Global Financial Regulatory Blog

SMCR: FCA Updates Expectations on Fitness and Propriety Assessments and Conduct Rules Training

Posted in Regulatory Reform

The FCA has provided updated guidance on the SMCR for solo-regulated firms, with new information on good and bad practices in two key areas.

By David Berman and Anna Lewis-Martinez

On 14 August 2020, the FCA updated its webpage on the Senior Managers and Certification Regime (SMCR) for solo-regulated firms. The updates include tables setting out good and bad practice (using positive and negative indicators) relating to training staff on the conduct rules as well as assessing the fitness and propriety (F&P) of Senior Managers and Certification staff. Continue Reading

SEC Issues Alert on Compliance Risks Related to COVID-19

Posted in Retail Markets, Securities Regulation

As COVID-19 continues to disrupt routine operations, OCIE reminds broker-dealers and investment advisers of their ongoing obligations.

By Dana G. Fleischman, Nabil Sabki, Stephen P. Wink, Laura N. Ferrell, and Deric Behar

On August 12, 2020, the US Securities and Exchange Commission (SEC) Office of Compliance Inspections and Examinations (OCIE) issued a Risk Alert titled Select COVID-19 Compliance Risks and Considerations for Broker-Dealers and Investment Advisers (Alert). The Alert highlights certain key areas of increased risk that SEC-registered broker dealers and investment advisers (Firms) have been subject to in the wake of the disruptions caused by the COVID-19 pandemic. OCIE is particularly concerned with risks related to the safekeeping of investor assets and risks associated with protracted remote operations, telework arrangements, technological challenges, market volatility, and the financial pressure on Firms and individuals to compensate for lost revenue.

The Alert reminds investment advisers and broker-dealers of their existing obligations and provides suggestions and best practices that Firms should consider implementing in the present COVID-19 environment. Continue Reading

Key Regulatory Developments in Hong Kong and Singapore: July 2020

Posted in Regulatory Reform

Regulators are consulting on how to enhance trust business regulation, introduce new omnibus legislation, and encourage best practices in sustainable banking.

By Farhana Sharmeen, Simon Hawkins, Kenneth Hui, and Marc Tan

This blog post summarises key regulatory developments in Hong Kong and Singapore during July 2020, including:

  • The HKMA’s publication of examples of good practices for green and sustainable banking adopted by various major international banks, which the HKMA has encouraged banks to review and consider in connection with managing climate change risks
  • The HKMA’s consultation proposing new measures to better regulate and supervise trust business, which will be particularly relevant to the wealth management sector
  • The MAS’s consultation on new omnibus legislation designed to enhance the effectiveness of addressing financial sector-wide risks

Continue Reading

Latham Collaborates on Pioneering Paper for Outsourcing in Financial Services

Posted in Conduct of Business, Regulatory Reform

New resource developed following increased regulatory focus on outsourcing.

Latham & Watkins has partnered with the Association for Financial Markets in Europe (AFME) and law firms Matheson and BSP to develop: Outsourcing – Guidance on the Legal and Regulatory Framework, a pioneering resource examining the key European legislation, rules, and guidance for financial services firms to consider in relation to outsourcing.

In light of the plethora of legislative change and increasing regulatory focus on outsourcing in financial services, as well as the growing range of sources that need to be taken into account to ensure compliance in this area, the Paper is designed to provide compliance, legal, and risk teams within regulated firms with a single reference point of regulatory requirements. The resource also provides a number of practical tools to help firms effectively map out their processes and procedures for legal compliance.

Partners Nicola Higgs, Fiona Maclean, and Andrew Moyle and associates Anne Mainwaring, Jagveen Tyndall, Oscar Bjartell, Sean Wells, and Sidhartha Lal led a team of more than 25 lawyers from five Latham offices and local law firms Matheson (Ireland) and BSP (Luxembourg) to produce the Paper. Continue Reading

HM Treasury Policy Statement Addresses Pressing Concerns With PRIIPs Regulation

Posted in Markets and Investments, Regulatory Reform, Retail Markets

The UK government has proposed amendments to the UK PRIIPs regime with performance information in the KID to differ from the EU “performance scenario” requirement.

By Nicola Higgs and Anna Lewis-Martinez

On 30 July 2020, HM Treasury published a policy statement on amendments to the Packaged Retail Investment and Insurance-based Products (PRIIPs) Regulation. The policy statement provides an update on HM Treasury’s previously announced intention to bring forward amendments to the onshored PRIIPs Regulation to improve the functioning of the UK PRIIPs regime.

