Blog: Stricter UK Financial Promotion Rules Going Ahead | Shearman & Sterling LLP – JDSupra – JD Supra

The U.K. Financial Conduct Authority has published its final Policy Statement and Rules on financial promotions of high-risk investments and firms approving financial promotions. Many of these changes address or build upon recommendations of the Gloster Report or are otherwise related to the fallout from the London Capital & Finance plc scandal. The rules on risk warnings for financial promotions of high-risk investments will apply from December 1, 2022, and all other rules will apply from February 1, 2023. The FCA’s related guidance (which is included in Annex 2 of the Policy Statement) will also apply from February 2023.

The FCA is making some changes to the rules on which it consulted. We highlight some of these changes in the summary of the new rules here.

Changes to Rules for High-Risk Investments

The FCA is proceeding to organize the applicability of its conduct of business rules by reference to three kinds of investments:

  • Readily Realizable Securities, which are listed and/or exchange traded securities, for which no additional marketing restrictions apply.
  • Restricted Mass Market Investments, which are Non-Readily Realizable Securities (NRRS), and Peer-to-Peer (P2P) agreements for which marketing to retail investors will be allowed subject to restrictions. Acknowledging the concerns expressed by respondents to the consultation that not all RMMI have the same risk profiles, the FCA is introducing different requirements for certain products as well as adjusting the guidance on its expectations of appropriateness assessments. The rules will also clarify that the marketing restrictions generally do not apply to promotions of investments issued by local authorities, in line with the exemption in the Financial Promotion Order.

The intention is to include qualifying crypto-assets; however, the FCA will wait for legislation to be laid to bring these within the Financial Promotion regime before it changes its rules.

  • Non-Mass Market Investments, which are Non-Mainstream Pooled Investments (NMPI) and Speculative Illiquid Securities (i.e., including speculative so-called “mini-bonds”) for which marketing to retail investors will be prohibited.

HM Treasury has separately announced that it plans to bring in legislation to close the apparent lacuna in financial regulation and the prospectus regime for non-transferable securities (which make up much of the third category listed above). In a consumer context, it is now in any event questionable whether such products are lawful or represent an extant grouping, following the finding that non-transfer clauses which characterise such securities are unenforceable under the Consumer Rights Act 2015, in a piece of LCF related litigation, R (Donegan) v Financial Services Compensation Scheme Limited [2021] EWHC 760 (Admin). In the meantime, these FCA rules tighten further the restrictions on such products.

Strengthening Rules to Enhance Consumer Protection

The financial promotion rules for Restricted Mass Market Investments and Non-Mass Market Investments are being changed, including:

  • Setting rules for how risk warnings should be displayed and prescribing the text to be used for risk warnings for all financial promotions. The main risk warning has been shortened, and the FCA will allow alternative risk warnings for P2P agreements and portfolios, as well as cases where the activity of the product issuer or provider could be covered by the Financial Services Compensation Scheme.
  • Prohibiting inducements to invest from all financial promotions for high risk investments, which will include banning the promotions from having any monetary and non-monetary benefits that incentivize investment activity. There will be an exemption for issuers raising funds via a crowdfunding platform where the issuer offers its own “real economy” products and services as inducement, such as discounts on their products.
  • Adding two positive frictions for first-time investors with a firm, the first being a personalized risk warning pop-up and the second a 24-hour cooling off period.
  • To align the rules with HM Treasury’s proposal to change the requirement for a firm to “believe on reasonable grounds” that the individual has signed the relevant investor statement to one where a firm is required to reasonably believe that an individual is a high net worth individual or self-certified sophisticated investor.
  • Enhancing the appropriateness tests for Restricted Mass Market Investments by introducing guidance on the types of questions to be covered by appropriateness assessments and to discourage binary answers.

Enhancing the Rules Applicable to Authorized Firms Approving the Financial Promotions of Unauthorized Firms

HM Treasury is implementing the regulatory gateway for the approval of financial promotions of unauthorized firms as part of the Financial Services and Markets Bill. This will mean that authorized firms will be banned from approving financial promotions of unregulated firms and will need to apply to have the prohibition removed in whole or part before they are able to approve financial promotions of unauthorized firms.

The FCA is also amending its rules on the approval of financial promotions of unauthorized firms by authorized firms, including, among other things, to require:

  • All relevant financial promotions to include a date stamp and name of the approver. Alternative formats will be permitted if space on the financial promotions dictates that this is necessary.
  • Firms to self-assess whether they have the necessary competence and expertise in an investment product or service before approving or communicating a financial promotion. A firm would need to consider whether it has the relevant experience and/or qualifications in the sector as well as the previous employment history and qualifications of the individuals responsible for approving promotions.

