In our first regulatory round up for September, the US Securities and Exchange Commission (SEC) continues its proactive approach to laying down the law, doling out fines and issuing amendments. In APAC, Japan Exchange Group (JPX) partners with a number of firms and organisations to lay the groundwork for digital asset cooperation, while in Europe, it’s strength in numbers as exchanges come together for the upcoming consolidated tape and trade associations implore the EU to ditch the ‘uncompetitive’ active account requirement proposal. Elsewhere, the Dubai International Financial Centre beefs up its data protection regulations.
- SEC fines nine investment advisors $850,000 for Marketing Rule violations
- CFTC fines three DeFi protocols for illegal digital asset derivatives trading
- SEC amends broker-dealer exemption from national securities association membership
- SEC orders exchanges, FINRA to improve governance of market data plans
- HKEX names Chris Roberts managing director and head of EMEA issuer services
- JPX and others establish Progmat, national digital asset infrastructure group
- SGX Group welcomes Guotai Junan Futures (Singapore) as derivatives trading and clearing member
- European exchanges get going on CTP plans with confirmed new venture
- Trade associations urge EU to ditch ‘uncompetitive’ active account requirement proposal
- DIFC enacts amended data protection regulations
- ICMA issues guidance for ‘blue bond’ lending and issuance to support marine life
Americas
SEC fines nine investment advisors $850,000 for Marketing Rule violations
The US Securities and Exchange Commission (SEC) fined nine investment advisors US$850,000 for advertising hypothetical performance without adopting and/or implementing policies and procedures required by the SEC’s Marketing Rule.
The firms are: Banorte Asset Management; BTS Asset Management; Elm Partners Management; Hansen and Associates Financial Group; Linden Thomas Advisory Services; Macroclimate; McElhenny Sheffield Capital Management; MRA Advisory Group; and Trowbridge Capital Partners.
Gurbir Grewal, director of the SEC division of enforcement, said: “Because of their attention-grabbing power, hypothetical performance advertisements may present an elevated risk for prospective investors whose likely financial situation and investment objectives don’t match the advertised investment strategy.
“It is therefore crucial that investment advisers implement policies and procedures to ensure their compliance with the rule. Until that is the case, we will remain vigilant and continue our ongoing sweep to ensure that investment advisers comply with the Marketing Rule, including the requirements for hypothetical performance advertisements.”
Registered investment advisers are barred from including hypothetical performance in their advertisements unless they have adopted and implemented policies and procedures “reasonably designed” to ensure the hypothetical performance is relevant to the likely financial situation and investment objectives of the intended audience of the advertisement, the SEC said.
CFTC fines three DeFi protocols for illegal digital asset derivatives trading
The US Commodity Futures Trading Commission (CFTC) filed charges against Deridex and Opyn for failing to register as a swap execution facility (SEF) or designated contract market (DCM); failing to register as a futures commission merchant (FCM); and failing to adopt a customer identification program as part of a Bank Secrecy Act compliance program, as required of FCMs.
ZeroEx, Opyn and Deridex were also charged with illegally offering leveraged and margined retail commodity transactions in digital assets.
The CFTC orders require that Opyn, ZeroEx, and Deridex pay penalties of US$250,000, US$200,000, and US$100,000, respectively, and cease and desist from violating the Commodity Exchange Act (CEA) and CFTC regulations. The firms’ cooperation saw them charged a reduced penalty by the regulator.
Ian McGinley, director of enforcement at CFTC, said: “Somewhere along the way, DeFi operators got the idea that unlawful transactions become lawful when facilitated by smart contracts. They do not. The DeFi space may be novel, complex, and evolving, but the Division of Enforcement will continue to evolve with it and aggressively pursue those who operate unregistered platforms that allow US persons to trade digital asset derivatives.”
SEC amends broker-dealer exemption from national securities association membership
The US Securities and Exchange Commission (SEC) has adopted rule amendments – designed to enhance oversight – that narrow the exemptions around broker-dealer national securities association registrations.
The exemption applies to Section 15(b)(8) of the Securities Exchange Act of 1934, which requires any broker or dealer registered with the SEC to become a member of a national securities association unless the broker or dealer effects transactions in securities solely on an exchange of which it is a member. The Financial Industry Regulatory Authority (FINRA) is currently the only registered national securities association.
