Greg Kilminster
Head of Product - Content
UK parliamentary committee calls for a regulator of regulators
A report from the UK Parliamentary Industry and Regulators Committee has raised significant concerns over the role of UK regulators, their ability to operate with genuine independence from Government, and how they are held to account.
There are around 90 regulators operating in the UK, and the report considered a number of aspects of each including duties and objectives, independence, resources and skills, accountability and transparency and engagement
The Committee’s findings highlight several key issues within regulatory bodies:
- Some regulators face an overwhelming number of objectives without clear guidance on prioritisation.
- Regulatory and political matters have become intertwined, leading to strategic guidance from the government avoiding decisive actions.
- Concerns exist regarding the appointment of regulatory leaders based on political allegiance rather than expertise.
- Disparities in funding sources create challenges, with some regulators reliant on government funding, potentially impacting their independence.
- Recruitment and retention difficulties persist, particularly in specialised areas, due to higher private sector salaries.
- Parliamentary oversight of regulators is reactive and inconsistent, lacking systematic and routine evaluation.
The report concludes: “To achieve more effective scrutiny, and improved regulatory performance, further resources and a new ‘Office for Regulatory Performance’ are needed.” The committee makes several recommendations which it calls on the government to adopt. Lord Hollick, chair of the inquiry added: “If the integrity and legitimacy of the UK’s regulatory system is to be preserved, the findings and recommendations in our report must be addressed by the Government, regulators and Parliament.”
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OCC fines bank $65 million for risk and control failures
The Office of the Comptroller of the Currency (OCC)has fined City National Bank, Los Angeles $65 million for systemic deficiencies related to the Bank’s operational, compliance, investment management, and strategic risk management and internal controls.
The consent order issued by the OCC finds that City National Bank engaged in a spate of no-compliant activities including unsafe or unsound practices with respect to its: operational risk management, including internal controls; compliance risk management, including Bank Secrecy Act and anti-money laundering, and fair lending; strategic risk management; and investment management practices.
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SEC adopts Form PF amendments
The Securities and Exchange Commission and the Commodity Futures Trading Commission (CFTC) have jointly adopted amendments to Form PF, the confidential reporting form for certain SEC-registered investment advisers to private funds.
Form PF provides the Commissions and the Financial Stability Oversight Council (FSOC) with important, confidential information about the basic operations and strategies of private funds and their advisers and has helped to establish a baseline picture of the private fund industry for use in assessing systemic risk.
The amendments will:
- Enhance reporting by large hedge fund advisers on qualifying hedge funds by improving reporting on qualifying hedge funds with a net asset value of at least $500 million.
- Enhance reporting on basic information about advisers and the private funds they advise, requiring advisers to report additional information about themselves and their private funds to improve data quality, comparability, and error reduction.
- Enhance reporting concerning hedge funds, requiring more detailed reporting on hedge fund investment strategies, counterparty exposures, and trading mechanisms.
- Amend how advisers report complex structures, requiring separate reporting for each component fund of master-feeder and parallel fund structures and requiring identification of trading vehicles used by reporting funds.
- Remove the aggregate reporting for large hedge fund advisers.
The amendments come into effect – including the compliance date – 12 months following publication in the Federal Register. Notably, commissioners Pham and Uyeda objected to the amendments believing that “(1) it is not necessary for the CFTC to be provided Form PF data for non-CFTC registrants; (2) broader distribution of all Form PF data increases its vulnerability to cybersecurity threats; and (3) the Memorandum of Understanding’s [between the SEC and the CFTC which will grant the CFTC unrestricted access to all data submitted by all Form PF filers] provisions for handling of confidential Form PF data are inadequate given the sensitivity of that information. ”
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