October’s first regulatory round-up sees the SEC tweak the rules around beneficial ownership reporting, requiring market participants to provide more timely information on their positions. Also in the US, the CFTC comes down on Goldman Sachs for supervision failures around customer trading as well as penalising the investment bank for swap reporting failures. In the UK, the updated trading venue perimeter guidance comes into force and the Bank of England publishes its systemic risk survey results for H2 2023. In APAC, SDX partners with Invest Direct to enhance its private markets offering and HKEX launches Synapse, a settlement acceleration platform for Stock Connect, the platform which connects Mainland Chinese markets with those in Hong Kong.
- SEC amends rules governing beneficial ownership reporting
- CFTC orders Goldman Sachs to pay $3 Million for supervision failure
- CFTC orders Goldman, JP Morgan and BoA to pay over $50m for swap reporting failure
- TMX Datalinx unveils ESG data hub
- Updated FCA trading venue perimeter guidance comes into force
- ESMA consults on the potential impact of shortening the standard settlement cycle
- FCA fines ADM Investor Services International Limited £6.5m for ‘serious’ financial crime control failings
- Bank of England publishes systemic risk survey results for H2 2023
- SDX partners with Invest Direct to enhance private markets offering
- HKEX launches Synapse, a settlement acceleration platform for Stock Connect
Americas
SEC amends rules governing beneficial ownership reporting
The US Securities and Exchange Commission (SEC) has adopted rule amendments governing beneficial ownership reporting under the Securities Exchange Act of 1934. The amendments require market participants to provide more timely information on their positions to meet the needs of investors in today’s financial markets.
SEC chair Gary Gensler said: “Today’s adoption updates rules that first went into effect more than 50 years ago. Frankly, these deadlines from half a century ago feel antiquated. In our fast-paced markets, it shouldn’t take 10 days for the public to learn about an attempt to change or influence control of a public company. I am pleased to support this adoption because it updates Schedules 13D and 13G reporting requirements for modern markets, ensures investors receive material information in a timely way, and reduces information asymmetries.”
Exchange Act Sections 13(d) and 13(g), along with Regulation 13D-G, require an investor who beneficially owns more than 5 percent of a covered class of equity securities to publicly file either a Schedule 13D or a Schedule 13G, as applicable.
CFTC orders Goldman Sachs to pay $3 Million for supervision failures
The Commodity Futures Trading Commission (CFTC) has come down on Goldman Sachs for failing to maintain adequate supervisory systems and controls to ensure its customers’ trading was not disruptive and for material omissions in a letter to the CFTC’s Division of Enforcement (DOE).
The CFTC order requires Goldman to pay a US$3 million civil monetary penalty and cease and desist from further violations of the Commodity Exchange Act (CEA) and CFTC regulations.
“The CFTC takes very seriously the role of registrants’ supervisory obligations to detect and prevent disruptive trading and to maintain the integrity of the futures markets,” said director of enforcement Ian McGinley. “This settlement, and the significant civil monetary penalty here, also reflects the CFTC’s expectation that responses to Division inquiries be accurate and complete.”
The CFTC alleged Goldman did not maintain an adequate supervisory system to ensure its customer’s trading on 29 December 2017 in the ICE Futures Europe (ICE) Low Sulphur Gasoil futures contract February 2018/December 2018 calendar spread was not disruptive. Specifically, the order finds Goldman’s Volatility Awareness Control (VAC), designed to suspend potentially disruptive trading when volatility thresholds were exceeded, had malfunctioned and did not suspend the trading as it should have.
CFTC orders Goldman, JP Morgan and BoA to pay over $50m for swap reporting failures
The Commodity Futures Trading Commission has charged affiliates of Goldman Sachs, JP Morgan and Bank of America for a number of swap dealer activities including failures related to swap data reporting and failures related to the disclosure of Pre-Trade Mid-Market Marks (PTMMMs).
The CFTC alleged Goldman Sachs failed to adequately supervise a wide range of its swap dealer activities. The regulator also fined Goldman for “unprecedented failures” regarding swap data reporting and the disclosure of PTMMMs in violation of multiple sections of the Commodity Exchange Act (CEA) and CFTC regulations. The order imposes a US$30 million civil monetary penalty and includes Goldman taking steps to develop a written remediation plan and retain a consultant to advise on and assess its remediation plan.
