an opportunity to make submissions before a decision is made about any final stop orders.
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