Global Investment Law Watch – Page 6 – Exploring the legal and regulatory issues affecting the worldwide investment community.

Where to Next for ASIC? Senate Economics References Committee Releases its Report

Jul 10 2024

On 3 July the Senate Economics References Committee handed down its report on ASIC. The Senate referred an inquiry into ASIC in October of 2022 to examine the capacity and capability of ASIC to undertake proportionate investigation and enforcement action arising from reports of alleged misconduct. The report is generally critical of ASIC’s performance as a corporate regulator. The report identifies several key issues. Chief among these is the broad remit of ASIC, ASICs approach to investigation and enforcement, and ASICs wider culture.

ISDA Publishes Framework to Facilitate Close-Out of Derivatives Contracts

Jul 08 2024

By: Kenneth Holston, Cheryl L. Isaac, Matthew J. Rogers, Jordan A. Knight, and Bradley D. Bostwick

On 27 June 2024, ISDA published the ISDA Close-out Framework, an interactive decision tree that market participants can use to help prepare for potential terminations of collateralized derivatives contracts that are documented under an ISDA Master Agreement. The ISDA Close-out Framework was launched in response to the March 2023 failures of Signature Bank and Silicon Valley Bank, which shed light on the complexities of terminating swaps and other over-the-counter derivatives in the multifaceted post-financial crisis swap regulatory regimes. ISDA designed this framework in response to feedback from the derivatives industry that factors such as segregated margin and stays on the exercise of termination rights and remedies makes terminating and closing out derivatives contracts increasingly complex.

Deciphering Derivatives Transaction Reporting

Jun 24 2024

By: Jim Bulling and Simon Kiburg

On 21 October 2024 the new ASIC Derivative Transaction Rules (Reporting) 2024 (2024 Rules) will come into effect replacing the current ASIC Derivative Transaction Rules (Reporting) 2022 (2022 Rules). In this post we set out some of the major changes to the 2022 Rules and some of the issues market participants in this space should be aware of.

Next Regulator Up: Treasury Department Explores AI in the Financial Sector

Jun 11 2024

By: Matthew J. Rogers and Maxwell J. Black

On 6 June 2024, the Department of the Treasury (the Treasury) published a request for information on the use of artificial intelligence (AI) in the financial services sector, with the goal of gathering input from a wide range of stakeholders. This request follows soon after the Treasury’s report on AI and cybersecurity.

Like other US regulators, including the Commodity Futures Trading Commission (CFTC), the Treasury is interested in understanding the opportunities and risks posed by AI, including the potential impact on consumers, investors, financial institutions, and businesses. Specifically, the Treasury is seeking feedback on the definition of AI under President Biden’s Executive Order on Safe, Secure, and Trustworthy Development and Use of AI, the types of AI models and tools used by financial institutions, and the general accessibility of AI.

Of particular interest is the Treasury’s query regarding a potential “human capital shortage” in financial organizations. This concerns the scenario where companies utilize AI tools without sufficient employees that fully understand their mechanisms. Additionally, the request solicits perspectives on model risks, operational risks, compliance risks, and third-party risks, among others.

This request for information shows that the Treasury is looking to augment the efforts of the CFTC, Securities and Exchange Commission (SEC), and banking agencies, which have also requested similar AI-related information. It remains to be seen the extent to which federal agencies such as the Treasury coordinate their rulemaking processes and how any such rules will fit together.

5th Circuit Vacates the Private Fund Adviser Rules in Full

Jun 05 2024

By: Pablo J. Man, TJ Bright, Kenneth Holston, Christopher W. Phillips-Hart, and Tristen C. Rodgers

Earlier today, 5 June 2024, the US Fifth Circuit Court fully vacated the Private Fund Adviser Rules (PFAR) in a unanimous and highly anticipated decision curbing the Securities and Exchange Commission’s authority to regulate private funds. Absent a successful appeal of the decision, the PFAR will not come into effect.

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.

NFA Announces Effective Date for New Compliance Rule 2-52 and Related Guidance Re: Member Questionnaire

May 22 2024

By: Clifford C. Histed, Cheryl L. Issac, Matthew J. Rogers, and Wiley F. Cole

On 20 May 2024, the National Futures Association (NFA) announced that its recently finalized Compliance Rule 2-52, related Interpretive Notice 9082 and amended Bylaw 301 will go into effect on 15 October 2024. NFA members will be required to submit their Member Questionnaire (formerly, the Annual Questionnaire) at least annually, and sometimes more frequently, as required by the NFA. If an NFA member’s business operations materially change rendering previously provided information inaccurate or incomplete, the NFA member will be required promptly to update its Member Questionnaire. While NFA members may use their discretion to determine what constitutes a material change, Interpretive Notice 9082 provides illustrative guidance on this point.

SEC Adopts Enhanced Privacy Safeguards

May 17 2024

By: Rich Kerr, Sasha Burstein, and Brian Doyle-Wenger

On 16 May 2024, the US Securities and Exchange Commission (SEC) adopted amendments to Regulation S-P’s safeguards and disposal rules. The amendments are designed to address the expanded use of technology and corresponding risks that have emerged since the original adoption of Regulation S-P in 2000. The amendments expand the scope of information and broaden the number of customers protected under both rules. The safeguards and disposal rule will apply to “customer information”, which includes records that contain “nonpublic personal information” as defined in the existing rule. Additionally, the amended rule expands the applicability of the safeguards rule to include transfer agents, and the disposal rules to include all transfer agents including those registered with appropriate regulatory authorities other than the SEC.