[View source.]

Blog: The Ethics Experts – Episode 130 – Hemma Lomax | Thomas Fox – Compliance Evangelist – JDSupra – JD Supra

In this episode of The Ethics Experts, Nick welcomes Hemma Lomax, Ph.D., and a Senior Corporate Counsel, Integrity & Compliance at Snap Inc. A qualified attorney with a Ph.D. in international law, she is skilled in the subjects of investigations, anti-corruption, human rights, modern slavery, financial regulation, and US Securities law, global trade compliance, trail advocacy, ESG policy and disclosure, corporate social responsibility, global regulatory policy, culture and compliance, compliance training, and more.

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Blog: Azadi of the financial sector – Business Standard

Azadi of the financial sector

Parts of the Indian financial sector have been liberated, and this has fuelled growth. The rest of the sector needs this now

Topics
financial sector | BS Opinion | Financial markets

K P Krishnan

The 75th anniversary of India’s Independence is a good time to look back and dream forward. In the field of financial economic policy, 44 of these 75 years were a period with a highly repressed financial system. As an illustration, the Capital Issues (Control) Act of 1947 was the applicable law for securities markets. Under this law, the government decided which company could raise capital in the public market using which instrument and at which time. It also decided the persons who could buy these securities and at what prices.

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First Published: Mon, August 15 2022. 21:42 IST

Blog: Cyprus Crypto Authorization Gives Revolut Green Light Across Europe – BeInCrypto

The financial regulatory agency of Cyprus has granted Revolut authorization, enabling the fintech firm to offer crypto services throughout the European Economic Area (EEA).

The Cyprus Securities and Exchange Commission (CYSEC) recognized the $33 billion-valued Revolut as a crypto-asset service provider (CASP), making it the first entity to earn one.

The digital banking firm said it chose Cyprus due to its sophisticated regulatory regime, which has also attracted the likes of Crypto.com, eToro and Bitpanda.

The authorization will enable Revolut to offer crypto services to its 17 million customers in the EEA out of the island country.

Revolut moves in anticipation of MiCA

Revolut made an effort to receive the approval before the anticipated introduction of the European Union’s Markets in Crypto Assets regulation (MiCA).

By targeting scams, money laundering and other financial crimes in the crypto industry, MiCA is designed to provide great consumer protection.

It would enable crypto services providers to offer their services across the EU with authorization from just one national authority. 

Consequently, other firms besides Revolut have been making strides in gaining approval somewhere in Europe. Last week, both Crypto.com and Coinbase secured virtual asset provider registrations with regulators in Italy, while Gemini received registration in Ireland.

Meanwhile, the world’s largest cryptocurrency exchange by volume, Binance, also managed to secure registration in France, Italy, and Spain over the past month.

Meanwhile, Revolut also confirmed that its U.K.-based entity would continue to serve customers there. While its registration application with the U.K. Financial Conduct Authority (FCA) remains unresolved, the firm has still been able to offer crypto services, by taking advantage of the FCA’s Temporary Registration Regime (TRR).

Globally, the digital banking firm has around 20 million customers. It currently offers exposure to roughly 80 crypto assets, adding over 20 new ones earlier this month including APE, AVAX and SAND.

Disclaimer

All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.

Blog: CFPB targets failed financial company consumer data safeguards – Financial Regulation News – Financial Regulation News

The Consumer Financial Protection Bureau (CFPB) recently confirmed in a circular that financial companies might violate federal consumer financial protection law when failing to safeguard consumer data.

© Shutterstock

“Financial firms that cut corners on data security put their customers at risk of identity theft, fraud, and abuse,” CFPB Director Rohit Chopra said. “While many nonbank companies and financial technology providers have not been subject to careful oversight over their data security, they risk legal liability when they fail to take common-sense steps to protect personal financial data.”

Per the CFPB, financial companies are at risk of violating the Consumer Financial Protection Act if they do not have adequate measures to protect against data security incidents, with the agency citing the 2017 Equifax data breach as an example.

Two years ago, the CFPB charged Equifax with violating the Consumer Financial Protection Act to address misconduct related to data security.

According to the CFPB circular, multi-factor authentication increases the level of difficulty for adversaries to compromise enterprise user accounts and gain access to sensitive customer data; unauthorized password use is a common data security issue, as well as the use of default enterprise logins or passwords; and protocols immediately updating software and addressing vulnerabilities once they become publicly known can reduce such circumstances.

Blog: Sens. Warren, Luján advocate enhanced corporate misconduct enforcement – Financial Regulation News – Financial Regulation News

U.S. Sens. Elizabeth Warren (D-MA) and Ben Ray Luján (D-NM) recently forwarded correspondence to U.S. Department of Justice (DOJ) personnel, encouraging the agency to use authority to ban corporations committing misconduct from government contracting.

