Global Financial Regulatory Blog

ESMA Issues Consultation Paper on Fund Names to Tackle Greenwashing

Posted in Environmental, Social and Governance (ESG)

The European Securities and Markets Authority proposes to restrict ESG- and sustainability-related terms in the naming of funds, with an eye on the US and UK fund naming regimes.

By Paul Davies, Nicola Higgs, Anne Mainwaring, and Dianne Bell

On 18 November 2022, the European Securities and Markets Authority (ESMA) published its consultation paper on guidelines in relation to funds’ names, including quantitative thresholds that would need to be met before ESG- and sustainability-related terminology can be used in funds’ names. The proposed rules would set common standards for AIFMs[1] and UCITS[2] management companies when promoting AIFs and UCITS using an ESG- or sustainability-related name, including when these funds are set up as EuVECA, EuSEF, and ELTIFs[3] to facilitate marketing of funds throughout EU Member States. Continue Reading

UK Pre-Emption Group Issues Updated Statement of Principles

Posted in Capital Markets

The updated Statement of Principles will have an immediate impact on UK listed companies, providing increased flexibility to undertake larger non-pre-emptive capital raisings.

By James Inness, Anna Ngo, and Johannes Poon

On 4 November 2022, the Pre-Emption Group (PEG), a UK body which represents listed companies, investors and intermediaries, issued its updated Statement of Principles which implements certain recommendations of the UK Secondary Capital Raising Review. (For further details on the UK Secondary Capital Raising Review, please see this Latham blog post). Continue Reading

FCA Proposes New Labelling and Disclosure Rules to Combat Greenwashing in the UK

Posted in Environmental, Social and Governance (ESG)

The FCA hopes the proposals will protect consumer trust in ESG-related financial products and help consumers navigate the increasingly complex ESG-related financial market.

By Paul A. DaviesNicola HiggsMichael D. Green, James Bee, and Anne Mainwaring

On 25 October 2022, the UK’s Financial Conduct Authority (FCA) issued a consultation paper (the Consultation Paper) on Sustainability Disclosure Requirements (SDR) and investment labels.[1] According to the FCA, investment firms in the UK may intentionally or unintentionally be making exaggerated, misleading, or unsubstantiated sustainability-related claims about their products — also known as greenwashing — which has impacted consumer confidence in ESG-related or sustainable investment products in the UK. The proposals in the Consultation Paper seek to address this risk and restore consumer faith. Continue Reading

Reducing Socioeconomic Bias in the UK Financial Services Sector: Emerging Best Practice

Posted in Conduct of Business, Environmental, Social and Governance (ESG)

The Financial Services Skills Commission has issued an insight paper outlining how companies can collect and evaluate data on employees’ socioeconomic backgrounds.

By David Berman, Nicola Higgs, Rob Moulton, and Dianne Bell

Socioeconomic backgrounds of employees and socioeconomic diversity at senior levels across the UK financial services industry is beginning to feature more prominently in diversity and inclusion (D&I) discussions. Several government and industry taskforces and studies conducted on the issue of social mobility and class advantages/disadvantages have revealed striking impacts of this bias within the UK financial services sector. Not only is the sector significantly reliant on individuals from higher socioeconomic backgrounds at the leadership level, but the studies also indicate that employees from working class or lower socioeconomic backgrounds are held back in a number of ways (which may lead to their eventual departure from the sector).

  • Progression gap: Employees from working class or lower socioeconomic backgrounds progress 25% slower than peers despite no difference in job performance, and they find conforming to the dominant cultures “exhausting” and this impacts on their individual performances.
  • Pay gap: A class pay gap of £17,500 appears to exist in financial services (compared with £5,000 in the technology sector).
  • Opportunities to upskill talent: Findings suggest that individuals from lower socioeconomic backgrounds are less likely to sign up for training opportunities.

From a regulatory perspective, this lack of diversity at the senior level impacts the culture of a firm, raising concerns around, for example, groupthink and its impacts on effective decision-making.

Continue Reading

CFTC Mandates Clearing for Interest Rate Swaps on IBOR Alternatives

Posted in Benchmark Regulations

A new rule removes the requirement to clear IBOR-based swaps and extends mandatory clearing to swaps on IBOR alternatives.

