Regulatory Changes, Financial Markets – Week 52

Horizon Scanning, Regulatory Update, Regulatory Changes

Regulatory Updates – 22nd December 2023 to 02 January 2024

Stay ahead of the curve in the fast-paced world of finance! Dive into our curated digest of key regulatory changes impacting the global financial landscape.

Central Bank of The Bahamas (CBB) πŸ”—

The Central Bank of The Bahamas has announced a relaxation of lending rules for residential mortgages, particularly focusing on the minimum equity injection requirement. Effective immediately, the requirement for mortgage indemnity insurance has been eliminated, allowing borrowers to qualify for reduced equity or down payment amounts without the insurance, which previously mandated a minimum down payment of 15 percent. Financial institutions are now permitted to vary or set lower down payment requirements for residential mortgages based on their internal risk assessment frameworks. However, institutions must ensure that borrowers maintain a prudent total debt service ratio below 50 percent, with exceptions for debt restructurings and consolidations. πŸ”—

Central Bank of Nigeria (CBN) πŸ”—

The Central Bank of Nigeria’s Financial Policy & Regulation Department has issued a circular to all banks and financial institutions outlining new guidelines for the operations of bank accounts for Virtual Assets Service Providers (VASPs). While a previous circular from February 2021 restricted banks from operating accounts for cryptocurrency service providers due to money laundering and terrorism financing risks, the current global trend and regulatory developments necessitate the regulation of VASPs, including cryptocurrencies and crypto assets. The Financial Action Task Force (FATF) updated its recommendations in 2018, and the Money Laundering (Prevention and Prohibition) Act, 2022 recognizes VASPs as part of the financial institution definition. πŸ”—

Commission de Surveillance du Secteur Financier (CSSF), Luxembourg

  1. Guidelines on cross-border marketing notification and de-notification procedures πŸ”—

These guidelines outline the procedures to be followed by Luxembourg undertakings for collective investment and investment fund managers in relation to pre-marketing and cross-border marketing. The document specifies the documentation required for notification or de-notification submissions, including the contents of the Alternative Investment Fund (AIF) and Undertakings for Collective Investment in Transferable Securities (UCITS) notification files. The submission process can be done through the eDesk portal or an Application Programming Interface (API) transmission. Contact information is provided for inquiries. The scope encompasses various entities, such as Luxembourg domiciled UCITS, Luxembourg AIFMs, and managers of Luxembourg EuVECAs or EuSEFs, covering marketing, de-notification, and pre-marketing procedures. πŸ”—

  1. Council Regulation (EU) 2023/2919 πŸ”—

Council Regulation (EU) 2023/2919, dated 21 December 2023, amends Regulation (EU) 2022/2576 concerning measures adopted during the gas supply crisis resulting from Russia’s war of aggression against Ukraine. The amendment extends the period of application of Regulation (EU) 2022/2576 beyond the original deadline of 30 December 2023. The regulation was initially introduced to address the impacts on gas prices, enhance security of supply, and promote solidarity among EU Member States. A review conducted by the Commission in September 2023 found that Regulation (EU) 2022/2576 played a crucial role in stabilizing the gas market and ensuring sufficient gas supply to the Union. The extension is deemed necessary due to persisting challenges in energy supply and the potential risks of a crisis. The amended regulation applies until 31 December 2024, introducing temporary and targeted measures to manage gas supply, demand, and pricing dynamics. πŸ”—

  1. Council Regulation (EU) 2023/2920 πŸ”—

Council Regulation (EU) 2023/2920, issued on 21 December 2023, amends Regulation (EU) 2022/2578, extending the application period of the temporary market correction mechanism (MCM) for derivatives linked to the Union’s virtual trading points (VTPs). The MCM, established to prevent excessively high prices for gas derivatives, is activated under specific conditions, including a threshold breach in the front-month Title Transfer Facility (TTF) derivative settlement price. Despite reports from ESMA and ACER indicating no negative impact on gas market dynamics, the amendment cites persisting difficulties in the Union’s energy supply security, with gas shortages and high prices posing risks, justifying the extension until 31 January 2025 to address potential crises and maintain stability in the face of geopolitical uncertainties and market fragility. πŸ”—

