Regulations Roundup – June 2023

The financial market remained on edge in May as the focus shifted to the US debt ceiling issue. After weeks of tense negotiations, Speaker Kevin McCarthy and the White House agreed to a deal that will raise the debt ceiling until 2025 and shrink the budget deficit. Meanwhile, cryptocurrency prices pulled back while American technology equities jumped to the highest level in months. As an agency specialising in financial marketing, our team has rounded up the top regulation changes in May, and now we’re looking at what’s coming up in June 2023.

European Commission targets live trading databases

European exchanges have been on edge in the past few years as the number of European companies listing in the US rise. While liquidity in the United States has jumped by 40% in six years to 2022, it has remained relatively flat in Europe.

In a statement, the European Commission said that it was considering tough minimum turnover targets for companies running live stock information. According to the statement, if a data provider fails to meet the target for two years, it will withdraw its tender. The commission’s goal is to bundle together trading information like sizes and price and make them more transparent. However, an association of key exchanges said that switching data providers every two years will be difficult and inefficient.

The commission has already started the tendering process of the tape, with potential winners being Euronext, Deutsche Boerse, and Nasdaq.

FRC tough conditions for directors

In the UK, the Financial Reporting Council (FRC) proposed new rules meant to strengthen corporate governance in the country. The new rules, which are seen as being more business-friendly, will see companies change how they produce financial reports.

For example, directors will need to disclose material weaknesses or failures in their controls. The rules will also strengthen company reporting on clawback arrangements affecting directors’ pay in the event of misconduct. The government has been working to boost audit and governance practices for large and small companies. These new rules will apply to blue-chip companies listed in the LSE.

Brussels and London to collaborate on regulations

In May, the European Commission said that it will deepen its collaboration with London on the regulation of the financial sector. The commission said that it had adopted a draft memorandum of understanding that will create the framework for voluntary regulatory cooperation with London. This memorandum will need to be ratified by EU member states.

Despite Brexit, London, and Brussels have continued to collaborate on finance because of how the sector is interconnected in the region. In a note, Mairead McGuinness, the head of financial services in the European Commission said:

I am confident that our relationship and future engagement in financial services will be built on a shared commitment to preserve financial stability, market integrity, and the protection of consumers and investors.

Binance seeks UK regulation

Binance, the biggest crypto exchange in the world, criticised the regulatory situation in the US and sought to be regulated in the UK. In a statement, the company’s chief strategy officer, Patrick Hillman, said that the US has been very confusing in the past six months.

The US has failed to come up with regulations in the industry. Instead, the key regulatory agencies like the Securities and Exchange Commission (SEC) have been using existing rules to go after companies in the industry. For example, the SEC sued Ripple Labs in 2020 accusing the company of selling securities without following the law. This year, it settled with Kraken after it accused it of offering illegal staking solutions. The agency also sent a Wells notice to Coinbase about its staking solutions.

Therefore, Binance is veering towards the UK, which is working on clear crypto regulations. However, the company has been at loggerheads with the FCA in the past. For example, the regulator asked Binance to stop all regulated activities in the country in 2021.

More bank regulations

The banking sector has been under pressure this year following the collapse of Credit Suisse, First Republic Bank, Silicon Valley Bank, and Signature Bank. Since then, regulators have been working to tighten the screws in the industry.

In a statement, the Federal Deposit Insurance Corporation (FDIC) said that it was considering raising deposit-insurance protection for accounts used for payroll and other business payments. This means that businesses will be protected if a bank fails. Further, the agency is considering unlimited insurance for all bank accounts. The other option is to raise the existing insurance cap above $250,000.

The goal of these changes is to prevent more bank runs in the future. A bank like First Republic collapsed since most people had over $250k in their accounts.

CySEC to pay brokers visits

In a statement, the Cyprus Securities and Exchange Commission (CySEC) said that it will start conducting on-site visits and desk-based reviews on regulated companies offering services to retail companies. These visits will happen to some companies starting from the second half of the year.

According to CySEC, these visits are in line with MIFID II regulations that were enacted by ESMA. Its goal will be to see whether marketing communications are fair, clear, and non-misleading. In a statement, the regulator said:

This action will allow CySEC to assess how the CIFs apply the MiFID II requirements on marketing communications, and it will also enhance the protection of investors in line with ESMA’s objectives.

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