SEC orders exchanges, FINRA to improve governance of market data plans
The US Securities and Exchange Commission (SEC) has ordered equity exchanges and the Financial Industry Regulatory Authority (FINRA) to develop a new national market system (NMS) plan for real-time equity market data distribution.
The new NMS plan will replace the three existing plans that govern the public dissemination of real-time, consolidated equity market data for national market system stocks, and is borne out of a May 2020 SEC order. The new plan should address inefficiencies of NMS plan operations and help allay concerns of market participants that are not self-regulatory organisations.
According to the SEC, consolidated equity market data is a “critical component” of the NMS through which equity investments are priced and traded but that advancements in technology and changes in equity markets have heightened conflicts of interest between exchanges’ regulatory responsibilities and their interests in maximising the value of the data products they sell.
APAC
HKEX names Chris Roberts managing director and head of EMEA issuer services
Hong Kong Exchanges and Clearing (HKEX) has named Chris Roberts as managing director and head of EMEA issuer services.
Based out of London, Roberts will oversee all marketing and promotional activities for Hong Kong’s IPO and primary markets, across Europe, Middle East and Africa. He will also have responsibility for ancillary and other post-IPO services in the region, working with international issuers and the European listing community.
HKEX co-head of sales and marketing, Christina Bao, said: “We are delighted to welcome Chris to HKEX. His extensive capital markets’ experience, advising on many corporate finance transactions and equity capital market fundraising, including IPOs in a career spanning over 25 years in the UK, EMEA, and the US, will be a great addition to our global issuer services team. Chris’s appointment will help us to further strengthen our commitment to building Hong Kong’s role as a preferred international listing venue of choice, connecting capital with opportunities.”
Roberts has held various senior investment banking roles at Moelis & Co., JP Morgan and Morgan Stanley in the UK and the US, and more recently founded an independent advisory firm.
JPX and others establish Progmat, national digital asset infrastructure group
Mitsubishi UFJ Trust and Banking Corporation, Mizuho Trust & Banking, Sumitomo Mitsui Trust Bank, Sumitomo Mitsui Financial Group, SBI PTS Holdings, JPX Market Innovation & Research, NTT DATA Japan Corporation, and Datachain have established Progmat, an issuance and management platform for a range of digital assets, and the management of the Digital Asset Co-Creation Consortium (“DCC”). DCC has 214 member companies.
Through this alliance, the 8 partner companies will implement “co-creation areas” with a “standardised format” making it easier for market participants operating in the digital asset market in Japan.
The single organisation will have both deep domain knowledge of the financial market as well as infrastructure construction capabilities and the joint venture will be able to make an impact “more quickly and more broadly”, the firms said.
SGX Group welcomes Guotai Junan Futures (Singapore) as derivatives trading and clearing member
Singapore Exchange (SGX Group) has added Guotai Junan Futures to its derivatives market as a trading and clearing member, as the firm looks to expand its geographic range.
Guotai Junan Futures (Singapore), a wholly owned subsidiary of Guotai Junan Futures, is the sole futures and derivatives platform in Singapore of Guotai Junan Securities, one of the largest investment banks and securities companies in China providing corporate finance, brokerage, FICC and asset management for its clients.
Guotai Junan has a network in China with more than 400 offices and wealth management centres, and overseas offices in Singapore, Vietnam, the United States and Europe.
Pol de Win, senior managing director, head of global sales and origination, SGX Group, said: “We have established a close relationship with Guotai Junan Securities through our MOU since 2020. As such, we are delighted to further deepen our collaboration with the addition of Guotai Junan Futures (Singapore) as our newest derivatives trading and clearing member. Guotai Junan’s extensive expertise in China’s futures market will inject fresh perspectives, global insights and diverse trading strategies to help us foster greater diversity to the Singapore futures landscape.”
The addition of Guotai Junan Futures (Singapore) brings the total number of trading and clearing members in SGX’s derivatives market to 68 and 28 respectively.