  1. Commission Delegated Regulation (EU) 2023/2772 πŸ”—

Commission Delegated Regulation (EU) 2023/2772, dated 31 July 2023, supplements Directive 2013/34/EU concerning annual financial statements, consolidated financial statements, and related reports of certain undertakings. The regulation addresses sustainability reporting standards, as amended by Directive (EU) 2022/2464. Large undertakings, small and medium-sized undertakings with securities on EU regulated markets, and parent undertakings of large groups are mandated to include information in a dedicated section of their management report or consolidated management report regarding the impacts of sustainability matters. The regulation specifies the information undertakings must report, considering technical advice from EFRAG, and ensures coherence with the Union’s legal framework and global standard-setting initiatives. The common sustainability reporting standards outlined in Annexes I and II are applicable from 1 January 2024 for financial years starting on or after that date. The regulation entered into force on the third day following its publication in the Official Journal of the European Union. πŸ”—

  1. FAQ concerning the Luxembourg Law of 12 July 2013 on alternative investment fund managers – version 21 πŸ”—

The CSSF (Commission de Surveillance du Secteur Financier) FAQ document provides guidance on key aspects of the Alternative Investment Fund Managers Directive (AIFMD) regulation in Luxembourg. It is designed for managers of alternative investment funds (AIFMs) and alternative investment funds (AIFs) established in Luxembourg. The FAQs should be considered alongside ESMA’s (European Securities and Markets Authority) questions and answers related to the AIFMD Regulation, which are periodically updated on ESMA’s website. Additionally, the European Commission’s webpage on Questions on Single Market Legislation provides answers to questions regarding the transposition of Directive 2011/61/EU on Alternative Investment Fund Managers. The CSSF reserves the right to modify its approach to any covered matter and advises regular checking of its website for updates and changes. πŸ”—

  1. FAQ concerning the Luxembourg Law of 17 December 2010 relating to undertakings for collective investment – version 17 πŸ”—

The CSSF (Commission de Surveillance du Secteur Financier) FAQ document provides insights into key aspects of the laws and regulations governing Undertakings for Collective Investment in Transferable Securities (UCITS) in Luxembourg. It is primarily intended for management companies overseeing UCITS established in Luxembourg. The FAQs should be considered alongside ESMA’s (European Securities and Markets Authority) questions and answers related to the application of UCITS Directive, which are periodically updated on ESMA’s website. The document emphasizes that specific FAQs address alternative investment fund managers. The CSSF retains the right to modify its approach to any covered matter, and stakeholders are encouraged to regularly check the CSSF website for updates and changes on matters of importance. πŸ”—

  1. Guidelines on internal policies, procedures and controls to ensure the implementation of EU and national financial sanctions πŸ”—

The European Banking Authority (EBA) has launched a public consultation on Guidelines for implementing Union and national restrictive measures. These measures, including financial sanctions and embargoes, are binding on entities within Member States. The Guidelines aim to establish a common understanding among payment service providers (PSPs), crypto-asset service providers (CASPs), and their supervisors on steps to comply with restrictive measures. One set of draft Guidelines addresses financial institutions and prudential supervisors, focusing on senior management, internal governance, and risk management. The second set is aimed at PSPs and CASPs, providing guidance on compliance during fund and crypto-asset transfers, emphasizing KYC, screening, and due diligence. The consultation period runs until March 25, 2024, and the EBA will conduct a virtual public hearing on February 8, 2024. πŸ”—

  1. Circular CSSF-CPDI 23/39 πŸ”—

The Circular CSSF-CPDI 23/39 outlines the survey on the amount of covered deposits held by credit institutions, POST Luxembourg, and Luxembourg branches of credit institutions with third-country headquarters as of December 31, 2023. The collected data assists the Conseil de protection des dΓ©posants et des investisseurs (CPDI) in determining contributions for the Fonds de garantie des dΓ©pΓ΄ts Luxembourg (FGDL) to maintain its target level in 2024 and calculate contributions to the additional financial means buffer in 2024. The circular provides definitions of “covered deposits” and “eligible deposits” and instructs on exclusions and treatments of specific account types. Institutions are required to report the data by January 18, 2024, via the CSSF eDesk platform or structured file through S3 protocol. The survey’s reporting through E-File or SOFiE has been deactivated. The document emphasizes the importance of accuracy and provides a user guide for technical procedures. πŸ”—

Deutsches Rechnungslegungs Standards Committee e.V. (DRSC), Germany πŸ”—

European Financial Reporting Advisory Group (EFRAG) has released three draft documents on ESRS Implementation Guidance related to Set 1 ESRS for public consultation. These drafts cover materiality assessment implementation guidance, value chain implementation guidance, and detailed ESRS datapoints implementation guidance. The feedback period is open until February 2, 2024, and constituents are encouraged to participate using web-based surveys accessible on EFRAG’s website. The documents provide guidance and explanations on disclosure requirements for materiality assessment, value chain, and a comprehensive list of detailed disclosure requirements for Set 1 ESRS. πŸ”—

