As AI use proliferates, the advisory reminds CFTC-regulated entities of their existing obligations and the CFTC’s intention to monitor for ongoing risks.
By Douglas K. Yatter, Yvette D. Valdez, Margaret Graham, Hanyu (Iris) Xie, Adam Bruce Fovent, Mia Stefanou, and Deric Behar
On December 5, 2024, the staff of the Commodity Futures Trading Commission’s (CFTC) Divisions of Clearing and Risk, Data, Market Oversight, and Market Participants published an advisory on the use of artificial
Three recent enforcement actions highlight the risks of failing to adhere to representations made to investors regarding ESG and biblically responsible investing strategies.
The upcoming change in US administration is expected to bring about significant priority shifts by the federal government, including at the US Securities and Exchange Commission (SEC). One area of potential overlap that the investment community should be prepared for, however, is in the realm of thematic investing. Citing its core mission to protect investors; maintain fair
Key risk areas for SEC registrants include standards of conduct, complex products, cybersecurity, digital engagement, and artificial intelligence.
By Latham & Watkins Investment Funds — Regulatory Strategy, Financial Regulatory, FinTech, and Commodities and Derivatives Regulation & Enforcement practices
On October 21, 2024, the Securities and Exchange Commission’s (SEC) Division of Examinations (the Division) published its annual examination priorities for 2025 (2025 Priorities), which focus on certain “practices, products, and services that the Division believes present potentially heightened risks
The SEC’s September 17, 2024, actions signal its commitment to penalize non-compliance, while encouraging market participants to self-report violations.
By Stephen Wink, John Sikora, Aaron Gilbride, Naim Culhaci, and Samantha Daisy
On September 17, 2024, the US Securities and Exchange Commission (SEC) announced charges against 11 institutional investment managers for failing to file Forms 13F and 13H. All parties settled the charges. These charges signal the SEC’s willingness to bring enforcement actions and impose sanctions against
The proposal seeks to make executive compensation arrangements more sensitive to risk and would require complex risk management programs to ensure compliance.
By Arthur S. Long, Pia Naib, and Deric Behar
On May 6, 2024, the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), the Federal Housing Finance Agency (FHFA), and the National Credit Union Administration (NCUA) (collectively, the agencies) issued a joint Notice of Proposed Rulemaking (the Proposed Rule) to curb “excessive risk-taking” resulting from incentive-based compensation arrangements. The Board of Governors of the Federal Reserve System (FRB) and the Securities and Exchange Commission (SEC) did not join in the Proposed Rule.[1],[2] Critically, without the FRB’s participation, the Proposed Rule may not be finalized.
The Proposed Rule seeks to curtail incentives for certain financial services sector officers, employees, and directors to take inappropriate risks as a result of seeking excessive compensation, fees, or benefits. It uses a tiered approach based on asset size categories, where covered institutions (defined below) within the two largest asset size categories would be subject to prescriptive requirements related to the structure of their incentive-based compensation arrangements, including incentive award limits, deferral requirements, downward adjustments, forfeitures, and clawbacks.
The Proposed Rule re-proposes the regulatory text previously proposed in June 2016 (with a new preamble that acknowledges developments and supervisory learnings) and seeks additional feedback from commenters on potential alternatives to various provisions.
Guidelines indicate when asset managers may legitimately use ESG or sustainability-related terms in their fund names.
By Nicola Higgs, Laura Ferrell, and Charlotte Collins
On 14 May 2024, ESMA published its final Guidelines on funds’ names using ESG- or sustainability-related terms. The Guidelines aim to address the risk of funds’ names misleading investors by ensuring that their names can be supported in a material way by evidence of sustainability characteristics or objectives that are reflected fairly and consistently in the fund’s investment objectives and policy.
ESMA originally consulted on the Guidelines in November 2022 (see this blog post), but finalisation has been delayed while reviews of the AIFMD and UCITS Directive were completed. Notably, ESMA received substantive feedback on the consultation and made several amendments to the Guidelines accordingly.
SEC defines the phrase “as part of a regular business” to capture private funds and other market participants that take on liquidity-providing roles.
By Marlon Q. Paz, Stephen P. Wink, Naim Culhaci, and Jessmine Lee
The Securities and Exchange Commission (SEC) adopted new rules that expand the definition of “dealer” and “government securities dealer” under the Securities Exchange Act of 1934 (Exchange Act), requiring registration by market participants that take on significant liquidity-providing roles. The February 6
Regulation SE, the last of the Title VII Dodd-Frank rulemakings, will become effective on February 13, 2024.
The Securities and Exchange Commission (SEC) has taken a significant step in enhancing the regulatory landscape of the financial markets by adopting new Regulation SE (17 CFR 242.800 through 242.835) under the Securities Exchange Act of 1934 (Exchange Act). The final rules establish a comprehensive framework for the registration and oversight of security-based swap execution facilities (SBSEFs) in compliance with Title VII of
Benchmark administrators should review the quality of their ESG benchmark disclosures ahead of a review by EU regulators during 2024.
By Nicola Higgs, Becky Critchley, Anne Mainwaring, Ella McGinn, and Charlotte Collins
On 13 December 2023, the European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, announced its plans to launch a Common Supervisory Action (CSA). Along with National Competent Authorities (NCAs), ESMA plans to review the mandatory disclosures of benchmark administrators providing benchmarks that pursue ESG objectives under the EU Benchmarks Regulation (EU BMR).
The CSA is the first that ESMA will conduct since it assumed its direct supervisory role under the EU BMR. As part of the CSA, ESMA and the NCAs will share knowledge and experience to harmonise how they supervise ESG disclosure requirements for benchmark administrators.
The priorities highlight emerging and core risk areas for investment advisers, broker-dealers, and other entities, including cybersecurity and crypto assets.
By Laura Ferrell, Aaron Gilbride, Marlon Q. Paz, Jamie Lynn Walter, Stephen P. Wink, Naim Culhaci, and Deric Behar
On October 16, 2023, the Securities and Exchange Commission’s (SEC) Division of Examinations (the Division) published its annual examination priorities for 2024 (2024 Priorities), which focus on “certain practices, products, and services that [the Division] believes present potentially heightened risks to investors or the integrity of the U.S. capital markets.” The Division will prioritize areas that pose emerging risks to investors or the markets, as well as examinations of core and perennial risk areas. The 2024 Priorities include certain of these focus areas, but are not an exhaustive list.
The 2024 Priorities are primarily organized by entity, with just four thematic topics broken out separately as applicable to a wide range of market participants: (1) information security and operational resiliency; (2) crypto assets and emerging financial technology; (3) regulation systems compliance and integrity; and (4) anti-money laundering. Notably, ESG was not specifically identified as a priority in adviser reviews for the first time in years.
The Division will continue to prioritize examinations of advisers and investment companies that have never been examined, including new registrants, as well as those that have not been examined for a number of years.