EMEA
European exchanges get going on CTP plans with confirmed new venture
EuroCTP, a company set up by European exchanges for the provision of a consolidated tape (CT) in the European Union, has been incorporated and elected a chair of the supervisory board
EuroCTP will act as the European Union’s consolidated tape provider for equities and ETFs and through its supervisory board, all participating exchanges are represented.
The organisation’s stated goals are to foster transparency and access to market data for all investors by providing a fully consolidated view of the European equity market. To achieve this, it will create a CT offering a comprehensive, standardised and consistent picture of the entire EU trading landscape for the benefit of all market participants; make available a well-governed, robust, and resilient CT in a cost-effective way, and in compliance with applicable laws and regulations.
Jorge Yzaguirre Scharfhausen, the newly elected chair of EuroCTP’s supervisory board said: “The initiative that has led to the creation of EuroCTP is a true representation of European capital markets and shows a broader range of interests than any other consolidated tape proposal, its aim is to strengthen the EU Capital Market Union. We are confident that we will be able to present the CEO of EuroCTP soon.”
Trade associations urge EU to ditch ‘uncompetitive’ active account requirement proposal
A number of trade associations have urged EU policymakers to delete the proposed Active Account Requirement, under the European Market Infrastructure Regulation (EMIR 3.0).
The European Commission’s active account proposal would require all market participants to hold active accounts at EU central counterparties (EU CCPs) for clearing at least a portion of certain systemic derivatives contracts. The EMIR 3.0. proposals are currently being debated by the co-legislators in the European Parliament and Council.
The letter, signed by EFAMA, BFPI Ireland, EACB, FIA EPTA, Federation of the Dutch Pension Funds, Finance Denmark, Nordic Securities Association, AIMA, ICI Global, FIA and ISDA, which collectively represent major European end users of derivatives along with providers of clearing services, reads: “Further efforts should focus on streamlining the supervisory framework for EU CCPs across member states while making the EU CCPs’ offering for clearing in the EU more attractive and innovative.
DIFC enacts amended data protection regulations
Dubai International Financial Centre (DIFC) has amended its data protection regulations, enhancing the provisions for the management of personal data processing and operations.
The updated regulations provide clarity on personal data breach assessment and reporting obligations; the use and collection of personal data for marketing and communications; investigations and enforcement powers of the commissioner; personal data processed through digital, generative technology systems under Regulation 10.
Regulation 10 is the first of its kind in the MEASA region on the processing of personal data via autonomous and semi-autonomous systems such as artificial intelligence (AI) or generative, machine learning technology.
A key feature of regulation 10 is that it creates space for DIFC to be a platform for interoperability of the many and varied guidelines and principles issued by sovereign governments and non-governmental organisations. “Creating a plug and play space for application of ‘best fit’ principles to AI technology development is fundamental, responsible and ethical processing of personal data in such systems,” the DIFC said.
World
ICMA issues guidance for ‘blue bond’ lending and issuance to support marine life
The International Capital Market Association (ICMA), working with the International Finance Corporation (IFC), has developed a global practitioner’s guide for bonds to finance the sustainable ‘blue economy’ – an economic system that seeks to conserve marine and freshwater environments.
The voluntary guidance provides market participants with criteria, practices and examples for ‘blue bond’ lending and issuances, providing information on the key components involved in launching a credible ‘blue bond; how to evaluate the environmental impact of ‘blue projects’; and the steps needed to facilitate transactions that preserve the integrity of the market.
The Guidance builds on existing market standards that underpin the global sustainable bond markets such as the Green Bond Principles and also draws on pre-existing specific blue guidance: UNEP FI’s Sustainable Blue Economy Finance Principles and associated Blue Finance Guidance, the UN Global Compact’s Practical Guidance to Issue a Blue Bond and Sustainable Ocean Principles, the Asian Development Bank’s Ocean Finance Framework and Green and Blue Bond Framework, and the IFC’s Guidelines for Blue Finance.
The ICMA’s deputy CEO and head of sustainable finance, said: “We are very pleased to support this global practitioner’s guide for bonds to finance the sustainable blue economy. Green bonds that focus on blue projects, also known as ‘blue bonds’, have great potential to expand the pool of capital market finance dedicated to the blue economy.”
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