Dubai Financial Services Authority (DFSA) πŸ”—

The Dubai Financial Services Authority (DFSA) Board has announced amendments to the DFSA Rulebook, effective from January 1, 2024, as part of the Anti-Money Laundering, Counter-Terrorist Financing, and Sanctions Module (AML) Instrument (No. 365) 2023. This instrument repeals and replaces the existing AML module with an updated version. The detailed amendments are available in the provided appendix. Stakeholders are encouraged to review the changes, accessible on the DFSA website under the “Amendments to Legislation” section. Earlier versions can be found in the archive for reference. The amendments follow the conclusion of the consultation period on proposed legislative changes outlined in Consultation Paper 151. πŸ”—

Federal Register, US

  1. Final changes to the Uniform Rules of Practice and Procedure πŸ”—

The Office of the Comptroller of the Currency (OCC), Board of Governors of the Federal Reserve System (Board), Federal Deposit Insurance Corporation (FDIC), and the National Credit Union Administration (NCUA) have jointly adopted final changes to the Uniform Rules of Practice and Procedure, recognizing the use of electronic communications in all aspects of administrative hearings and enhancing the efficiency and fairness of administrative adjudications. The changes, effective from April 1, 2024, aim to modernize the rules to reflect the Agencies’ experience in administrative litigation and address the shift towards electronic communication in administrative hearings. The OCC is also consolidating its Uniform and Local Rules, applying one set of rules to both national banks and Federal savings associations. The Agencies are amending their rules to update, improve, or clarify certain sections. πŸ”—

  1. Bad Debt Deductions for Regulated Financial Companies and Members of Regulated Financial Groups πŸ”—

The Internal Revenue Service (IRS) and Treasury have issued proposed regulations providing guidance on determining the worthlessness of a debt instrument for federal income tax purposes. The regulations aim to update the standard for conclusively presuming when a debt instrument held by a regulated financial company, or a member of a regulated financial group is worthless. The proposed regulations will impact regulated financial companies and members of regulated financial groups holding debt instruments. Interested parties can submit written or electronic comments and requests for a public hearing until February 26, 2024, following the provided instructions. πŸ”—

  1. Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change πŸ”—

On December 12, 2023, Cboe BYX Exchange, Inc. (BYX) filed a proposed rule change with the Securities and Exchange Commission (SEC) to amend its Fees Schedule. Specifically, BYX proposes to increase the monthly fee for 10 Gb physical ports from $7,500 to $8,500 per port, citing the need to maintain and improve its market technology and services. The proposed fee change is noted to be in line with or lower than amounts assessed by other exchanges for similar connections. BYX highlights the equitable allocation of fees based on bandwidth consumption, with the value of the 10 Gb port being higher due to broader access to the Exchange’s products and services. The Exchange asserts that the proposed fee increase is reasonable and consistent with the competitive forces governing access fees in the market. The SEC is soliciting comments on the proposed rule change until January 18, 2024. πŸ”—

  1. Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing of Amendment No. 3 and Order Granting Accelerated Approval of a Proposed Rule Change πŸ”—

Cboe Exchange, Inc. (Exchange) on April 10, 2023, filed a proposed rule change seeking to make permanent its Flexible Exchange Options (FLEX Options) pilot program. The pilot program allows PM-settled Flexible Exchange Index Options (FLEX PM Third Friday Options) to expire on or within two business days of the third Friday of the month expirations for non-FLEX Options. The proposal was published for comment in the Federal Register on April 28, 2023. The Securities and Exchange Commission (SEC) had previously designated extended periods for approval or disapproval and instituted proceedings to determine whether to approve or disapprove the proposed rule change. Amendments No. 1, 2, and 3 were subsequently filed by CBOE, with Amendment No. 3 prompting the SEC to publish a notice soliciting comments on the amendment and approving the proposed rule change, as modified by Amendment No. 3, on an accelerated basis. πŸ”—

  1. Privacy Act Regulations; Correction πŸ”—

The Department of the Treasury recently published a final rule that corrects and updates its regulations under the Privacy Act. The final rule modifies the list of Treasury systems of records that are exempt from certain Privacy Act provisions. It adds several Treasury systems of records to the list of exemptions claimed under the Privacy Act subsections for law enforcement, investigatory material, testing material, and statistical records. The final rule also updates the names and descriptions of some existing exempt Treasury systems of records. These technical amendments ensure the Treasury’s Privacy Act regulations accurately reflect the exemptions currently claimed for its systems of records that contain sensitive law enforcement, investigatory, testing, and statistical records. πŸ”—

