Global Financial Regulatory Blog

SEC Proposes to Expand the Definition of an “Exchange”

Posted in Securities Regulation

Updated on May 9, 2022.

The proposal would require certain systems and platforms currently not subject to any registration requirements to register as broker-dealers and ATSs.

By Stephen P. Wink, Marlon Q. Paz, Naim Culhaci, and Deric Behar

On January 26, 2022, the Securities and Exchange Commission (SEC) issued a set of proposed amendments (Proposal) regarding the regulation of alternative trading systems (ATSs) that would, among other things, substantially expand the definition of an “exchange” as interpreted by Rule 3b-16 under the Securities Exchange Act of 1934 (the Exchange Act) to capture “Communication Protocol Systems.” Specifically, Rule 3b-16’s interpretation of the “exchange” definition would be broadened in several meaningful aspects, including by removing the current requirement that a platform needs to bring together “firm orders” to be deemed an “exchange.” Continue Reading

ESMA Consults on ESG-Related Amendments to Its Suitability Guidelines

Posted in Environmental, Social and Governance (ESG)

Proposed changes seek to reflect the integration of sustainability considerations into MiFID II.

By Nicola Higgs, Anne Mainwaring, Dianne Bell, and Charlotte Collins

ESMA is consulting on updates to its Guidelines on the MiFID II suitability requirements, in light of upcoming changes that will embed sustainability considerations into the MiFID II framework. These changes will require firms to consider sustainability preferences as part of the suitability process when providing advisory and portfolio management services. ESMA is considering how it needs to update its Guidelines to reflect these new requirements, in order to assist firms in understanding what is expected of them in an area potentially difficult to navigate given that many clients may have limited understanding of sustainability factors and ESG or sustainability-related products, and that the availability of such products is still reasonably limited. Continue Reading

Hong Kong’s New Crypto Regulatory Framework to Facilitate Greater Institutional Participation

Posted in Fintech and Cryptocurrency

Regulators released comprehensive guidance to banks, intermediaries, and insurers on virtual asset-related activities.

By Simon Hawkins and Adrian Fong

On 28 January 2022, Hong Kong’s principal financial services regulators issued much-anticipated guidance to banks, securities firms, and insurers looking to undertake activities related to virtual assets (VAs). In particular:

  • The Hong Kong Monetary Authority (HKMA) issued a circular to banks on “Regulatory approaches to Authorized Institutions’ interface with Virtual Assets and Virtual Asset Service Providers” (HKMA Circular).
  • The HKMA and the Securities and Futures Commission (SFC) issued a joint circular to banks and SFC-licensed intermediaries on “Intermediaries’ Virtual Asset-Related Activities” (Joint Circular).
  • The Insurance Authority (IA) issued a circular to insurers on “Regulatory Approaches of the Insurance Authority in Relation to Virtual Assets and Virtual Asset Service Providers” (IA Circular).

This Client Alert analyses how, with the guidance, financial services industry participants can move towards engaging in VA proprietary investments and client services. The guidance will also impact existing crypto firms, as the regulators stressed that financial services intermediaries are required to use SFC-licensed VA trading platforms. For those not already licensed or seeking to be licensed, this stipulation may serve as the impetus to obtain a license in order to serve Hong Kong customers.

Top 5 Focus Areas for UK Equity Capital Markets in 2022

Posted in Markets and Investments, Regulatory Reform, Uncategorized

Broad reform to listing regimes, growing ESG scrutiny, and increasing retail participation in fundraisings are among the areas to watch.

By Chris Horton, James Inness, Anna Ngo, and Johannes Poon

Last year was memorable for UK equity capital markets (ECM). The IPO market was at its busiest since 2014, and we encountered innovative deal structures such as the emergence of special purpose acquisition companies (SPACs) in the UK, direct listings, and growing retail participation in fundraisings. In addition, the government and regulators embraced a radical and dynamic reform agenda, bolstering prospects for UK ECM.

Many of these trends are expected to continue in 2022. This Client Alert examines the top five legal and regulatory issues that will most likely impact ECM and listed companies and provides a timeline for the key regulatory developments. Continue Reading

UK to Regulate Cryptoasset Promotions

Posted in Fintech and Cryptocurrency

HM Treasury has confirmed that it will bring certain unregulated cryptoassets within scope of the financial promotions regime.

By Stuart Davis, Rob Moulton, and Charlotte Collins

On 18 January 2022, the UK government confirmed its intention to bring the promotion of certain cryptoassets into scope of regulation. HM Treasury has been considering for some time whether, and if so how, to bring unregulated cryptoassets within the regulatory perimeter, having originally consulted on these proposals in 2020. Continue Reading

French and Dutch Regulators Propose Tighter Supervision of Cross-Border Retail Activities

Posted in Conduct of Business, Market Misconduct

The regulators suggest improvements to the supervision of firms passporting retail products and services in the EU.

