Regulations Round up – May 2020

As governments continued to respond to the coronavirus pandemic, regulators worked behind the scenes to safeguard the financial sector. As a leading financial services agency, our team has rounded up the top regulation updates that happened in April and what lies ahead for May 2020.

Short selling ban extended in Europe

The coronavirus pandemic led to significant market volatility in March. In response, a number of local regulators announced that they would suspend short selling for a month. These included regulators from France, Austria, Belgium, and Spain. In April, the regulators extended the suspension for one month, in a measure that was supported by ESMA. Still, as volatility in the market reduces, we believe that these restrictions may be halted in May.

CySEC focuses on transparency of securities financing transactions

On April 16,the Cyprus Securities and Exchange Commission (CySEC) published updates to the securities financing transactions. The updates said that entities must take necessary actions to ensure that they will implement and maintain policies and procedures during this reporting when the new standards take effect in July. Also, the members must sign and submit a form regarding these transactions. The options in the form are repurchase transactions, securities or commodities lending, margin lending transactions, and buy-sell back transactions.

ASIC emphasises transparency in capital raising

The Australian Securities and Investments Commission (ASIC) emphasised that it supported increased transparency and disclosure requirements when companies issue share purchase plans. This announcement followed a decision by the Australian Stock Exchange (ASX) to provide a waiver to companies as they dealt with the coronavirus pandemic. The regulator urged companies to consider best practices and ensure that all those involved in the transactions are well known. In a statement, ASIC’s director said:

“Directors should act in the best interests of the company in making fundraising decisions. They should consider not only speed and certainty of fundraising but also fairness considerations. Companies should be as transparent as possible and be prepared to explain to their shareholders the fundraising decisions they have made.”

In another statement, ASIC said that it would provide more time for unlisted companies because of the pandemic. The new deadline will expire on May 31 2020.

CFTC provides more relief to participants

In the United States, the Commodity Futures Trading Commission (CFTC) announced that it would provide more relief to participants in the industry. Most specifically, the regulator asked companies to waiver fingerprinting that is required to prevent criminal behaviours like money laundering. The goal was to make the dealers be able to provide services to their clients when most of their staff were working from home.

SEC focuses on fund valuation

The Securities and Exchange Commission (SEC) announced that it was proposing new rules to modernise fund valuation strategies. The goal of the new rules is to ensure that funds pay a correct price when making investments. Another goal was to ensure that these rules are modernised since they were last updated in 1970. SEC chair, Jay Clayton said:

“The way a fund values its investments is critical to our Main Street investors. It affects the fees they pay, the returns they receive, and the value of the fund shares they hold.  Today’s proposal would improve valuation practices, including oversight, thereby protecting investors and improving market efficiency, integrity and fairness.”

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