Katten's Financial Markets and Funds Quick Take is a monthly newsletter that highlights key developments that may impact financial markets and funds.
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FINRA decides to update its advertising rule
By Susan Light
The Financial Industry Regulatory Authority (FINRA) filed a proposed rule change amending FINRA Rule 2210 with the Securities and Exchange Commission (SEC) on November 13, 2023. This change would allow a broker-dealer to forecast performance or provide a target rate of return with respect to a security, asset allocation or other investment strategy in a communication distributed solely to qualified buyers. Read the proposed FINRA change.
A breath of fresh air: CFTC proposes voluntary guidelines for carbon credit market
By Carl Kennedy
After a two-year investigation into carbon markets, the Commodity Futures Trading Commission (CFTC) proposed measures focused on improving integrity, transparency and enforcement in voluntary carbon credit markets (VCCMs). VCCMs are seen by many as an increasingly important means of combating climate change. On December 4, the CFTC released proposed guidelines outlining certain factors that a CFTC-regulated exchange or designated contract market should consider when addressing the requirements of the Commodity Exchange Act (CEA) and CFTC regulations, which are relevant to the VCCM draft contract and the listing process. Read more about the proposed guidance on VCCMs.
Gary DeWaal offers Fortune clarity on why NFTs are not securities
Fortune contacted Financial Markets and Funds Senior Counsel Gary DeWaal regarding the regulatory status of non-fungible tokens (NFTs). Gary cited two reasons: (1) Their infungibility or uniqueness sets them apart from traditional securities such as stocks or bonds because each investment is an investment in a unique asset – there is no common entity. Additionally, (2) the increase in value of an NFT is not necessarily tied to an underlying project; Rather, its value is tied to a person, such as baseball cards or Beanie Babies. Read more about Gary's comments.
Daniel Davis joins CoinDesk to discuss the Sam Bankman-Fried trial and its implications for U.S. cryptocurrency regulation
Dan Davis, Partner and Co-Chair of Financial Markets and Regulation, appeared on CoinDesk TV's morning show “First Mover” to discuss the Sam Bankman-Fried (SBF) trial and its potential impact on US cryptocurrency regulation. Dan, who regularly contributes insights to CoinDesk publications and broadcasts, explained the inherent risks of SBF's strategy of testifying in his own case, including exposing himself to significant government cross-examination of his own publicly made statements used against himself and difficulty building credibility with the jury. Read more about Dan's comments.
Financial Markets and Funds Team Authors, Chambers Overview of Alternative Funds
Presented by Chambers and Partners, key members of Katten's financial markets and funds practice – Wendy Cohen, New York Managing Partner and Co-Chair, Investment Management and Funds; Allison Yacker, partner and co-chair, investment management and funds; Henry Bregstein, partner and chairman, Alternative Products; Lance Zinman, Partner and Global Chair, Financial Markets and Funds – is the author of the chapter “Alternative Funds 2023 – USA”, which provides an in-depth look at how the robust legal and regulatory framework in the United States leads to this the prevailing jurisdiction is for alternative funds and their managers and investors. Read more about the Chambers Global Practice Guide “Alternative Funds 2023 – USA”.
EU/UK
The FCA publishes guidance consultation on anti-greenwashing
By Neil Robson, Sara Portillo
On 28 November, the Financial Conduct Authority (FCA) published its policy statement on sustainability disclosure requirements (SDR) and investment labels (PS23/16) and a guidance consultation on the anti-greenwashing rule (GC23/3). PS23/16 follows the FCA's consultation on SDRs and investment labels issued in October 2022 and introduces measures to inform and protect consumers and increase confidence in the sustainable investment market. In particular, it introduces: (i) an anti-greenwashing rule for all approved companies (the Rule); (ii) four investment labels to help consumers navigate the market; and (iii) new rules and guidelines for companies marketing investment funds based on their sustainability credentials. Read more about the anti-greenwashing rule.
Artificial intelligence and machine learning in the UK, EU and US: bridging the regulatory gap
By Neil Robson, Ciara McBrien, Sara Portillo
On November 8, 2023, Neil Robson, Partner at Financial Markets and Funds, moderated a panel discussion on the artificial intelligence (AI) regulatory divide in the UK, EU and US, with a focus on providing legal and compliance insights for the asset management industry was. The panel and subsequent consultation examines the existing regulatory framework for AI in the UK financial services industry, draws a brief comparison with the global landscape and attempts to predict what lies ahead. Read the key takeaways from the panel discussion. Read Katten's guide.
UK regulators release updates on regulating fiat-backed stablecoins
By Neil Robson, Ciara McBrien, Sara Portillo, Nathaniel Lalone, Carolyn Jackson, Christopher Collins
On November 6, 2023, the Bank of England (BoE) published a discussion paper on the “Regulatory Regime for Systemic Payment Systems Using Stablecoins and Related Service Providers” (the Discussion Paper). The discussion paper was published together with (1) the Financial Conduct Authority's (FCA) discussion paper “Regulation of Cryptoassets Phase 1: Stablecoins”, which details its regulatory approach to stablecoin issuers and custodians (DP23/4); (2) a letter from the Prudential Regulation Authority (PRA) to the Bank's Chief Executive Officers on “Innovations in the Use of Deposits, Electronic Money and Regulated Stablecoins by Depositors” (the Letter); and (3) a “Cross-Agency Roadmap for Payments Innovation” (the Roadmap) issued by the BoE, PRA and FCA (collectively, the Regulators). Read more about regulatory plans for fiat-backed stablecoins.
UK confirms proposals for future financial services regulatory rules for cryptoassets
By Neil Robson, Ciara McBrien, Sara Portillo, Nathaniel Lalone, Carolyn Jackson, Christopher Collins
On 30 October 2023, HM Treasury (HMT) published a response to its February 2023 consultation and a call for evidence on its proposals for the future financial services regulatory framework for cryptoassets used in financial services (the Consultation ). The response summarizes the 131 comments HMT received following the consultation and sets policy decisions based on this feedback. Read more about the HMT consultation.
The UK government publishes a response to its consultation – failure or success?
By Neil Robson, Sara Portillo, Christopher Collins
On 30 October 2023, HM Treasury (HMT) published a response to its May 2022 consultation (the Consultation) on its approach to addressing the failure of systemically important digital asset (including stablecoin) businesses (the Response). The consultation sought views on the proposed application of a modified Financial Markets Infrastructure Special Management Regime (FMISAR) to systemic payment systems and service providers of systemic importance to those systems using digital settlement assets (DSAs). Read more about the proposed modified FMISAR.
The UK's FCA publishes marketing guidelines for cryptoasset companies
By Neil Robson, Ciara McBrien, Sara Portillo, Christopher Collins
On 2 November 2023, the FCA published final non-manual guidance on financial advertising for crypto assets in the UK (FG23/3), together with a press release, to further support crypto asset firms in complying with the new marketing rules. FG23/3 provides information on the communication and approval of financial advertising relating to qualifying cryptoassets and sets out the FCA's expectations. Qualified cryptoassets are broadly understood to mean any cryptographically secured digital representation of value or contractual rights that are transferable and fungible. Read more about marketing recommendations for crypto assets.
ICYMI
Here's a look back at Katten's recent client consultations.
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