By Yvette D. Valdez and Adam Bruce Fovent

On August 12, 2022, the US Commodity Futures Trading Commission (CFTC) voted to amend its mandatory clearing requirements for interest rate swaps (the Rule). The vote furthers the CFTC’s  efforts in the global transition away from inter-bank offered rates (IBORs) towards alternative reference rates. Continue Reading

Recap on Reforming the UK Capital Markets

Posted in Capital Markets

A reminder of the ongoing reforms to implement recommendations from the Lord Hill and Kalifa Reviews.

By James Inness, Anna Ngo, and Johannes Poon

The outcome of the UK Secondary Capital Raising Review, launched on 12 October 2021 to improve further capital raising processes for UK publicly traded companies, was published by HM Treasury on 19 July 2022. (For further details, please see this Latham blog post).

Below is a recap on the other key developments on reforming the UK capital markets following the Lord Hill and Kalifa Reviews. Continue Reading

Major Reforms to UK Secondary Capital Raising Processes

Posted in Capital Markets

The landmark UK Secondary Capital Raising Review Report takes a holistic approach in making bold and comprehensive recommendations to improve the UK secondary capital raising processes and ecosystem.

By James Inness, Anna Ngo, Ryan Benedict, and Johannes Poon

On 19 July 2022, HM Treasury published the UK Secondary Capital Raising Review Report (the Report) that sets out a series of recommendations to improve further capital raising processes for publicly listed companies in the UK. Continue Reading

European Central Bank Announces Plans to “Green” the Debt Capital Markets

Posted in Environmental, Social and Governance (ESG)

The policy change integrates climate change considerations for the first time into the ECB’s quantitative easing and repo facilities.

By Roberto Reyes Gaskin, Edward Kempson, and Peter Neuböck

On July 4, 2022, the European Central Bank (ECB) announced that it would integrate climate change considerations into Eurosystem monetary policy through changes to its corporate bond asset purchase program and its credit operations, to be implemented from October 2022 (the 2022 Announcement). The initial disclosure regarding this policy shift was tantalizingly brief, but nonetheless the 2022 Announcement has a number of implications for sustainable finance, the European investment grade debt market and, by extension, the entire European debt capital markets. Continue Reading

SEC Adopts Amendments to Form 13F

Posted in Securities Regulation

Changes include switching from paper to electronic filing requirement for confidential treatment requests.

By Stephen P. Wink, Naim Culhaci, Jackie Rugart and Matthew Lee

On June 23, 2022, the Securities and Exchange Commission (SEC) adopted certain amendments to Form 13F (the Adopting Release) that will become effective at the beginning of 2023. Continue Reading

CFTC Issues Request for Information on Climate-Related Financial Risk

Posted in Derivatives, Environmental, Social and Governance (ESG)

The agency will use the information to take further steps to address climate risks in the commodity derivatives markets.

By Jean-Philippe Brisson, Yvette Valdez, Douglas Yatter, Joshua Bledsoe, Michael Dreibelbis, Qingyi Pan, and Deric Behar

On June 2, 2022, the Commodity Futures Trading Commission (CFTC) issued a Request for Information (RFI) to inform its understanding and oversight of climate-related financial risk relevant to the derivatives markets and underlying commodities market. The CFTC is seeking public feedback on all aspects of climate-related financial risk that “may pertain to the derivatives markets, underlying commodities markets, registered entities, registrants, and other related market participants.”

According to the RFI, public response may be used to inform new or amended guidance, interpretations, policy statements, regulations, or other potential CFTC action. The information will also inform CFTC’s response to the recommendations of the Financial Stability Oversight Council 2021 Report on Climate Related Financial Risk (see Latham’s blog post on the FSOC Report) and inform the work of the CFTC’s Climate Risk Unit (CRU) (see Latham’s blog post on the CRU). Comments on the RFI were originally due by August 8, 2022. On July 18, 2022, the CFTC extended the deadline by an additional 60 days; comments are therefore due by October 7, 2022.  Continue Reading

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