Katten's Financial Markets and Funds Quick Take is a monthly newsletter that highlights important developments potentially impacting financial markets and funds.
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Be neither a borrower nor a lender!
By Susan Light
FINRA filed a rule change with the Securities and Exchange Commission (SEC) on January 2 to propose an amendment to FINRA Rule 3240, Borrowing from or Lending to Customers (SR-FINRA-2024-001). This proposed rule change seeks to strengthen the general prohibition on borrowing and lending arrangements, limit some existing exceptions to this general prohibition, modernize the immediate family exception, and increase the requirements for notifying members and obtaining member consent for such arrangements . Read more about proposed changes to FINRA Rule 3240.
CFTC settles enforcement proceedings against commodity trading firms for alleged fraud involving only physical commodity trading – not derivatives
By Gary DeWaal, Dan Davis, Carl Kennedy
The Commodity Futures Trading Commission (CFTC), emphasizing its broad authority over fraud solely related to commodities – not just fraud related to derivatives related to commodities – concluded an enforcement action against Freepoint Commodities LLC on December 14, 2023 , alleging that the company illegally traded heating oil based on non-public information obtained through “corrupt payments” in violation of an applicable provision of the Commodity Exchange Act (7 USC Sec. 9(1)) and a CFTC Rule (180.1). Read more about the enforcement action.
SEC Regulatory Update: Fall 2023 Rulemaking Agenda Released
By Adam Bolter
The Office of Information and Regulatory Affairs recently released the Fall 2023 Semi-Annual Regulatory Agenda. The agenda describes the SEC Chairman's rulemaking priorities for the next 12 months and reflects continued focus on completing various previously proposed regulatory initiatives. Read more about key initiatives for investment advisors and broker-dealers.
The SEC's Treasury Clearing Mandate
By Stephen Morris
New rules have been adopted requiring central clearing in the US financial market for transactions that were previously settled bilaterally or on triparty repo platforms. The SEC cites lower counterparty credit risk, centralized default management and improved market structure as advantages. Although the adopted mandate is less comprehensive than originally proposed in September 2022, the SEC remains open to future review and possible expansion of the requirement to settle cash transactions with hedge funds and leveraged accounts. Read Katten's guide.
New SEC clawback rules create a “two-policy” corporate problem
By Mitchel Pahl
The article, published by Bloomberg Tax, evaluates new SEC clawback rules and their impact on publicly traded companies. Effective December 1, publicly traded companies were required to adopt policies consistent with the SEC's recent guidance on clawing back incentive-based compensation that was “mistakenly awarded” to executives. Read Katten's article.
New Jersey passes comprehensive data protection law
By Trisha Sircar
On the final day of the 2023 legislative session, the New Jersey Legislature approved final passage of a comprehensive privacy bill, Senate Bill 332. The bill was amended to its comprehensive framework in December 2023 before receiving Senate and Assembly approval on the same day January 8, 2024. Read more about New Jersey's privacy law.
EU/UK
Thomson Reuters – Regulatory Intelligence discusses AIFMD II with Neil Robson
In an article in Thomson Reuters – Regulatory Intelligence, Financial Markets and Funds Partner – Neil Robson helped review the European Council's final compromise text on the revised Alternative Investment Fund Management Directive (AIFMD II) and the Undertakings for Collective Investment in Transferable Securities Directive ( UCITS). Changes and what they mean for hedge fund, private equity and mutual fund managers. Read more about Neil's comments.
FCA publishes update on UK market share test for secondary employment exemption 2024-2025
By Carolyn Jackson, Ciara McBrien
On 20 December 2023, the Financial Conduct Authority (FCA) published a statement providing an update on the Acillary Activities Exemption (AAE) for commodity derivatives for the period 2024-2025. The AAE allows firms that provide investment services and activities relating to commodity derivatives and emissions allowances “in addition” to their main business to avoid being authorized by the FCA. Read more about the AAE update.
FCA is consulting on reforming the UK regulatory framework for commodity derivatives
By Carolyn Jackson, Ciara McBrien
On 4 December 2023, the FCA published a consultation paper (CP23/27) on reforming the UK's commodity derivatives regulatory framework. CP23/27 sets out the FCA's proposals for commodity derivatives, including position limits, the exceptions to those limits, position management controls, the reporting system and the Auxiliary Activities Test (AAT). Read more about the FCA's reforms.
UK regulators publish policy statement on margin requirements for non-centrally cleared derivatives
By Carolyn Jackson, Ciara McBrien
On 18 December 2023, the FCA and the Prudential Regulation Authority (PRA) published a joint policy statement on the UK's bilateral margin requirements for non-centrally cleared derivatives under the Onshored European Market Infrastructure Regulation (UK EMIR). The policy statement sets out the final guidance from the FCA and PRA in the form of amendments to Mandatory Technical Standards (BTS) 2016/2251. Read more about bilateral margin requirements.
Preparation for the implementation of EMIR REFIT
By Carolyn Jackson, Ciara McBrien
The article, published in the Journal of Financial Compliance, examines the new obligations under the European Market Infrastructure Regulation (EMIR) Regulatory Fitness and Performance Program (REFIT), which requires companies in the EU or UK involved in derivatives transactions to adopt new reporting standards and Update outstanding documents and convert derivative transactions to the new reporting format. The implementation date is April 29, 2024 in the EU and September 30, 2024 in the UK. Read Katten's article.
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