Global Regulatory Development – Page 4 – Global Investment Law Watch

Europe: The Central Bank of Ireland Continues to Focus on Financial Stability

Jun 05 2024

By: Shane Geraghty, Michelle Lloyd, and Ruth Hennessy

The Central Bank of Ireland has announced this week that they will publish a feedback statement on their approach to macroprudential policy for investment funds, we expect in the coming months.

They issued a discussion paper on this topic late last year. The European Commission also released a targeted consultation on macroprudential policies for non-bank financial intermediaries on 22 May 2024.

The Central Bank’s announcement follows hot on the heels of its publication of a macroprudential policy framework for Irish-authorised GBP-denominated liability driven investment funds, as discussed here.

At the Central Bank’s recent Macroprudential Policy for Investment Funds Conference, the Governor of the Central Bank, Gabriel Makhlouf, indicated that a macroprudential framework for investment funds should not be a replication of the banking framework and should have:

A well-articulated set of objectives and principles; and
A framework tailored to the nature of the systemic risk from different fund cohorts – i.e. not a
‘one-size-fits-all approach’.

Governor Makhlouf noted that the objective is to ensure that this growing segment of the financial sector becomes more resilient and less likely to amplify adverse shocks.

The Central Bank of Ireland Introduces Macroprudential Measures to Irish-Authorised GBP-Denominated Liability Driven Investment Funds

May 24 2024

By: Shane Geraghty, Michelle Lloyd, and Ruth Hennessy

The Central Bank of Ireland has introduced a macroprudential policy framework for Irish-authorised GBP-denominated liability driven investment funds (LDI Funds), to make them more resilient to shocks to UK interest rates.

AML Reforms Part 2: Digital Currency Service Providers

May 23 2024

By: Daniel Knight and Kithmin Ranamukhaarachchi

The Australian Attorney-General’s Department (Department) has released five consultation papers outlining proposals for extensive reforms to Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) regime.

Europe: ESMA publishes Guidelines on fund names using ESG or sustainability-related terms

May 14 2024

By: Áine Ní Riain, Dr Philipp Riedl, and Ruth Hennessy.

The European Securities and Markets Authority (ESMA) has published its much anticipated Final Report: Guidelines on funds’ names using ESG or sustainability-related terms (Guidelines).

This follows a consultation on the subject between November 2022 and February 2023 and an update provided by ESMA last December.

Acknowledging the significant impact of fund names on investor decision-making, ESMA has determined that a fund with ESG- or sustainability-related terms in its name must apply at least 80% of its investments to meet environmental or social characteristics or sustainable investment objectives.

The Guidelines also apply exclusion criteria for certain terms in fund names:

“Environmental”, “impact” and “sustainability”- related terms will require compliance with the exclusions applicable to Paris-aligned Benchmarks; and
“Transition, “social” and “governance”- related terms will necessitate compliance with the exclusions applicable to Climate Transition Benchmarks.

Use of “sustainability”-related terms in fund names will require a commitment to “invest meaningfully” in sustainable investments. Similar use of “transition” or “impact” – related terms will require that the relevant fund’s investments used to meet the 80% threshold are on a clear and measurable path to transition or are made with the objective to generate a positive, measurable impact alongside a financial return.

The Guidelines will apply to all EU UCITS and EU AIFs, and it currently seems likely that they will also apply to non-EU funds marketed into the EU (this is a point on which we will be watching developments closely).

The Guidelines are expected to come into force in Q3 or Q4 2024, subject to completion of administrative formalities including a decision by national competent authorities on whether to apply them locally (which is generally expected). Existing funds will have an additional 3-month transition period before compliance becomes mandatory.

CFTC Releases Artificial Intelligence Report

May 09 2024

By: Matthew J. Rogers and Maxwell J. Black

On 2 May 2024, the Commodity Futures Trading Commission’s (CFTC) Technology Advisory Committee (Committee) released a report entitled Responsible AI in Financial Markets: Opportunities, Risks & Recommendations. The report discusses the impact and future implications of artificial intelligence (AI) on financial markets and further illustrates the CFTC’s desire to oversee the AI space.

Japan: FSA Requires Real Estate Funds Take Additional Safeguards Against Conflicts of Interest

May 08 2024

By: Tsuguhito Omagari, Yuki Sako, Jason Nelms and Charmaine Mok

Financial Services Agency of Japan (FSA) proposed amendments to its supervisory guidelines applicable to managers of investment trust (toshin) funds and real estate funds, and is currently accepting comments until May 13. Of those, amendments relating to real estate funds would require managers to take additional measures to manage transactional conflicts of interest, specifically:

Europe: New Funds May Apply for UK Overseas Fund Regime Recognition from September 2024

May 03 2024

By: Áine Ní Riain, Aoife Maguire, Gayle Bowen, and Philip Morgan

The Financial Conduct Authority (FCA) has released updated information and, together with HM Treasury, a “roadmap,” on the UK’s Overseas Funds Regime (OFR). It intends to accept applications from new funds (i.e. those not in the Temporary Marketing Permissions Regime (TMPR)) from September 2024. This is a welcome development for managers of new EEA UCITS that are not currently able to access the UK retail market.

Don’t Bank on it: FDIC Board Withdraws Asset Manager Bank Control Proposals

Apr 26 2024

By: Grant F. Butler and Yuki Sako

Two proposals regarding oversight of the control of banks by asset managers were withdrawn at the 25 April board meeting of the Federal Deposit Insurance Corporation (FDIC). These proposals were a result of increasing concern by bank regulators regarding concentration in control of banks by institutional investors, particularly index funds.

Europe: Research Cost Re-Bundling – Is the UK Going Back to the Future?

Apr 23 2024

By: Andrew Massey, Philip Morgan, and Omega Modi

The UK’s FCA has published consultation paper 24/7: Payment optionality for investment research. It proposes a new, more flexible, way to charge third-party investment research to clients.

The new payment option would sit alongside the two existing options under which research costs are either paid by firms from their own resources or charged to clients through a research payment account. The latter approach has not been popular because of its operational complexities, so research has been an out-of-pocket expense for many UK asset managers.

Kicked Out of the Club: NFA Orders Commodity Pool Operator Not to Reapply for NFA Membership

Apr 18 2024

By: Matthew J. Rogers and Benjamin C. Skillin

On 10 April 2024, the National Futures Association’s (NFA) Business Conduct Committee (BCC) issued an order against 50.ai Investments LLC, a former NFA Member commodity pool operator and forex firm. The order stipulates that 50.ai Investments may not reapply for NFA membership or act as a principal of an NFA Member at any time in the future due to violating a suite of NFA compliance rules.

Category:Global Regulatory Development