Global Investment Law Watch – Page 18 – Exploring the legal and regulatory issues affecting the worldwide investment community.

United States: SEC’s Stunning Enforcement Actions Against Binance and Coinbase

Jun 08 2023

By Rich Kerr, Eden Rohrer, and Max Black

In a stunning move, over the last two days, the Securities and Exchange Commission (SEC) has filed back-to-back enforcement actions against major crypto exchanges Binance (See here) and Coinbase (See here). This clearly indicates that the SEC is flexing its enforcement power over both international exchanges as well as those exchanges with a focus on the United States. Please visit the K&L Gates Fintech and Blockchain Law Watch to see commentary about these developments from our Digital Assets team.

Europe: Public Marketing of Cryptocurrencies in the UK – The End is (Nearly) Nigh

Jun 08 2023

By Kai Zhang and Jin Enyi

Thousands of advertisements for cryptoasset-related products were displayed on London public transport, including the underground network, in 2021. There has been a drop-off since the Advertising Standards Authority (“ASA”) issued standards for crypto adverts. Nonetheless, in 2022 there were reportedly adverts for 24 crypto products on London public transport. Now, however, legislation seems likely to end much of this public advertisement of crypto in the UK.

People’s Republic of China: MOU of ETF Products Between China and Singapore Exchanges

Jun 01 2023

By Chloe Duan and Grace Ye

Shanghai Stock Exchange (SHSE) announced that it has entered into a memorandum of understanding (MOU) with Singapore Exchange (SGX) to establish a link for exchange-traded funds (ETFs) between two exchanges. SHSE and SGX are also aiming to jointly develop more ETF products available to investors on both markets via the link.

Australia: Proposed Reforms to the Anti-Money Laundering and Counter-Terrorism Financing Regime

May 29 2023

By Daniel Knight and Grace Hall

The Australian Government has committed to reforming Australia’s AML/CTF regime, with proposed reforms aimed to strengthen and modernise the framework.

In April 2023, the Attorney-General released the first of two consultation papers outlining the proposed reforms to the regime. Subsequently, as part of the 2023-24 Federal Budget, the Government announced that it will provide $14.3 million in funding over the next four years to support policy and legislative reforms to the AML/CTF regime.

Europe: ESMA Advocates More Specific Restrictions on the Costs Fund Managers May Pass on to Investors

By Áine Ní Riain and Gayle Bowen

The European Securities and Markets Authority (ESMA) has suggested that the European Commission should clarify the costs that UCITS management companies and AIFMs may pass on to investors under existing rules that prohibit “undue costs”. Costs for this purpose include fees payable to the manager and other fund service providers and all other one-off, recurring or transaction-related costs. The purpose of the proposed clarification would be to provide for better convergence between the approaches of different EU member states, and a better basis for national regulators to take supervisory and enforcement actions in this area.

United States: New Conference, More Rulemaking?

May 22 2023

At the Conference On Emerging Trends In Asset Management sponsored by the US Securities and Exchange Commission (SEC) and held 19 May 2023, Chair Gary Gensler, and Director of the SEC’s Division of Investment Management, William Birdthistle, called for greater discourse with industry participants and highlighted the strengths of recent rulemaking activities of the SEC.

Mr. Birdthistle kicked off the conference by referring to funds and investment advisers as “critical agents” in the investment management industry and in advancing the SEC’s mission. He also acknowledged the need for the SEC and its staff to be open to different opinions. He did not, however, indicate how such different views have been—or would be—addressed in the rulemaking process or otherwise.

Australia: Preparing for the Extension of the Superannuation Performance Test to Trustee-Directed Products

May 18 2023

By Jim Bulling and Grace Hall

The release of draft regulations by the Australian Government and publications by the Australian Prudential Regulation Authority (APRA) provide further guidance to regulated superannuation funds on how annual performance assessments (the performance test) will apply to trustee-directed products.

United States: SEC Charges Two Broker-Dealers With Record Retention Violations

May 16 2023

By: Neil T. Smith, Hayley Trahan-Liptak, and Christopher F. Warner

In November 2022, The Securities and Exchange Commission (SEC) Chair Gary Gensler stated that the SEC was only just getting started in its efforts to ensure firms were properly retaining business-related communication occurring over off-channel mediums. Two settled orders against two prominent broker-dealers released 11 May 2023 emphasize that point.

As with the SEC’s December 2021 and September 2022 settlements with major Wall Street firms, the 11 May 2023 settlements find violations of the record keeping requirements of Exchange Act Rule 17a-4 based on the firms’ failures to retain off-channel business-related communication. In the orders, which closely track the September 2022 orders, the SEC emphasized that the broker-dealers engaged in “pervasive off-channel communication” that occurred at all firm levels. The SEC continued to identify discussions about clients, client meetings, investment strategy, and communication regarding market color, trends, and events as “concerning” the broker-dealers’ respective businesses.

The May 2023 and September 2022 orders diverge with the discussion of cooperation. The SEC emphasizes in the recent orders that it considered the broker-dealers’ self-reporting, immediate remedial action, and cooperation with the SEC’s ensuing investigation when assessing penalties. Ultimately, the SEC ordered penalties of US$15 million and US$7.5 million, a fraction of the US$50 to US$125 million penalty range assessed in most prior similar orders.

It is clear the SEC’s investigatory efforts into record retention are in full swing. In fact, since the Fall of 2022, a myriad of firms have publicly announced that they are under investigation by the SEC in connection with potential record retention issues. It is likely additional formal charges are on the horizon.

Australia: ASIC Releases Report on Recent Greenwashing Actions

May 16 2023

By Matthew Watts and Rebecca Mangos

The Australia Securities and Investment Commission (ASIC) has published a report on its regulatory interventions made between 1 July 2022 and 31 March 2023 in relation to greenwashing concerns (which can be accessed here). The report covers ASIC’s issuance of greenwashing infringement notices during the period and its observed increase in representations made by listed companies, managed funds and superannuation funds on environmental, social and governance credentials.

Australia: ASIC Revises its IDR Reporting Framework. Are You Ready?

May 12 2023

By Daniel Knight and Hugo Chow

All holders of an Australian Financial Services License (AFSL) with a retail client authorisation will need to comply with ASIC’s internal dispute resolution (IDR) reporting framework. Summary reports will need to be provided to ASIC on a 6 monthly basis, highlighting the status of each client complaint. Reporting obligations commence from 1 July 2023 (for reporting in January or February 2024). AFSL holders should put systems in place now to ensure all required information is being captured.