Discussion Paper opens debate on potential new rules to improve diversity in financial services.

By Rob Moulton, David Berman, Paul Davies, and Charlotte Collins

On 7 July 2021, the FCA, the PRA, and the Bank of England published a joint Discussion Paper on diversity and inclusion in the financial sector. The regulators, in particular the FCA, have been focused on diversity and inclusion as regulatory issues for some time. According to the regulators, research shows there is a positive correlation between increased diversity and inclusion and better outcomes in risk management, conduct, culture, and innovation. Therefore, improving diversity and inclusion in financial services is seen as tying in closely with the regulators’ objectives. In the Discussion Paper, the regulators consider diversity and inclusion not only in terms of how a firm is run internally, but also how the firm serves its customers.

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.

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).

The measures grant relief for EU banks to enhance bank lending to companies and households.

By Axel Schiemann and Dominik Schöneberger

On 18 June 2020, the European Parliament approved the so-called CRR “quick fix” to Regulation (EU) 575/2013 (Capital Requirement Regulation (CRR)) and Regulation 2019/876 (Capital Requirement Regulation 2 (CRR2)) to mitigate the economic consequences of COVID-19. The temporary measures are, inter alia, intended to enhance credit flows to companies and households, thereby supporting the EU’s economy.

New guidance for issuers and market participants on capital raising events and alternative working arrangements, and additional time allowed for filing half-yearly financial reports.

By James Inness, Nicola Higgs, Connor Cahalane, and Anna Lewis-Martinez

On 27 May 2020, the FCA published its Primary Market Bulletin 28, which provides an update for issuers on temporary relief for the timing of the publication of half-yearly financial reports, going concern assessments, and shareholder engagement.

Additionally, the FCA has published its Market Watch 63 newsletter on market conduct and transaction reporting issues, setting out its expectations for issuers and market participants in relation to identifying, handling, and disclosing inside information in the context of increased capital raising events, alternative working arrangements, and the additional challenges created by the pandemic. The FCA has also provided guidance on short selling activities, managing conflicts, and market conduct in relation to credit default swaps.

While regulators in the EU have lifted the temporary COVID-19-related short-selling bans, they will monitor the markets and impose further restrictions if required.

By Carl Fernandes and Sherryn Buehlmann

Regulators in Austria, Belgium, France, Greece, Italy, and Spain announced that the temporary short-selling bans imposed in those jurisdictions expired on 18 May 2020 at 11.59pm.

Most of the bans restricted the increase of “net short positions” in certain shares under the purview of the relevant regulators and were introduced to curb market volatility and manage uncertainties surrounding the economic impact of the COVID-19 pandemic. Article 20 of the Short Selling Regulation (SSR), under which the bans were introduced, permits national competent authorities in the EU a reasonable amount of discretion to implement short-selling bans in respect of shares. As a result, the scope of the various bans differed by jurisdiction (for example, in terms of duration, prohibited activities/outcomes, and exemptions). Market participants faced difficulty understanding and implementing the required changes across their entire global trading operations in the short period between the announcement of the bans and their effective date.

In the wake of COVID-19, the SEC and FINRA are taking steps to support markets and market participants.

By Dana G. Fleischman, Stephen P. Wink, and Deric Behar

The US Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority, Inc. (FINRA) continue to monitor and address ongoing impacts of COVID-19 to US capital markets and securities industry participants. These latest support and regulatory measures include the following:

  • SEC Forms Investor Advisory Committee Focusing on COVID-19: On April 24, 2020, the SEC announced the formation of a COVID-19 Market Monitoring Group comprised of senior-level directors from across a number of SEC divisions. The Group will assist with analysis and actions related to the effects of COVID-19 on markets, issuers, and investors. The group will also respond to requests for information, analysis, and assistance from regulators, financial agencies, and public sector partners, such as the President’s Working Group on Financial Markets, the Financial Stability Oversight Council, and the Financial Stability Board.

Economic aid legislation will likely result in increased scrutiny of certain industries, similar to investigations that followed relief efforts in the 2008 financial crisis.

By the White Collar Defense & Investigations Practice

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) became law. It provides more than US$2 trillion in emergency relief to address the financial upheaval created by the COVID-19 pandemic and is the largest stimulus package in US history. The CARES Act establishes

Further economic measures provide support for small and mid-sized businesses, as well as state and local economies facing pandemic hardships.

By Alan W. Avery, Pia Naib, and Deric Behar

The Federal Reserve, in its continuing efforts to safeguard financial markets, provide stability to the financial system, and support the flow of credit in the economy, has announced an additional series of emergency measures to assist private markets and institutions that are continuing to be impacted by the COVID-19 pandemic. Federal Reserve Chair Jerome H. Powell, in his remarks on the impact of COVID-19 and the economy, noted that the Federal Reserve can “contribute in important ways … by providing a measure of relief and stability during this period of constrained economic activity,” including “by using its [emergency] tools to ensure that the eventual recovery is as vigorous as possible.”

The most recent measures, which provide up to US$2.3 trillion in loans to support the economy, include:

Federal Reserve set to make up to $600 billion available to eligible small and mid-sized businesses.

By Alan W. Avery, Courtenay Myers Lima, and Pia Naib

On April 9, 2020, the Board of Governors of the Federal Reserve System (Federal Reserve) announced details regarding the terms and conditions of two Main Street lending facilities to support small and mid-sized businesses that were “in good financial standing” prior to the COVID-19 emergency: the Main Street New Loan Facility (MSNLF) and the Main Street Expanded Loan Facility (MSELF, and together with the MSNLF, the Main Street Lending Facilities).