JP Morgan was hit with a US$15 million penalty for violations related to swaps reporting while Bank of America failed to adequately supervise swaps reporting and comply with swaps reporting obligations. The order imposes an US$8 million civil monetary penalty on Bank of America.
“It now has been 13 years since Dodd-Frank and well past time for swap dealers to ensure they are in full compliance with the CEA and CFTC regulations,” said division of enforcement Director Ian McGinley. “As significant reporting failures continue to persist, our resolutions will reflect the gravity of swap dealers’ continuing failures to prioritize compliance and seek to deter future failures. And when appropriate, we will require a neutral third party to advise, assist with, and test the sufficiency of an entity’s remediation.”
TMX Datalinx unveils ESG data hub
TMX Datalinx, TMX Group’s information services division, has launched an environmental, social and governance (ESG) data hub, helping clients to integrate ESG into their investment decision making processes.
Leveraging providers such as OWL ESG, MT Newswires and Inrate, TMX ESG Data Hub tracks climate action plans, quantifies their impact, monitors companies and news and events, and performs corporate peer analysis.
Michelle Tran, president, TMX Datalinx, said: “Expanding TMX Datalinx’s offering is in response to client demand and growing investor need for a range of high quality ESG data to support portfolio construction, enhanced investment strategies and investment risk management processes.
“We are pleased to offer a suite of ESG data sets to our global clients and will continue to look at ways to deliver new content and innovative analytics and indices to support our clients’ ESG investment needs.”
Europe
Updated FCA trading venue perimeter guidance comes into force
The UK’s Financial Conduct Authority’s (FCA) guidance on the trading venue perimeter has come into force following a consultation with stakeholders.
In September 2022, as part of the Wholesale Markets Review (WMR), the FCA consulted on providing new guidance on the regulatory perimeter for trading venues.
The new guidance takes the form of Questions and Answers (Q&As), in Chapter 13 of the Perimeter Guidance manual (PERG) of the FCA’s handbook on the definition of a multilateral system.
It also sets aside the European Securities and Markets Authority’s (ESMA) market structures Q&As dealing with the trading venue perimeter post-Brexit and updates the definition of a company that will fall under the guidance’s remit.
The FCA said further clarity about the perimeter will provide greater certainty to firms about their regulatory status and also help to promote “a level playing field”, while allowing firms to innovate and develop new technologies.
ESMA consults on the potential impact of shortening the standard settlement cycle
The European Securities and Markets Authority (ESMA) launched a Call for Evidence (CfE) on the shortening of the settlement cycle. Stakeholders have been invited to provide their input by 15 December 2023.
The Call for Evidence will help ESMA assess the costs and benefits of a possible reduction of the settlement cycle in the European Union (EU); and identify whether any regulatory action is needed to smoothen the impact for EU market participants of the planned shortening of the settlement cycle to T+1 in other jurisdictions, such as the US. ESMA seeks input from all stakeholders involved in financial markets, and not only those in financial market infrastructures.
In particular, ESMA invites market infrastructures (CSDs, CCPs, trading venues), their members and participants, other investment firms, issuers, fund managers, retail and wholesale investors, and their representatives to provide detailed feedback on the questions put forward.
ESMA will publish and submit to the European Commission (EC) a feedback report with its main findings in the course of 2024.
ESMA said it may provide an earlier report to the EC identifying possible regulatory actions to address the impact for EU market participants of the US move to T+1.
FCA fines ADM Investor Services International Limited £6.5m for ‘serious’ financial crime control failings
ADM Investor Services International Limited (ADMISI), a broker, has been fined £6,470,600 for inadequate anti-money laundering (AML) systems and controls.
The FCA said the nature of ADMISI’s business presented potentially high levels of money laundering risk because of its business model, the geographical location of its customers, the proportion of its business involving high-risk clients and because it had Politically Exposed Persons as clients.
The FCA raised concerns with ADMISI in 2014 about its AML systems, including the absence of a formal process to classify customers by risk with an expectation that ADMISI would make improvements. However, during a 2016 visit, the FCA found significant failings remained.