© Shutterstock

Warren and Luján sent a letter to Attorney General Merrick Garland and Deputy Attorney General Lisa Monaco regarding the matter, noting the DOJ possesses underutilized authority enabling the ability to bar an individual or company from contracting with the government for a certain period of time.

Entities can be debarred for a wide range of misconduct, including misconduct falling outside of a company’s contracting activities with the government.

“We cannot allow these corporate entities to continue to engage in criminal misconduct and get by with a mere slap on the wrist,” Warren said. “The Department of Justice can and should expand its use of these suspension and debarment authorities to protect the use of government resources and discourage recidivism by big business.”

The senators are urging the DOJ to use debarment authority for corporate entities, not just individuals; use debarment government-wide; use suspension authority; and consider debarment for all corporate misconduct.

“No one is above the law,” Luján said. “Corporate criminals must be held accountable, and it’s critical that the Justice Department utilizes its authority to ensure that no one can abuse public trust. Along with Sen. Warren, I’m calling on the Justice Department to use its debarment power and put an end to corporations taking advantage of the government.”

Blog: New York details cannabis Conditional Adult-Use Retail Dispensary licensing process – Financial Regulation News – Financial Regulation News

New York Office of Cannabis Management (OCM) officials have indicated the agency will begin accepting Conditional Adult-Use Retail Dispensary (CAURD) licenses on Aug. 25, 2022.

© Shutterstock

The endeavor is essential to the New York State Seeding Opportunity Initiative. The effort enables the first legal adult-use retail dispensaries to be operated by those most impacted by the enforcement of the prohibition of cannabis via products grown by New York farmers.

“With the Seeding Opportunity Initiative, New York has affirmed our commitment to making sure the first sales are conducted by those harmed by prohibition,” Cannabis Control Board Chairman Tremaine Wright said. We’re writing a new playbook for what an equitable launch of a cannabis industry looks like and hope future states follow our lead.”

Prospective qualifying business applicants must possess a marijuana-related offense conviction that occurred prior to the passage of the Marijuana Regulation and Tax Act (MRTA) on March 31, 2021, or have had a parent, legal guardian, child, spouse, or dependent with a pre-MRTA marijuanarelated offense conviction in the State of New York; and have experience owning and operating a qualifying business.

“In just two weeks, my team will start accepting applications for adult-use retail cannabis dispensaries,” OCM Executive Director Chris Alexander said. “This is a monumental step in establishing the most equitable, diverse, and accessible cannabis industry in the nation. We’ve worked to make this application as simple as possible for all interested applicants, and I cannot emphasize it enough that you do not need any legal expertise to fill this application out.”

They are encouraging applicants to prepare application documentation before the portal opening. The OCM has published an interactive resource page to help.

Blog: Central banks play important role in building social capital – OMFIF

The contribution of central banks to social capital can be expressed through words like trust, stability, predictability, confidence and credibility. Citizens value the commitment of central banks to these values, as they constitute a key element of the implicit social contract between society and central banks. Social capital is based on trust, norms and values, and generates positive externalities. The functioning of the economy, and particularly that of the financial system, relies on trust and confidence and central banks have a unique role in this.

Monetary and financial stability are the key pillars of strong and sustainable growth. Episodes of inflation and financial instability contribute to an erosion of social capital. The preservation of trust in the value of the currency is the most important contribution by central banks to rebuilding social capital. As a precondition for monetary and financial stability, central banks should achieve efficiency, innovation and security in the use of payment systems, adjusting swiftly to digitalisation.

The growing multiplicity and complexity of roles played by central banks bring about more responsibilities and much higher expectations by citizens. Central banks’ responsibilities have spread in many cases to microprudential supervision, conduct supervision, supervision of insurers and the funds industry, resolution, deposit guarantee schemes, consumer protection and financial literacy. The successful achievement of all these objectives is essential for building social capital.

Financial reforms implemented over the last 15 years have been decisive for rebuilding social capital, by restoring trust in market mechanisms and institutions. The process of rebuilding social capital is not, however, complete. Urgent action is needed on completing the Basel reforms, developing a macroprudential framework for the non-banking sector and addressing emerging risks for financial stability (from digitalisation, innovation and climate change).

Financial literacy and financial inclusion initiatives promote more effective and fairer economic outcomes. Insights from behavioural economics are crucial for the design of financial regulation and consumer protection. Developing financial literacy and financial inclusion initiatives is of paramount importance to reinforce social capital.