  1. Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Designation of Longer Period for Commission Action on Proposed Rule Change πŸ”—

The Financial Industry Regulatory Authority, Inc. (FINRA) has proposed a rule change seeking to amend its rules to allow the dissemination of information on individual transactions in U.S. Treasury Securities reported to FINRA’s TRACE on an end-of-day basis, with specified dissemination caps for large trades. The proposal also includes amendments to FINRA Rule 7730 to incorporate U.S. Treasury Securities within the existing fee structure for end-of-day and historic TRACE data. Published for comment in the Federal Register on November 9, 2023, the original 45-day review period was set to end on December 24, 2023. The Securities and Exchange Commission, finding it necessary to extend the review period, designates February 7, 2024, as the new deadline for approval, disapproval, or initiation of proceedings concerning the proposed rule change πŸ”—

  1. Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change πŸ”—

On December 12, 2023, Cboe BZX Exchange, Inc. filed a proposed rule change with the Securities and Exchange Commission (SEC) seeking amendments to its Fee Schedule. The proposed changes include modifications to Add/Remove Volume Tiers, Lead Market Maker Pricing Tiers, and discontinuation of the NBBO Setter Program. The amendments aim to decrease the Exchange’s expenditures related to transaction pricing while remaining consistent with its goal of encouraging added liquidity. The proposal suggests lowering enhanced rebates for certain tiers, eliminating fee codes associated with Lead Market Maker Add Volume Tiers, and discontinuing specific programs. The Exchange believes these changes are in line with the statutory requirements and will not unduly burden competition. Interested parties are invited to submit comments on the proposed rule change until January 16, 2024. The SEC has already deemed the rule change effective. πŸ”—

Department for Business and Trade, GOV.UK, United Kingdom πŸ”—

The UK Government has issued a call for evidence, closing on January 17, 2024, seeking input on its Smarter Regulation program, introduced in May 2023. The program aims to enhance regulatory efficiency, reduce burdens, and foster innovation and growth. The call emphasizes three pillars: minimizing regulatory burden, making regulation a last resort, and ensuring effective regulatory bodies. Stakeholders are invited to provide feedback on regulatory agility, proportionality, and consistency. The government has already announced reforms, including over 1,000 changes to Retained EU Law, a Better Regulation Framework, and consultations on various sectors. The call seeks insights from businesses, consumers, and regulators to shape a world-leading regulatory system. πŸ”—

Financial Services and the Treasury Bureau (FSTB), Hong Kong πŸ”—

The Financial Services and the Treasury Bureau (FSTB) has released a paper summarizing the outcomes of a public consultation on the proposal to establish a policyholders’ protection scheme (PPS). The consultation period, running from December 30, 2022, to March 31, 2023, gathered feedback from insurers, professional bodies, and the public. Of the 14 submissions received, the majority expressed support for the PPS and its key features. The FSTB, along with the Insurance Authority, engaged with industry representatives and plans to refine the proposal based on stakeholders’ input. Preparatory work for the PPS, including legislative amendments, will commence to enhance policyholder protection in case of insurer insolvency. πŸ”—

Hong Kong Monetary Authority (HKMA) πŸ”—

The Banking Policy Department has announced the publication of several rules in the Gazette, including the Banking (Capital) (Amendment) Rules 2023, Banking (Disclosure) (Amendment) Rules 2023, Banking (Exposure Limits) (Amendment) Rules 2023, and Banking (Liquidity) (Amendment) Rules 2023. These rules primarily aim to implement the Basel III final package and incorporate consequential updates and changes. Notably, the BCAR introduces amendments to enhance certain provisions of capital rules, address banks’ risk exposures, and introduce the option of a positive neutral countercyclical capital buffer. The rules are set to undergo negative vetting at the Legislative Council, with provisions associated with Basel III expected to come into operation on April 1, 2024, and other provisions on a date to be appointed, currently intended for January 1, 2025. πŸ”—

Financial Service Agency (FSA), Japan

  1. Cabinet Office Ordinance (draft) that partially amend the terms of consolidated financial statements, style and format and creation methods πŸ”—

