The European Securities and Markets Authority published a report reviewing how national regulators across the EU have implemented its guidelines on automated trading. The guidelines aim to increase levels of supervision on automated trading activities. ESMA’s review found that the majority of EU national regulators have integrated the guidelines into their supervisory practices. However, the report also identified areas for improvement such as the need for regulators to: (i) increase their IT expertise; (ii) allow sufficient resources to be available so that proper supervision can take place; and (iii) coordinate between themselves so that ring fencing programs can be set up to prevent cyber-attacks.

View the report

The Agency for the Cooperation of Energy Regulators published the European register of market participants on its designated portal together with its list of standard contracts and the fourth edition of ACER’s Q&As on the Regulation on Energy Market Integrity and Transparency. This is further to ACER finalizing its preparatory work on supporting documentation under REMIT, the EU Regulation that aims to prevent market manipulation and trading on inside information in the wholesale energy market, and more generally improves integrity in this market. On March 20, 2015, ACER also published a recommendation to the European Commission on wholesale energy derivative contracts that must be physically settled under Markets in Financial Instruments Directive II. ACER’s recommendation states that wholesale energy products that must be physically settled and that are in the scope of REMIT include futures, options on futures, options on swaps and any other type of derivative that must be physically settled. ACER also proposes, amongst other recommendations, that the Commission clarifies in its delegated acts that a wholesale energy derivative contract traded on an Organized Trading Facility must be physically settled if it cannot be settled in cash.

View the ACER’s designated REMIT portal, Q&As and recommendation.
 

HM Treasury published the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No. 2) Order 2015 together with a corresponding explanatory memorandum. The Order amends the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 to create a new type of regulated activity of advising on the conversion or transfer of pension benefits which are safeguarded benefits. Safeguarded benefits are defined to mean any benefits other than money purchase benefits and cash balance benefits. This means that the activity cannot generally be carried on in the UK except by an authorised person or pursuant to an exemption. Concurrently, HM Treasury published the Financial Services and Markets Act 2000 (Regulated Activities) (Transitional Provisions) Order 2015, which makes transitional provision in connection with this new regulated activity. This instrument provides that advisors previously permitted to advise on an equivalent class of transfer are automatically authorised to advise under the new activity. Both Orders enter into force on April 6, 2015.

View the Orders and explanatory memoranda

View the Orders and explanatory memoranda 2

View the Orders and explanatory memoranda 3

View the Orders and explanatory memoranda 4

The FCA published an updated timetable relating to the implementation of the Markets in Financial Instruments Directive II and Markets in Financial Instruments Regulation. The timetable sets out the key dates for the implementation and transposition of the Directive and Regulation into domestic law. The deadline for transposing MiFID II into domestic law is July 3, 2016. MiFID II and MiFIR enter into force on January 3, 2017. The FCA aims to publish its main consultation paper on the implementation of MIFID II and MIFIR in December 2015. The final rules are to be published in June 2016.

View the FCA’s timetable

The European Banking Authority published its opinion on lending-based crowdfunding, recommending that the applicability of existing EU law to the activity be clarified. The EBA considers that such clarification is necessary to avoid regulatory arbitrage across the EU and to ensure a level playing field as EU Member States have adopted different approaches to regulating lending-based crowdfunding. The opinion is addressed to the European Commission, the European Parliament and the EU Council.

View the EBA opinion

The European Securities and Markets Authority published the results of its peer review of supervision and enforcement of the best execution provisions in the Market in Financial Instruments Directive by national regulators. Investment firms are required to provide best execution for their clients when executing their client’s orders. ESMA’s review found that implementation of the best execution provisions in MiFID I varied across the EU. To address the issue, ESMA recommends several improvements, including: (i) prioritization of best execution by national regulators; (ii) the allocation of supervisory resources; and (iii) the adoption of a proactive approach to monitoring compliance with best execution requirements, including through onsite inspections. ESMA intends to work with national regulators to give effect to the recommendations.