By Rob Moulton, Thomas Vogel, and Charlotte Collins

The French and Dutch financial services regulators (the AFM and the AMF) have published a joint position paper on strengthening conduct supervision of cross-border retail financial services.

The regulators are concerned that the current split of responsibilities between home and host state regulators in relation to cross-border retail business needs to be adjusted to ensure better consumer protection. While the paper does not represent agreed EU policy at this stage, it gives a clear picture of the regulators’ views in these prominent jurisdictions, and could well lead to changes to the supervisory approach in the future. Continue Reading

China Securities Regulatory Commission Proposes Major Expansion of Shanghai London Stock Connect Programme

Posted in Markets and Investments

The expansion would include Shenzhen Stock Exchange and potentially European stock exchanges, and would permit overseas issuers to raise capital in China through CDR listings.

By Chris Horton, James Inness, Anna Ngo, Terris Tang, Cathy Yeung, and Johannes Poon

On 17 December 2021, the China Securities Regulatory Commission (CSRC) launched a consultation that proposes a major expansion to the scope of the Shanghai London Stock Connect programme. The Stock Connect currently allows eligible companies listed on the Shanghai Stock Exchange or the London Stock Exchange to list depositary receipts on the other exchange that can be traded under local rules in the local time zone. Continue Reading

SEC Proposes Stricter Requirements for the Rule 10b5-1 Affirmative Defense

Posted in Individual Accountability and Governance, Securities Regulation

The Proposal would have a significant impact on current practices surrounding the use of Rule 10b5-1 plans by public companies and insiders.

By Joel H. Trotter, Stephen P. Wink, Naim Culhaci, and Deric Behar

On December 15, 2021, the Securities and Exchange Commission (SEC) issued a set of proposed amendments (the Proposal) regarding the adoption of trading plans that qualify for the affirmative defense against liability for trading on the basis of material non-public information (MNPI) under Rule 10b5-1 under the Securities Exchange Act of 1934 (the Exchange Act). These proposed changes would impose additional requirements on public companies and insiders.

Significantly, the Proposal would require a waiting period or “cooling off period” of 120 days for the director or officer of a company (or 30 days for the company itself) between the adoption of a plan or an amendment to the plan and the effecting of trades under such plan. Moreover, the Proposal would prohibit the use of multiple overlapping plans. The Proposal would also introduce additional disclosure requirements regarding 10b5-1 plans and the charitable gifting of securities by insiders. In explaining its rationale for issuing the Proposal, the SEC stated that it aims “to address apparent loopholes in the [current] rule that allow corporate insiders to unfairly exploit informational asymmetries.”

This post provides a high-level summary of some of the changes that are being proposed. Continue Reading

10 Key Focus Areas for UK-Regulated Financial Services Firms in 2022

Posted in Conduct of Business, Environmental, Social and Governance (ESG), Financial Crime, Regulatory Reform

This annual publication outlines some of the primary focus areas in 2022 for UK-regulated financial services firms. There has been a marked shift away from dealing with immediate post-Brexit priorities to more fundamental consideration of the direction of travel of UK financial services regulation, and this is borne out across many of the topics covered in this year’s publication.

While monitoring regulatory divergence between the UK and the EU will be a key theme for 2022, other familiar topics will play an important part in the regulators’ agendas, such as diversity and inclusion, financial crime, and operational resilience. Further, relatively new topics such as climate change and environmental, social, and governance (ESG) issues are increasingly significant for financial services firms, and are likely to remain so for some time.

We hope you find this publication useful as a checklist to benchmark against your own “to do” list.

Read the publication here.

SEC Staff Issues Key Considerations on LIBOR Transition

Posted in Benchmark Regulations

As a major LIBOR transition milestone approaches, a Staff Statement provides key considerations for market participants regarding their obligations.

By Laura N. Ferrell, Marlon Q. Paz, Zach Lippman, and Deric Behar

On December 7, 2021, the Staff of the Securities and Exchange Commission (SEC) issued a statement (the Statement) on the transition away from the London Interbank Offered Rate (LIBOR). The transition away from LIBOR is reaching an inflection point as the publication of the USD LIBOR benchmark for the 1-week and 2-month USD LIBOR maturities and many non-USD LIBOR maturities cease immediately after December 31, 2021.[1] The SEC, like other regulators around the world, continues to emphasize its expectation that market participants understand the risks associated with LIBOR transition and take appropriate action to move to alternative rates in a manner that protects customers, counterparties, the firm itself, and the capital markets more broadly. Continue Reading