December was a relatively busy month for global regulators as they assessed their performance during the coronavirus pandemic. In Australia, ASIC delivered its verdict against Westpac, one of the big-four banking groups. Similarly, the Securities and Exchange Commission (SEC) launched an onslaught against Ripple, the giant fintech company. As a leading financial services marketing agency, our team has rounded up the top regulation updates that happened in December and what lies ahead for January 2021.
ASIC verdict against Westpac
In 2019, a news report accused Westpac for having loopholes in its know-your-customer (KYC) and anti-money laundering (AML) policies. As a result, the firm was accused of enabling millions of dollars to flow through its vast network. This prompted a full-blown investigation by the Australian Securities and Investments Commission (ASIC).
In September, the company settled with ASIC, agreeing to pay more than $983 million. Further investigations continued. And in December, the bank said that the regulator would not take any action against it and the executives involved.
SEC files lawsuit against Ripple
In December, the SEC announced that it was filing a major lawsuit against Ripple and its former and current CEO. The regulator accused the company of running a financial security, XRP, without authorisation. This decision pushed more cryptocurrency exchanges to suspend XRP trading. It also pushed its price down by more than 50%. In a statement, the SEC said:
“We allege that Ripple, Larsen, and Garlinghouse failed to register their ongoing offer and sale of billions of XRP to retail investors, which deprived potential purchasers of adequate disclosures about XRP and Ripple’s business and other important long-standing protections that are fundamental to our robust public market system.”
In its response, Ripple said that XRP was a simple digital currency that is similar to BTC and ETH. It also said that other agents had found it to be compliant with the existing laws.
ESMA reiterates on Brexit issues
The European Securities and Markets Authority (ESMA) sent an update about key changes that will happen when the UK leaves the European Union. The two sides reached a deal that will prevent major changes on January 1, when the transition period ends.
Among the key changes will relate to the share trading obligations (STO), derivatives trading obligations (DTO), access to the UK central counterparties (CCPS), and settlement. There will also be changes to the credit rating agencies and trade repositories, cooperation agreements, and supervisory convergence. You can find key changes to expect here.
CySEC issues cryptocurrency regulations
In a statement in December, the Cyprus Securities and Exchange Commission (CySEC) said that it had unveiled the first regulations about cryptocurrencies. These rules are contained in Circular C417. They outline the key rules that Cyprus Investment Firms (CIFs) should follow so long as they want to offer these crypto investment services.
In the same month, the regulator gave a temporary reprieve to UK investment firms in the country. After the transition period ends, companies in the country will be able to operate there until December 2021.
After this, the firms will need to create a branch in the country if they wished to continue doing business there. This rule will affect 86 UK investment firms. CySEC said:
“CySEC has established a Temporary Permission Regime without physical presence for UK firms providing investment services solely to professional clients and eligible counterparties, in order to allow for the smooth transition to new contracts on a reverse solicitation basis.”
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