Regulations Round Up – August 2020

July was a good month in the financial markets. Global stocks, cryptocurrencies, and metals continued to rally while the US dollar tumbled. Economic data from around the world was also positive. For example, preliminary data showed that manufacturing and services PMIs rose to their highest levels this year. At the same time, regulators continued to do what they do best. As a leading financial services agency, our team has rounded up the top regulation updates that happened in July and what lies ahead for August 2020.

OCC clarifies on banks role in cryptocurrencies

In a statement in July, the Office of the Comptroller of Currency said that the banks and savings association had the authority to provide crypto custody services. The office said that it had recognised the important role played by digital currencies in the modern society. As such, it believes that it is in the interest of both sides for banks, to provide these services. In a statement, Brian Brooks, the acting head of the agency said:

“This opinion clarifies that banks can continue satisfying their customers’ needs for safeguarding their most valuable assets, which today for tens of millions of Americans includes cryptocurrency.”

European banks dividends frozen

Banking investors are about to suffer a longer dividend drought than expected. In a statement, the European Central Bank (ECB) ordered banks in the block to freeze dividend payments until at least January. The banks were also requested to be “extremely moderate” on staff bonuses.

The announcement came after all banks in the bloc allocated billions of dollars to nonperforming loans. In a statement, Andrea Enria, the chair of the bank’s supervisory board said:

“We know investors have not been particularly pleased with our decision, but we think it is necessary action to take at this stage of heightened uncertainty. It is important to ask banks to focus their capital resources on lending and loss absorption.”

ESMA focuses on waivers from pre-trade transparency

In an opinion published in March, ESMA provided guidance on pre-trade transparency waivers for equity and non-equity instruments. The new document replaced the previous Committee of European Securities Regulators that were in MIFID I. In the statement, ESMA said that National Competent Authorities (NCAs) will need to notify the regulator of the intended use of each individual waiver and provide more information on its functioning.

In addition to this waiver, ESMA also published the MIFID/MIFIR annual review report. In the report, the regulator suggested that the European Commission should move to the next stage for the trade percentiles that determine pre-trade sizes specific to financial instruments for bonds. Also, it suggested an addition criterion for the average daily number of trades used for the quarterly liquidity assessment of bonds.

ASIC sends minor update on RG97

Meanwhile, in Australia, ASIC released a minor update on the Regulatory Guide 97 on disclosing of fees and costs in periodic statements and product disclosure statements (PDs). The legislation, which was passed in 2019, was mostly targeted to providers of superannuation products and managed investment products. In the amendment, ASIC said that all PDs issued on or after September 30 2022 will need to comply with the requirements. It also said that issuers could choose to apply the new requirements from 30 September this year. It also said that:

“Once an issuer has elected to apply the new requirements, all subsequent PDSs for that financial product must comply with the new requirements.”

FCA launches more tools to protect consumers

In a statement, the Financial Conduct Authority (FCA) said that it had launched an updated financial service register to provide more services to customers. The register, which had 7 million unique users in 2019 helps customers to verify people and companies in a bid to protect them from fraud. The key enhancements in the new register include simpler language, clearer navigation and design, and mobile optimisation.

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