View the peer review

The Federal Reserve Board, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency, as members of the Financial Literacy and Education Commission (“FLEC”), together with the Financial Crimes Enforcement Network for the US Department of the Treasury, jointly issued guidance to encourage federally insured depository institutions to offer youth savings programs to develop the financial aptitude of young people. The guidance also provides answers to frequently asked questions related to the establishment of these programs. The guidance does not create any new regulatory policy or establish new industry expectations. This effort is consistent with the “Starting Early for Financial Success” focus of the FLEC. Congress created FLEC in 2003 to improve financial capability and education in the United States.

View the guidance

Luc Coene, currently Governor of the Nationale Bank van België, has been appointed as one of four European Central Bank representatives to the Supervisory Board of the Single Supervisory Mechanism. The other ECB representatives are Sirkka Hämäläinen, Julie Dickson and Ignazio Angeloni.

Sandra C. Krieger, executive vice president of the Risk Group and chief risk officer of the Federal Reserve Bank of New York, announced her intention to retire from the bank in the second quarter of 2015.

View the notice.

The US Commodity Futures Trading Commission announced the members of the CFTC’s Market Risk Advisory Committee. MRAC, first chartered in 2014, is intended to support the CFTC’s efforts to identify and mitigate risks within the market to industry participants, consumers and the broader financial community.

View the full list of MRAC members.

The European Commission published a green paper on building a Capital Markets Union. This was published alongside two complementary consultation papers on: (i) a EU framework for simple, transparent and standardized securitization; and (ii) the review of the Prospectus Directive. These publications form part of a wider initiative to develop a single market for capital across the EU. The green paper consults on the establishment of the CMU, which aims to lower the costs of funding within the EU and increase sources of funding for businesses. The paper identifies five priority areas for early action: (i) reducing barriers to accessing capital markets; (ii) widening the investor base to small and medium-sized enterprises; (iii) building sustainable securitization; (iv) boosting long-term investment; and (v) developing European private placement markets. The Prospectus Directive consultation seeks views on making it easier for companies to raise capital throughout the EU whilst effective investor protection is maintained and information to be included in prospectuses is simplified. The consultation on the EU framework for simple, transparent and standardized securitizations aims to increase high-quality securitization, through higher standards of process, legal certainty and comparability across securitization. The green paper and two consultations close for comments on May 13, 2015.

View the Green Paper.

View the Prospectus Directive consultation.

View the consultation on the EU framework for simple, transparent and standardized securitization.

The G20 Finance Ministers and Central Bank Governors issued a draft communiqué which was adopted in a meeting at the Turkish G20 Presidency on February 9-10, 2015. The communiqué highlighted the risk of prolonged low inflation, slow growth, and demand weakness in some advanced economies. G20 members will keep fiscal policy flexible to reflect near-term economic realities.

Additionally on February 10, 2015, the Chairman of the Financial Stability Board published a letter to the G20 Finance Ministers and Central Bank Governors titled, Financial Reforms – Finishing the Post-Crisis Agenda and Moving Forward. This letter sets out the FSB’s priorities in the next phase of reform which include: consistent and prompt implementation of agreed reforms, finalizing the design of remaining post-crisis reforms and addressing new risks and vulnerabilities.

The FSB plans to publish its first annual report on the implementation of agreed reforms and their effects this year. In addition, implementation will be supported through peer reviews which will cover: implementation of the G20 policy framework for ‘other shadow banking entities’, effective supervisory frameworks for global systemically important banks; bank resolution powers and recovery and resolution planning requirements and the effectiveness of reporting of OTC derivatives transactions to trade repositories. Additionally, the FSB will focus efforts to address two explicit emerging vulnerabilities: market-based finance and misconduct.

View The Communiqué.

View the FSB Chairman's Letter.