Accountability is very important: central banks should be able to explain why they have taken specific policy decisions and to explain their respective outcomes. The inclusion of heterogeneity in macroeconomic modelling is an essential component of central banks’ accountability, as central banks should fully understand how their actions impact the economy in aggregate and distributional terms.

Another important element of accountability is the evaluation of policy measures, based on rigorous ex post assessments. Evidence-based policies – supported by the findings of sound economic evaluations and lessons learnt, as in the framework implemented by the Basel Committee on Banking Supervision – are typically much more effective.

The existence of expectation gaps between what it is expected from central banks and what they can effectively deliver endangers social capital. Effective communication by central banks is required, with full public understanding of the objectives and the mission being the aim. Greater accountability and transparency are essential, as well as promoting proximity with society.

The degree to which central banks contribute to building social capital depends on how credible they are as institutions. This contribution is conditional on the functioning of other public authorities. The ability to deliver collectively – by governments, central banks and other public institutions – is what contributes to rebuilding social capital. The institutional framework is also an important conditioning factor. Trust in central banks can be limited or even endangered if any part of the institutional sector is not functioning properly, or if the institutional framework is not perfectly designed.

Pedro Duarte Neves is Adviser for the board of directors, Banco de Portugal.

This article is based on the summing up by Pedro Duarte Neves of the Proceedings of the Conference: Rebuilding Social Capital: the Role of Central Banks, celebrating the 175th anniversary of Banco de Portugal.

This article was published the Sustainable Policy Institute Journal, summer edition.

Blog: Weekly Column: Federal Bureaucrats Should Not Dictate Social Policy Affecting Idahoans | U.S – Senator Mike Crapo

I have long fought efforts to politicize financial decisions.  Sadly, this is something we continue to see at the federal level.  For example, look at the U.S. Securities and Exchange Commission (SEC).  The SEC’s primary focus should be shoring up the strength and stability of the U.S. capital markets.  Instead, under the direction of Chairman Gary Gensler, the agency has proposed regulations that would require all publicly-traded companies to disclose climate change related information.  

There are a number of problems with this proposal.  The SEC already requires these companies to disclose material information and various companies disclose climate-related information because it is material to their business.  Telling companies this information is material, regardless of whether such a determination has been made, weakens the current disclosure system.  Further, this reporting burden would be imposed on stakeholders nationwide, including agricultural producers, at a time when they already face considerable compliance, fuel, labor and other high input costs. 

Even more concerning, the SEC is side stepping Congress and undermining our constitutional system of checks and balances.  Because Democrats in Congress have been unable to enact radical climate policy through legislation, unelected bureaucrats in the Biden Administration are now implementing their preferred agenda through regulation, with little regard for American businesses.  Congress did not give the SEC authority to do this, and I am fighting this heavy-handed federal overreach.

 

  • In April, I joined my Republican colleagues on both the Senate Banking and Senate Environment and Public Works Committees in opposing the proposal and calling for its withdrawal

 

  • On June 10, 2022, along with fellow U.S. Senator for Idaho Jim Risch and 30 of our Senate colleagues, we called on the SEC to rescind this overreaching proposal that would place unworkable climate disclosure regulations on farmers, ranchers and agriculture producers

 

  • Also in June, I joined fellow Banking Committee Republicans in asking the SEC to provide more information related to its 500-page proposed climate disclosure rule.  We stressed the rule will impose enormous costs on the entire U.S. economy if it takes effect.

 

  • After the SEC provided an inadequate response to our concerns, we called on the SEC to provide prompt answers to the concerns while expressing concerns with the SEC’s lack of transparency, especially with such a sweeping new regulation that will harm consumers, workers and the entire U.S. economy.

 

  • To further reinforce this effort, in July, Senator Risch and I co-sponsored S. 4610, the Food and Energy Security Act, which would require the federal financial and securities regulators to provide an analysis of the real-world impacts that their ESG climate rules would have on American energy and agriculture producers and consumers’ food, electricity, and gas prices. 

 

The Biden Administration should not circumvent our system of government and implement its own agenda beyond the scope of federal law.  As we pointed out in the recent letter to SEC Chairman Gensler, the U.S. Supreme Court issued a major decision that reinforces the importance of congressional oversight of the SEC’s climate disclosure rule.  We wrote, “In West Virginia v. EPA, the Supreme Court ruled that the executive branch and its agencies, including financial regulators, cannot use creative, new interpretations of existing law to pretend they have legal authority to support sweeping policy changes that Congress never intended. Unfortunately, the SEC appears to be trying to act in precisely this way with its climate disclosure rule.” 

Imposing repressive regulation and subjective standards onto industries the Biden Administration views as disfavored is a disservice to Idaho businesses, employees and investors, and is beyond the scope of the Administration’s authority.  I will continue to fight this overreach. 

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