Industry has widely condemned the PRIIPs standardised disclosure document, known as the Key Information Document (KID), as being potentially misleading to ordinary consumers with regards to the products it is intended to describe. The European Supervisory Authorities carried out a recent review of the KID but failed to agree on proposals to amend it following the outcome of the review, which was published on 20 July 2020. Continue Reading

European Commission Proposes Changes to MiFID II Due to COVID-19

Posted in Markets and Investments

Many of the wide ranging amendments address the perceived barriers MiFID II introduced in capital markets and are likely to be welcomed by industry.

By Nicola Higgs, Anne Mainwaring, Gabriel Lakeman and Anna Lewis-Martinez

The European Commission (the Commission) has adopted a legislative proposal for a directive amending Directive 2014/65/EU on markets in financial instruments (MiFID II) as part of a capital markets recovery package designed to facilitate the economic recovery following the COVID-19 pandemic. The proposed text amending MiFID II was published on 24 July 2020, along with proposals to amend securitisation rules, the Capital Requirements Regulation (575/2013) (CRR), and the Prospectus Regulation (2017/1129). Continue Reading

What the CFTC Interpretation of “Actual Delivery” Means for Crypto

Posted in Fintech and Cryptocurrency, Retail Markets

The long-awaited guidance clarifies the application of the “actual delivery” exception to leveraged virtual currency transactions with retail purchasers.

By Yvette D. Valdez, J. Ashley Weeks, and Deric Behar

Earlier this year, the US Commodity Futures Trading Commission (CFTC) approved final interpretive guidance (Guidance) concerning retail commodity transactions involving certain digital assets. The Guidance clarifies the CFTC’s views regarding the “actual delivery” exception to Section 2(c)(2)(D) of the Commodity Exchange Act (CEA) in the context of virtual currencies, and is intended for exchanges, trading platforms, custodians, and other market participants transacting in virtual currencies that are considered commodities (such as Bitcoin and Ether) and traded via leverage, margin, or other financing provided by the seller, trading platform, or other third party. Continue Reading

UK Government Proposes to Strengthen Protections Around Promotion of Financial Products and Cryptoassets

Posted in Regulatory Reform

HM Treasury is planning significant changes to the financial promotion regime, including expanding its scope to certain cryptoassets, and amending the approval process for promotions of unauthorised firms.

By Stuart Davis, Sam Maxson, and Anna Lewis-Martinez

On 20 July 2020, HM Treasury published two consultation papers on a regulatory framework for approval of financial promotions and cryptoasset promotions. The consultations propose to establish a regulatory “gateway” that a firm must pass through before it is able to approve the financial promotions of unauthorised firms, and to bring certain types of cryptoassets into the scope of financial promotions regulations. Continue Reading

CJEU Invalidates EU-US Privacy Shield

Posted in Conduct of Business, Regulatory Reform

A ruling by the EU’s top court invalidates the key mechanism for transferring personal data from the EU to the US and imposes additional conditions for use of the standard contractual clauses.

By Gail E. Crawford, Fiona M. Maclean, Michael H. RubinUlrich Wuermeling, Calum Docherty, and Amy Smyth

On 16 July 2020, the Court of Justice of the European Union (CJEU) invalidated the EU-US Privacy Shield, one of the key mechanisms for lawfully transferring personal data from the European Union to the United States. At the same time, the CJEU ruled that the standard contractual clauses (Model Clauses) remain valid but can only be used under strict conditions.

This post provides an initial analysis of the judgment and proposes some immediate next steps for businesses to ensure compliant data transfers from the EU. Continue Reading

SEC Proposal: Will You Still Be a 13F Filer?

Posted in Markets and Investments

The SEC proposes a significant increase in the 13F reporting threshold from US$100 million to US$3.5 billion.

By Stephen P. Wink, Naim Culhaci, Jacqueline Marie Rugart, and Deric Behar

On July 10, 2020, the US Securities and Exchange Commission (SEC) released a proposed rule amendment to increase the Form 13F reporting threshold from US$100 million to US$3.5 billion. An institutional investment manager (Manager) is currently required to file a Form 13F on a quarterly basis if the Manager exercises investment discretion over accounts of certain equity securities with an aggregate fair market value of at least US$100 million on the last trading day of any month, a number that has continued to look smaller and smaller since the adoption of the threshold in 1975. The SEC has explained that the proposed threshold increase to US$3.5 billion is proportionate to the growth of the US equities market since that time. The SEC has estimated that 89.2% of current 13F filers would no longer be required to make such filings based on this threshold increase. At the same time, the SEC explained that, since most reported holdings are currently held by large Managers, the increase of the threshold to US$3.5 billion would retain disclosure of 90.8% of the dollar value of Form 13F holdings currently reported. Continue Reading