The Joint Forum (made up of the Basel Committee on Banking Supervision, the International Organization of Securities Commissions and the International Association of Insurance Supervisors) launched a consultation on developments in credit risk management across the banking, securities and insurance sectors. The consultation document includes an analysis of responses to a survey conducted in 2013 which included supervisors and firms on credit risk management and four recommendations to supervisors: (i) supervisors should be cautious against over-reliance on internal models for credit risk management and regulatory capital; (ii) supervisors should be aware of the growth of risk-taking behaviors, for example, in the syndicated leveraged loan market, and the need for firms to have appropriate risk management processes; (iii) supervisors should be aware of the growing need for high-quality liquid collateral for margin requirements in derivatives trading; and (iv) supervisors should consider whether firms are accurately capturing CCP exposures as part of their credit risk management. Comments on the paper are requested by March 4, 2015.

View the Joint Forum consultation paper.

The European Securities and Markets Authority published its final technical advice on delegated acts under the new Market Abuse Regulation. The European Commission requested the advice from ESMA to assist it in developing the required Delegated Acts under MAR. ESMA’s advice covers: (i) clarification of the indicators of market manipulation; (ii) minimum thresholds for the exemption of certain participants in the emission allowance market from the requirement to publicly disclose inside information; (iii) ways for determining the relevant national regulator for notification of delays in public disclosure of inside information; (iv) clarification on the enhanced disclosure regime for managers’ transactions; and (v) reporting of
infringements. The European Commission must adopt Delegated Acts on these issues so that they enter into force 24 months after MAR entered into force, which was on July 2, 2014.

View ESMA advice.

The UK Financial Conduct Authority published its review of the regulatory regime for crowdfunding. The document sets out the FCA’s approach to regulating loan-based and investment-based crowdfunding platforms, including the new rules introduced in March 2014. The FCA does not, at this stage, intend to amend its rules or approach to supervision of the market but will undertake a full review of the crowdfunding market and regulatory framework in 2016.

View the FCA review document.

The SEC named David Grim as Acting Director of the Division of Investment Management, replacing Norm Champ.

The Prudential Regulation Authority published a consultation paper proposing transitional provisions and new rules to the PRA Rulebook, and amendments to the PRA Handbook arising out of rules previously proposed in the Depositor Protection and Policyholder Protection consultation papers published by the PRA in October 2014. The measures proposed under the consultations aim to minimize any possible adverse impact that could be caused to UK financial stability through the failure of a PRA-deposit taker, dormant account fund operator or PRA-authorized insurer. It also aims to ensure an effective compensation system to eligible depositors, dormant account holders and policyholders. The consultation includes new rules on compensation arrangements related to dormant account protection as well as a statement of policy on the PRA's expectations of the Financial Services Compensation Scheme when dealing with dormant accounts. The consultation period ends on February 27, 2015.

View the consultation paper.

Robert E. Rice, Chief Counsel to the US Securities and Exchange Commission (“SEC”) Chair Mary Jo White, announced he will leave the SEC at the end of February.

The European Commission stated in a press release that it had launched plans to establish a Capital Markets Union by holding an orientation debate at the College of Commissioners. The establishment of the single market for all 28 EU member states will aim to lower the costs of funding within the EU, remove barriers to cross-border investment and increase sources of funding for businesses. In a separate press release dated January 30, 2015, the European Commission stated that a consultation on the CMU will be launched on February 18, 2015, and that a plan of action will be released during the third quarter of 2015.

View the press release.

View the other press release.

Erin Schneider was named Associate Regional Director in the San Francisco Office of the SEC.

The Bank of England announced the appointment of two new directors to its executive team. Alex Brazier is appointed as Executive Director for Financial Stability, Strategy and Risk from March 16, 2015 and will also be a member of the Financial Policy Committee from April 1, 2015. Sam Wood is appointed as Executive Director for Insurance Supervision from April 7, 2015.

Michael Brickman was named Deputy Comptroller for Special Supervision at the Office of the Comptroller of the Currency.

