Regulations Round Up – March 2024

The financial market was vibrant in February as stocks and cryptocurrencies surged to new highs. The recently-launched spot Bitcoin ETFs continued to add assets during the month as focus shifted to the applications for a spot Ethereum ETF. As an agency specialising in financial services marketing, our team has rounded up the biggest changes that happened last month and what’s coming up in March.

Companies apply for Ethereum ETFs

One of the most consequential events of the year was the approval of eleven spot ETFs by the Securities and Exchange Commission (SEC). Following this approval, these companies applied for a spot Ethereum ETF. The most notable applicant was Franklin Templeton, a large asset management company with over $1.5 trillion in assets under management. The expectation is that the agency will approve these funds since Ethereum is the second-biggest cryptocurrency in the world.

Other companies that have filed for a spot Ether ETF are Blackrock, VanEck, and Fidelity. However, some analysts warn that the SEC could reject these applications since it sees ETH as a financial security because of its staking features.

FCA focuses on fees charged by advisors

In the UK, the Financial Conduct Authority (FCA) continued to focus on the investment advice industry. In a letter to the 20 biggest companies, the FCA said that it could start cracking down on their fees to customers. The letter was in accordance to the Consumer Duty regulations that were implemented in 2023 as part of the agency’s efforts to protect customers. According to these rules, companies must always act in good faith towards their customers and aim to avoid causing foreseeable harm.

Companies in the industry have warned that these rules will hurt their bottom lines in the foreseeable future. They have also blamed these rules for the collapse of their stock prices.

Chinese regulators and DMA

The Chinese stock market remained under pressure in February as stocks continued their sell-off. In line with this, regulators moved to help boost confidence among investors. One approach by regulators was to put controls on Direct Market Access (DMA) by quantitative hedge funds. The regulators barred these funds from placing sell orders and from cutting stock positions in their leveraged market-neutral funds.

These moves happened as Chinese stocks shed over $7 trillion in value in the past few months. In a statement, the China Securities Regulatory Commission said that the move were necessary to prevent manipulation in the country. China has also taken measures to limit short selling, a process where investors seek to benefit when stocks and other assets drop. In another big news, Beijing decided to replace its securities regulator in a bid to boost confidence in the market.

SEC continues to target hedge funds

The Securities and Exchange Commission, under Gary Gensler, has been accused of overreach among major market participants. In February, the agency published new rules targeting hedge funds. In these rules, the agency is aiming to increasing oversight of these funds. For example, the agency will require hedge funds to register with the agency as dealers. This registration will help the agency to better monitor the market for government debt.

Some analysts warn that these rules will see more companies move away from the Treasuries market, leading to more instability.

Taiwan to allow ETF trading

The Taiwan Financial Supervisory Commission (TFSC) announced that it was finalising plans to allow active ETFs in the city. The agency has been studying the assets and how they fit in developing the financial services industry. It has already collected views from key players in the industry.

Taiwan will join other companies that have launched ETFs in the Asian region. Singapore and Japan have already permitted these assets as demand rises. The most recent data shows that the total valuation of all ETFs in Taiwan has jumped by over 64% in the past 12 months to over $3.8 trillion.

ASIC focuses on predatory lending

In Australia, ASIC announced that it would deepen its focus on companies it accuses of doing predatory lending. The agency has already sent letters to over 30 large lenders who have been in the industry for a while.

It asked them to ensure that they were following the law to ensure that they appropriately support customers in hardship. It has also sued some of these companies, seeking financial compensation.

FCEE tackles money laundering in the US

The Treasury Department’s Financial Crimes Enforcement Network (FCEE) intensified its battle against money laundering. In a statement, the agency said that it would require investment advisors to start detecting and reporting suspected money laundering to the government.

While many big investment advisors are already required to disclose these events, more than 17,000 state-registered advisors are not required to do that. These rules will apply to these advisors.

According to the department, these firms will need to implement anti-money laundering (AML) and counterterrorism financing compliance program and file activity reports with FinCEN. They will also be required to keep records and promote sharing between FinCEN and other law-enforcement agencies.

SFC prepares crypto regulations

Hong Kong has become one of the most friendly places for crypto companies. Regulators have welcomed many companies in the industry as Beijing has continued its crackdown. However, the securities and Futures Commission (SFC) is now planning new laws to crackdown on some sectors in the industry.

In this case, the city plans to target over 450 shops, ATMs, and websites that provide crypto services. The move is expected to reduce the number of these platforms in the city with the goal of reducing crimes like money laundering and terrorism financing.

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