Regulations Round Up – July 2020

Global regulators continued to take more measures to protect the public as the coronavirus pandemic continues. As a leading financial services agency, our team has rounded up the top regulatory updates in June and what to expect going forward.

ESMA guidance on MIFID II compliance

The European Securities and Markets Authority (ESMA) started implementing the comprehensive MIFID II regulations in 2018. Since then, the regulator has been tweaking and providing more updates on key issues. In June, it published the final guidance on MIFID’s compliance functions. The new guidelines replaced the existing functions published under MIFID I in 2012. The updated document was targeted towards investment firms, credit institutions, and firms that provide advise to clients. You can read the 44-page report here.

ESMA provides guidance on NFRD reporting

In June, ESMA provided more guidance on Non-Financial Reporting Directive (NFRD). The statement was in response to queries by the European Commission. In the report, ESMA recommended standardising disclosure requirements. Also, widening the range of companies required to report, and to ensure consistency between legislative initiatives on sustainable finance. In 2019, ESMA found that the reporting standards had some gaps. For example, they were not standardised, were based on wide reporting frameworks, and did not always meet expectations. You can read the recommendations here.

BaFin in trouble over Wirecard

In June, BaFin, the German financial regulator got into trouble after Wirecard filed for bankruptcy. For starters, Wirecard was the second biggest fintech company in Germany. Just two years ago, the company replaced Commerzbank in the prestigious DAX index. The company’s troubles started last year when a whistle blower talked to the Financial Times about the inflated income statement. With the firm now in bankruptcy protection, BaFin is under pressure to explain how it missed key red flags.

ASIC warns of rising fraud cases during the pandemic

In a statement in June, the Australian Securities and Investment Commission (ASIC) warned of the rising number of investment scams in the country. It noted that these scams had jumped by up to 20% between March and May. Some of the scams these scams are related to crypto assets, term deposits, and scams that start through romance websites. The commission said:

‘Australians are at risk of being scammed and losing money, and scammers are using age-old tactics in new and sophisticated ways to target people.’

FCA makes mini-bond marketing ban permanent

Early this year, the Financial Conduct Authority (FCA) banned the marketing of mini bonds in a bid to protect customers from the risky assets. In June, the regulator announced that it was making the ban permanent. To starters, mini bonds are debt that allow people to invest in companies and receive  a fixed return over a period. In the statement, the FCA said:

‘Since we introduced the marketing ban we have seen evidence that firms are promoting other types of bonds which are not regularly traded to retail investors. We are very concerned about this and so we have proposed extending the scope of the ban.’

The FCA also announced new measures to protect customers who are unable to pay back their mortgage payments.

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