The Financial Services Agency (FSA) has announced the compilation of a draft Cabinet Office Ordinance, proposing partial revisions to the Regulations Concerning Terminology, Forms, and Preparation Methods of Consolidated Financial Statements. The amendments respond to changes in Accounting Standard No. 27 by the Accounting Standards Board (ASBJ) and include adjustments to specify corporate accounting standards based on standards published by the Business Accounting Standards Board and the International Accounting Standards Board up to December 31, 2020. The enforcement date of the proposed amendment will be effective upon promulgation. Stakeholders are invited to provide opinions via mail or the e-Gov website, with disclosure considerations outlined for submitted opinions. The FSA emphasizes refraining from providing opinions over the phone and notes that personal information may be used for clarification purposes. πŸ”—

  1. Guidelines for Management Guarantees πŸ”—

The Financial Services Agency (FSA) emphasizes the importance of disseminating and establishing the “Guidelines for Management Guarantees” as integral lending practices, urging financial institutions to actively employ them. The FSA, with the goal of further encouraging guideline utilization, has compiled, and published the results of private financial institutions’ use of the guidelines from April 2022 to the end of September 2022. The announcement includes access to detailed records in both Excel and PDF formats, as well as a graphical representation of the utilization outcomes. The FSA notes that the provided information represents the current aggregated value, subject to potential changes based on future scrutiny. πŸ”—

  1. Cabinet Orders and Cabinet Office Ordinances related to the 2020 Amendment to the Payment Services Act πŸ”—

The Financial Services Agency (FSA) has released details of the Cabinet Orders and Cabinet Office Ordinances related to the 2020 Amendment to the Payment Services Act. The amendment primarily focuses on electronic payment methods and exchange transaction analysis businesses. It establishes regulations for specific trust beneficiary rights, prepaid payment instruments, and operations of electronic payment method businesses. The FSA encourages feedback and opinions on the proposal, and interested parties can submit comments by January 31, 2020, either by mail or through the e-Gov website. The FSA will disclose the names of individuals or organizations providing opinions upon request, with provisions for anonymous submissions. πŸ”—

Monetary Authority of Singapore (MAS)

  1. ID 20/23 Issuance of Notice for Recovery and Resolution Planning for Insurers (“MAS Notice 134”) and Response to Feedback on Consultation Paper πŸ”—

The Monetary Authority of Singapore (MAS) has issued Circular No: ID 20/23 on December 29, 2023, announcing the issuance of MAS Notice 134, which outlines the requirements for recovery and resolution planning for insurers. The notice, applicable to insurers notified by MAS, particularly domestic systemically important insurers (D-SIIs), aims to enhance preparedness for recovery and resolution. MAS expressed gratitude for the feedback received during the consultation period and has made the MAS Notice 134 and the response available on its website for reference. Insurers are advised to contact their company’s liaison officer at MAS for any inquiries. πŸ”—

  1. Deposit Insurance and Policy Owners’ Protection Schemes (Deposit Insurance) Regulations 2011 πŸ”—

The regulatory update pertains to the Deposit Insurance and Policy Owners’ Protection Schemes (Deposit Insurance) Regulations 2011, which outline the requirements for asset maintenance, operational preparedness, register maintenance, and disclosure related to the Deposit Insurance Scheme. The scheme aims to safeguard depositors in the event of a full bank or finance company failure. The recent amendment, effective as of December 31, 2023, introduces changes to the existing regulations. The amendment likely addresses evolving needs in the financial sector, potentially enhancing asset protection, operational readiness, and other aspects to ensure the continued effectiveness of the Deposit Insurance Scheme. The update builds upon previous amendments implemented in 2018 and 2016, with the original Deposit Insurance and Policy Owners’ Protection Schemes Act coming into operation on May 1, 2011. πŸ”—

NASDAQ Stock Market, US πŸ”—

The Nasdaq Stock Market LLC has submitted a regulatory proposal, as per Section 19(b)(1) of the Securities Exchange Act of 1934, to amend Nasdaq Rule 4758(a)(1)(A). The proposed amendment includes the addition of a user-specific routing option applicable to the RFTY routing strategy and the correction of typographical errors in Equity Rules 4703 and 4758. The new routing option, termed “User Specific,” allows users to designate or exclude destinations in Nasdaq Market Centre’s routing table, determine the sequence of accessing destinations, and choose price and peg instructions on a per-venue basis. The proposal aims to provide users with greater control over order execution while correcting minor errors in existing rules. The amendment is set to be implemented in the fourth quarter of 2023, and the Exchange believes it aligns with the Securities Exchange Act’s objectives to promote fair markets, protect investors, and remove impediments to a free and open market. πŸ”—

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