The Federal Reserve Bank of New York announced the appointment to its Community Depository Institutions Advisory Council of Martin K. Birmingham, president and chief executive officer of Five Star Bank and Financial Services Inc. in Warsaw, New York.

The CFPB announced the addition of several new members to leadership positions.

• Anthony Alexis will serve as the CFPB’s Assistant Director of Enforcement.
• Leandra English is returning to the CFPB to serve as the Deputy Chief Operating Officer.
• Agnes Bundy Scanlan is joining the CFPB to serve as the Northeast Regional Director of Supervision Examinations.
• Jeffrey Sumberg is joining the CFPB to serve as the Chief Human Capital Officer.

A Delegated Regulation correcting the Regulation on notification of significant net short positions in sovereign debt (which supplements the Short Selling Regulation) was published in the Official Journal of the European Union. The amended article of the Regulation originally only referred to the notification threshold on significant net short positions in shares, but should also have referred to the notification threshold on significant net short positions in sovereign debt. The correcting Delegated Regulation rectifies this omission, to avoid legal uncertainty. The Delegated Regulation enters into force on February 12, 2015.

View the Delegated Regulation.

The UK Department of Energy & Climate Change published its response to the consultation to strengthen the regulation of wholesale energy markets through criminal offences together with draft legislation to implement new criminal sanctions for insider dealing and market manipulation. The new sanctions will give more power to the relevant regulators (in Great Britain, Ofgem and in Northern Ireland, the Northern Ireland Authority for Utility Regulation) to address market abuse in the wholesale energy markets. The new powers implement the EU Regulation on Energy Market Integrity and Transparency requirement for Member States to create penalties for breach of REMIT that are proportionate, effective and dissuasive. REMIT applies to spot trading in the electricity and natural gas market. The DECC consider that criminal sanctions are more dissuasive than civil sanctions alone. UK legislation implementing the civil sanction regime came into force on June 29, 2013. The DECC acknowledges that it may be necessary to review the UK criminal sanctions regime to align the penalties with UK financial markets legislation for similar offences.

View the DECC response.

View the draft legislation.

The Financial Conduct Authority issued its Finalized Guidance on retail investment advice, which aims to explore and clarify the barriers and boundaries affecting market development. The guidance follows on from the FCA's two consultations on the topic and focuses on what may constitute a personal recommendation for retail investments. The guidance also discusses how firms should communicate with customers so that required information is passed on to customers in an accessible and understandable format, and deals with the concept of regulated advice, generic advice, focused advice and personal advice, and well as what amounts to investment advice under Markets in Financial Instruments Directive.

View the Finalized Guidance.

The US Securities and Exchange Commission announced that Norm Champ, Director of the Division of Investment Management, will leave later this month after five years serving in senior leadership positions.

The Federal Reserve Bank of New York announced following appointments to its Board of Directors:
 

• Emily K. Rafferty, president of the Metropolitan Museum of Art, has been re-appointed a Class C director.
• Paul P. Mello, president and chief executive officer of Solvay Bank, has been re-elected a Class A director representing Group 3 which consists of banks with capital and surplus of less than $30 million.
• Terry J. Lundgren, chairman and chief executive officer of Macy’s Inc., has been re-elected by the Group 3 shareholders as a Class B director representing the interests of the public.

The OCC issued the "Litigation and Other Legal Matters" booklet of the Comptroller’s Handbook which replaces the booklet of the same title issued in February 2000. The revised booklet provides guidance to examiners assessing a bank’s litigation exposures, associated risks, and risk management practices.

View the booklet titled "Litigation and Other Legal Matters".

