Regulations Round-Up – February 2023

January was good for the financial market as stocks and cryptocurrencies rebounded. The Nasdaq 100 index moved into a bull market while Bitcoin rose by about $9,000 to $24,000. There was also some important headlines on financial market regulations around the world. As an agency specialising in financial marketing, our team has rounded up the top regulation changes in January, and now we’re looking at what’s coming up in February 2023.

FCA targets bloggers

Bloggers and influencers have become a major issue in the past few years. In 2022, the SEC settled with Kim Kardashian for promoting a cryptocurrency in her Instagram accounts. The Financial Conduct Authority (FCA) is also battling the situation.

In a statement, the FCA said that it had forced social media companies to amend or remove 8,252 promotions in 2022, a 14 times increase from the previous year. It had also published over 1,800 alerts to prevent customers from losing money to scams.

There are concerns that more people in the UK are exposed to these scams now that the cost of living has surged in the past few months. As a result, many are investing in risky assets like cryptocurrencies and forex. The FCA said:

This year, we will continue to put the pressure on people using social media to illegally promote investments, which put people’s hard-earned money at risk.

UK unveils crypto regulations

The UK has been working to attract more technology investments in the country. Its leaders believe that Brexit plays an important role in helping the country launch friendly regulations in the country. The country unveiled sweeping proposals that will pull a significant part of the crypto industry into the regulatory regime that applies to traditional finance.

The new consultation paper will close in April and will then be followed by the next part of its implementation process. These regulations differ from those proposed by the European Union, which are known as Markets in Crypto-assets (Mica) regulations. In a statement, the UK Treasury said:

We are bringing stablecoin and crypto asset activities into the existing financial services framework via secondary legislation. This means that the UK will be able to update regulation as the sector evolves, rather than hard-coding detailed rules in legislation like Mica.

SEC presses for more private placement rules

In the United States, the Securities and Exchange Commission (SEC) continued to assess the failures that led to the collapse of FTX. At its peak, FTX was the second-biggest crypto exchange by valuation. In a statement, the SEC urged for more and better disclosures for investors who buy company stock through private placement.

A private placement is when companies raise money outside the public market. In the past few years, many investors in private companies have lost billions of dollars. Top companies that have cost them huge sums of money because of weak disclosures are WeWork and Theranos.

Coinbase settlement with regulators

Coinbase touts its regulatory credentials in its marketing programs. Its books are audited by Deloitte, the biggest audit firm in the world. Also, as a publicly-traded company, it is regulated by the Securities and Exchange Commission (SEC).

In January, the company reached an agreement with the New York State Department of Financial Services (SDFS) to pay $50 million for failing to conduct good anti-money laundering (AML) and Know Your Customer (KYC) measures. These lags helped to promote money laundering, fraud, and narcotics trafficking. The company will also need to invest another $50 million to upgrade its systems.

EU considers ban of inducements

In the European Union, regulators in Brussels pressed for an EU-wide ban on inducements in a bid to promote more retail investments in exchange-traded funds (ETFs). In a statement, Mairead McGuinness, the region’s commissioner for financial stability, said that inducements paid to financial advisors were leading to poor outcomes for retail investors in the bloc.

As a result, these retail investors were being steered to invest in expensive products while better and cheaper alternatives existed. In its research, the department said that products in which inducements were paid were about 35% expensive for retail investors than those without them. However, opponents of these measures cite the UK, where the ban on inducements led to a gap for consumers with lower levels of wealth.

SEC plans to ease climate-disclosure rules

In the US, the Securities and Exchange Commission (SC), under the leadership of Gary Gensler, has been working to incorporate climate-change issues in its regulations. Some of its rules have been controversial with corporate leaders, who argue that they increase their regulatory burden.

Now, the SEC is considering softening the rules that force companies to disclose the effects of weather and other costs related to global warming. The final version of the agency’s document will be published later this year. However, these rules will likely find a hostile congress now that Republicans control the House of Representatives.

ASIC was monitoring FTX

A major regulatory news item in January was the revelation that the Australian Securities and Exchange Commission (ASIC) was concerned about FTX months before the crypto exchange imploded. The company, which was operating in Australia using an AFSL license, had over 30,000 customers in the country. By holding the license, many customers thought that the company was regulated by ASIC.

India to regulate index providers

Indices are major financial instruments with over $42 trillion in assets. India is becoming a major player in the indices business. Therefore, authorities in the country are seeking to regulate the biggest companies in the sector like S&P, FTSE, and MSCI. For example, some of these regulations will cover indices that cover Indian assets. For example, indices on non-Indian equities will be regulated in the country even though they are not regulated in their home markets.

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