July 2023 – Global Investment Law Watch

United States: CFTC Proposes to Broaden Scope of Eligible Collateral for Initial Margin

Jul 28 2023

By: Kenneth Holston, Cheryl Isaac, Matthew Rogers and Gustavo De La Cruz Reynozo

On July 26, 2023, the Commodity Futures Trading Commission (“CFTC”) proposed an amendment (“Proposal”) to, among other things, expand the universe of eligible collateral for the CFTC’s initial margin (“IM”) requirements for uncleared swaps. The Proposal would result in swap dealers that are not subject to prudential regulation being able to use a broader range of money market funds (“MMFs”) and similar funds as collateral to meet their uncleared swap IM requirements under CFTC Regulation 23.156(a)(1)(ix).

United States: We’re Not in Kansas Anymore: The SEC Proposes Rules for the Use of Predictive Data Analytics by Broker-Dealers and Investment Advisers

Jul 27 2023

By: Richard Kerr and Matthew Rogers

On July 26, 2023, the Securities and Exchange Commission (“SEC”) proposed new rules (“Proposal”) intended to address certain conflicts of interests associated with the use of “Covered Technology” (defined below) by broker-dealers and investment advisers (“firms”) in investor interactions. If adopted as proposed, firms will be required to (i) identify conflicts of interests when using Covered Technology in interactions with investors, and (ii) adopt policies and procedures to eliminate or neutralize those conflicts of interests.

United States: Updating – and Limiting – the Internet Advisers Exemption

Jul 27 2023

By Keri Riemer and Matthew Rogers

On 26 July 2023, the U.S. Securities and Exchange Commission (SEC) proposed amendments (Proposal) to the “internet adviser exemption” set forth in Rule 203A-2(e) under the Investment Advisers Act of 1940, which permits registration with the SEC of certain investment advisers that would not otherwise be eligible for such registration. The proposed reforms would impose new limitations on advisers seeking to rely on the exemption by precluding them from providing advice through a means other than an “operational interactive website” (i.e., a website or mobile application through which the adviser provides “digital investment advisory services” (as defined in the Proposal) on an ongoing basis to more than one client (except during temporary technological outages)).

Australia: “Greenwashing” – Are the ACCC and ASIC Aligned?

Jul 26 2023

By Jim Bulling and Ben Kneebush

‘Greenwashing’ has been a priority for both the Australian Competition and Consumer Commission (ACCC) and the Australian Securities and Investments Commission (ASIC) for some time now.

ASIC’s approach to ‘greenwashing’ first emerged over a year ago with the publication of Information Sheet 271 (considered previously in our post), and was expanded with the release of Report 763 (considered previously in our post).

On 14 July 2023, the ACCC released its long-awaited draft guidance titled Environmental and Sustainability Claims – Draft Guidance for Business. The aim of this was to aid businesses in avoiding ‘greenwashing’ when making environmental or sustainability claims.

United States: CFTC Seeks to Refresh Swap Dealer and FCM Risk Management Program Requirements

Jul 18 2023

By: Clifford C. Histed, Cheryl L. Isaac and Christine Mikhael

On July 18, 2023, the Commodity Futures Trading Commission (“CFTC”) published in the Federal Register an advanced notice of proposed rulemaking (“ANPRM”) on Risk Management Program (“RMP”) requirements for swap dealers (“SDs”), major swap participants (“MSPs”) and futures commission merchants (“FCMs”). After initially adopting its RMP requirements for SDs and MSPs (CFTC Regulation 23.600) and FCMs (CFTC Regulation 1.11) in 2012, the CFTC now seeks to refresh certain aspects in light of feedback it has received on market participants’ confusion and lack of uniformity on their RMP obligations and filings. In particular, the CFTC identified the impetus for issuing the ANPRM as being:

Australia: Regulation for ESG Ratings Agencies Gathers Pace

Jul 18 2023

By Jim Bulling and Kai Luck

With increased demand for “ESG friendly” investments (in an ESG investment market on track to exceed US $53 trillion globally by 2025), asset managers, funds management companies, superannuation funds and other investors are actively turning to ESG ratings agencies to guide their decisions.

As it currently stands, there is significant potential for discrepancy in the ratings being produced. This is confusing and potentially misleading for investors and may also divert capital away from its intended direction.

SEC Passes New Money Market Fund Rules: Swing Pricing is Out and Mandatory Liquidity Fees are In

Jul 12 2023

By: Max Black, Michael Davalla and Cal Gilmartin

On July 12, 2023 the SEC adopted rules applicable to money market funds (“MMFs”). The new rules change: (i) liquidity thresholds; (ii) liquidity fees and redemption gates; (iii) options for responding to negative interest rate environments; and (iv) reporting obligations. Importantly, the SEC declined to impose swing pricing mechanisms on MMFs depending on their net redemptions. The new rules institute mandatory liquidity fees for institutional prime funds and institutional tax exempt funds.

Archive:July 2023