A consultation paper was published setting out proposals to reform the UK financial services trade association landscape. The proposals emerge from a steering committee set up to assess the UK trade association framework. The steering committee is made up of ten retail and commercial banks in the UK — Barclays, Clydesdale Bank, HSBC, Lloyds Banking group, Nationwide Building Society, Santander UK, The Co-operative bank, The Royal Bank of Scotland, TSB Bank and Virgin Money. The key proposal is for a single trade association representing the payments, mortgage, retail, wealth, SME and commercial banking sectors to be formed to ensure more effective and efficient service to the industry. Trade associations that would contribute to this effort include the Asset Based Finance Association, Association for Financial Markets in Europe, British Bankers’ Association, Council of Mortgage Lenders, Finance & Leasing Association, Intermediary Mortgage Lenders Association, Investment Management Association, Payments Council, Tax Incentivized Savings Association, TheCityUK, UK Cards Association and Wealth Management Association. Responses to the consultation are due by April 10, 2015 following which recommendations and a proposed action plan for implementing the changes will be published. A final recommendation is expected in May 2015.

View the consultation paper.

The SEC announced that beginning on February 14, 2015, the rates applicable to most securities transactions will be set at $18.40 per million dollars. Each self-regulatory organization will continue to pay the SEC a rate of $22.10 per million for transactions occurring on charge dates through February 13, 2015 and will begin paying the new quoted rate on charge dates on or after February 14, 2015. The assessment on security futures transactions will remain unchanged at $0.0042 for each round turn transaction.

View the SEC order.

The FDIC announced the appointment of Charles Yi as the agency’s new general counsel.

The Office of the Comptroller of the Currency ("OCC") issued the "Retail Nondeposit Investment Products" booklet of the Comptroller’s Handbook which replaces a similarly titled booklet issued in February 1994. This revised booklet provides updated guidance to examiners on national banks and federal savings associations regarding the recommendation or sale of nondeposit investment products to retail customers. It includes an overview of bank delivery channels and the regulatory structure and requirements supplementary with banks offering these products. The revised booklet describes the risks inherent in offering such products and offers a framework for managing such risks.

The OCC issued the "Conflicts of Interest" booklet of the Comptroller’s Handbook which replaces a booklet of the same title issued in June 2000. This booklet has been revised to include the supervision of federal savings associations and includes updated guidance for examiners on risks and expected controls over conflicts of interest that may arise in asset management activities. The booklet explains the risks inherent in such conflicts and provides a structure for managing those risks.

View the booklet titled "Retail Nondeposit Investment Products".

View the booklet titled "Conflicts of Interest".
 

The UK Payment Systems Regulator announced three new senior appointments: Carole Begent as head of legal from April 1, 2015; Mark Falcon as head of regulatory policy and strategy from March 2, 2015; and Louise Buckley as head of stakeholder engagement and communications from January 26, 2015.

The UK Banking Standards Review Council appointed Alison Cottrell as its first Chief Executive from April 2015.

The SEC named Walter Jospin Regional as Director of its Atlanta Office.

The FDIC named Michael J. Dean as Atlanta Regional Director.

The Federal Reserve Board appointed Thomas Laubach as director of the Division of Monetary Affairs.

The FDIC issued a list of state non-member banks which were evaluated for compliance with the Community Reinvestment Act. The list relates to evaluation ratings that the FDIC assigned to institutions in October 2014. All of the banks rated received either satisfactory or outstanding ratings. The CRA was instituted in 1977 in order to encourage insured banks and thrifts to meet local credit needs, including those of low-income neighborhoods. Included in the Financial Institutions Reform, Recovery and Enforcement Act of 1989, Congress mandated that the public disclosure of the results of each bank and thrift that undergoes a CRA examination.

View the monthly list of banks examined for CRA compliance.

View the January 2015 list of banks examined for CRA compliance.

The SEC introduced a pilot program intended to simplify investor analysis and comparisons of public company financial statement data. The new program will organize data provided by companies into structured data sets which can be used for bulk downloads on the SEC’s website by investors. The SEC anticipates that such data sets will be expanded in 2015 to contain data in footnotes to the financial statements.

View examples of financial statement structured data sets.