In this instalment of our regulatory round-up, we have new hires at the International Capital Markets Authority (ICMA) and the International Organisation of Securities Commissions (IOSCO). The European Securities and Markets Authority (ESMA) sets forth guidelines on the creiteria for ESG terms in fund names, while in the US, the SEC and the Treasury’s Financial Crime Enforcement Network propose rules designed to make it more difficult to use false identities to establish customer relationships with investment advisers.
- SEC, FinCEN propose customer identification programme requirements
- CFTC issues $1.8m order against crypto prime brokerage firm Falcon Labs
- ICMA ERCC publishes note on EU NSFR and short-term reverse repos
- ICMA announces new co-head structure for its Market Practice and Regulatory Policy team
- IOSCO names Tajinder Singh acting secretary general
- ESMA establishes harmonised criteria for use of ESG and sustainability terms in fund names
SEC, FinCEN propose customer identification programme requirements
The US Securities and Exchange Commission (SEC) and the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) have proposed a new rule that would require SEC-registered investment advisers (RIAs) and exempt reporting advisers (ERAs) to establish, document, and maintain written customer identification programs (CIPs).
The proposal is designed to prevent illicit finance activity involving the customers of investment advisers by strengthening the anti-money laundering and countering the financing of terrorism (AML/CFT) framework for the investment adviser sector.
“The proposed rule is designed to make it more difficult to use false identities to establish customer relationships with investment advisers,” said SEC Chair Gary Gensler. “I support this proposal because it could reduce the risk of terrorists and other criminals accessing US financial markets to launder money, finance terrorism, or move funds for other illicit purposes.”
The rule, if adopted, would require RIAs and ERAs to, among other things, implement a CIP that includes procedures for verifying the identity of each customer to the extent reasonable and practicable and maintaining records of the information used to verify a customer’s identity, among other requirements. The proposal is generally consistent with the CIP requirements for other financial institutions, such as brokers or dealers in securities and mutual funds.
CFTC issues $1.8m order against crypto prime brokerage firm Falcon Labs
The Commodity Futures Trading Commission (CFTC) has filed and settled charges against Falcon Labs for failing to register with the CFTC as a futures commission merchant (FCM). This marks the CFTC’s first action against an unregistered FCM that inappropriately facilitated access to digital asset exchanges.
Falcon Labs is ordered to cease and desist from acting as an unregistered FCM by providing US citizens access to digital asset derivatives trading platforms. The order also requires Falcon Labs to pay US$1,179,008 in disgorgement and a $589,504 civil monetary penalty. The reduced civil monetary penalty reflects Falcon Labs’ substantial cooperation with the CFTC’s Division of Enforcement.
“The CFTC’s enforcement program has made clear it will not tolerate digital asset exchanges that fail to register with the CFTC or comply with the agency’s rules that maintain integrity in the derivatives markets,” said director of enforcement Ian McGinley.
Global
ICMA ERCC publishes note on EU NSFR and short-term reverse repos
The European Repo and Collateral Council (ERCC) has published a briefing note highlighting concerns related to the re-calibration of the NSFR RSF factors for short-term securities financing transactions that is due to be applied in the EU in June 2025.
The note attempts to quantify the impacts for EU banks, both in terms of the aggregate annual cost to support reverse repo activity as well as the proportion of fixed income market-making that would be affected. It also points to other jurisdictions that are not implementing a similar re-calibration, thereby putting EU banks at a competitive disadvantage.
ICMA announces new co-head structure for its Market Practice and Regulatory Policy team
The International Capital Markets Association (ICMA) has named Andy Hill and Natalie Westerbarkey co-head of ICMA’s Market Practice and Regulatory Policy (MPRP) team, effective 1 July. Hill will lead the work on market practice and Westerbarkey will lead on public policy and advocacy.
Hill is currently senior director and deputy head of MPRP, with primary responsibility for the work on secondary markets and repo and collateral. He has authored numerous reports on bond and repo market structure and development, with a particular focus on regulatory, technological, and economic impacts on market liquidity and resilience. Prior to joining ICMA in 2014, Hill was a repo and money market trader for 18 years, 10 years of which he was an executive director at Goldman Sachs.
Westerbarkey brings buy side, sell side and cross-regional policy experience to ICMA with around 25 years of financial services industry experience. She was most recently with Fidelity where she headed EU public policy since 2017 and prior to that worked at the Abu Dhabi Investment Authority and Citigroup in broader policy roles.
IOSCO names Tajinder Singh acting secretary general
International Organisation of Securities Commissions (IOSCO) deputy secretary general Tajinder Singh has been named as acting secretary general to replace Martin Moloney, effective immediately.
“Singh has been with IOSCO since 2010 and has demonstrated exceptional leadership skills on countless occasions. Tajinder is best placed to lead the Secretariat and to ensure continuity, also given his deep understanding of IOSCO’s objectives and his broad knowledge of and experience with international standard setting,” the organisation said.
EMEA
ESMA establishes harmonised criteria for use of ESG and sustainability terms in fund names
The European Securities and Markets Authority (ESMA) has published final guidelines on funds’ names using ESG or sustainability-related terms.
The guidelines are designed to protect investors against “unsubstantiated or exaggerated” sustainability claims in fund names, and to provide asset managers with clear and measurable criteria to assess their ability to use ESG or sustainability-related terms in fund names.
To be able to use these terms, a minimum threshold of 80% of investments should be used to meet environmental, social characteristics or sustainable investment objectives. The guidelines also apply exclusion criteria for different terms used in fund names:
The guidelines will be translated into all EU languages and will subsequently be published on ESMA’s website. They will start applying three months after that publication.
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