Therese Chambers, joint executive director of enforcement and market oversight, said: “All financial firms need to have effective anti-money laundering checks in place. ADM Investor Services’ failures put it at risk of being used to facilitate financial crime. These failings continued even after the firm had received clear warnings on the need to improve its systems.”
The firm’s acceptance of the FCA’s findings meant it qualified for a 30% settlement discount. Otherwise, the FCA would have imposed a financial penalty of £9,243,738.
Bank of England publishes systemic risk survey results for H2 2023
The Bank of England has published the results of its Systemic Risk Survey which is conducted on a biannual basis, to quantify and track market participants’ views of risks to, and their confidence in, the stability of the UK financial system.
The survey, which was conducted between 14 August and 8 September, is generally completed by executives responsible for firms’ risk management or treasury functions. Participants include UK banks and building societies, large foreign banks, asset managers, hedge funds, insurers, pension funds, large non-financial companies and central counterparties. Summary statistics are calculated by giving equal weight to each survey response. 56 firms participated in the 2023 H2 survey, representing a 65% response rate.
Key results of the survey include: Survey respondents remain confident in the stability of the UK financial system and reported a similar level of confidence to H1 2023; the perceived probability of a high-impact event affecting the UK financial system in both the short term and medium term is lower than judged in the previous survey; cyber attack and geopolitical risks remain the most frequently cited risks among participants; the number of participants citing risks associated with a UK economic downturn has continued to increase sharply; the number of survey respondents citing inflation risk has slightly increased after having decreased in the previous survey; the risk of cyber attack, geopolitical risk and inflation risk are still considered the most challenging for firms to manage by a significant margin; a number of respondents flagged artificial intelligence as posing new risks to financial stability.
SDX partners with Invest Direct to enhance private markets offering
SDX is set to partner with Invest Direct, a Geneva-based start-up specialising in independent company assessments, due diligence and investor matchmaking for private companies, designed to foster transparency and standardisation within SDX’s private equity offering.
The planned collaboration with Invest Direct will help to enhance the efficiency and transparency of private placements while addressing the prevailing challenges of information asymmetry.
Invest Direct’s team, led by Frank Levy, assists private companies at all stages during their funding process. Following an independent assessment, it ensures direct matchmaking with professional investors and wealth management companies. Its company analysis of privately-held entities is reviewed by its Wisdom Circle — a panel of industry leaders.
“This planned collaboration highlights the strengths of both Swiss entities, catering to surging demand for streamlined processes and standardised practices within the private equity landscape,” says David Newns, head SIX Digital Exchange. “It enables a more accessible and transparent platform for financial institutions, issuers, and professional and institutional investors to engage in private placements with enhanced confidence.”
“By combining the digital expertise of SDX and Invest Direct’s independent analysis and matchmaking, this planned collaboration is set to reimagine how private placements are conducted; fostering transparency and trust in the Swiss private equity markets,” adds Frank Levy, founder and CEO of Invest Direct.
APAC
HKEX launches Synapse, a settlement acceleration platform for Stock Connect
Hong Kong Exchanges and Clearing (HKEX) has launched HKEX Synapse, an integrated settlement acceleration platform designed to deliver greater market efficiency and transparency.
Synapse is the latest enhancement to Stock Connect, the unique mutual market access programme that connects Mainland Chinese markets with those in Hong Kong. Synapse will launch on 9 October 2023, and will deploy DAML smart contracts to standardise and streamline post-trade workflows, enhancing operational efficiencies and transparency whilst reducing settlement risks.
HKEX Synapse eliminates sequential processes, offering real-time visibility and insights into the settlement process for all market participants. Asset managers, brokers, custodians and clearing participants will benefit from real-time data synchronisation and improved scalability, helping them to handle the growing volume of trades through Northbound Stock Connect.
HKEX group head of emerging business and FIC, Glenda So, said: “We are delighted to launch HKEX Synapse, a major enhancement to our Stock Connect infrastructure that will support the next phase of growth for international participation in Mainland China’s equity markets. This technology-empowered platform will not only improve post-trade efficiencies, but will, over time, build a better, stronger ecosystem, supporting both market growth and investor growth strategies. We are very proud to be introducing Synapse to our market and we look forward to continuing to embrace new technologies that benefit our markets and our customers in the future.”
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