By: Kai Zhang, Philip J. Morgan, Andrew J. Massey, and Hazel Doyle
The Financial Conduct Authority (FCA) has published its final rules for the UK’s Overseas Funds Regime (OFR) (see our prior blogs here and here which discuss eligibility and the expected OFR launch timetable).
Read MoreBy: Jim Bulling and Emre Cakmakcioglu
In May 2024, the NSW Anti-slavery Commissioner (Commissioner) published a Discussion Paper introducing a draft Code of Practice (Code) to reduce modern slavery in the financial services sector. The Commissioner sought feedback on both the Discussion Paper and Code by 15 July 2024.
Read MoreBy: Kenneth Holston, Cheryl L. Isaac, Matthew J. Rogers, Jordan A. Knight, and Bradley D. Bostwick
On 27 June 2024, ISDA published the ISDA Close-out Framework, an interactive decision tree that market participants can use to help prepare for potential terminations of collateralized derivatives contracts that are documented under an ISDA Master Agreement. The ISDA Close-out Framework was launched in response to the March 2023 failures of Signature Bank and Silicon Valley Bank, which shed light on the complexities of terminating swaps and other over-the-counter derivatives in the multifaceted post-financial crisis swap regulatory regimes. ISDA designed this framework in response to feedback from the derivatives industry that factors such as segregated margin and stays on the exercise of termination rights and remedies makes terminating and closing out derivatives contracts increasingly complex.
Read MoreBy: Matthew J. Rogers and Maxwell J. Black
On 6 June 2024, the Department of the Treasury (the Treasury) published a request for information on the use of artificial intelligence (AI) in the financial services sector, with the goal of gathering input from a wide range of stakeholders. This request follows soon after the Treasury’s report on AI and cybersecurity.
Like other US regulators, including the Commodity Futures Trading Commission (CFTC), the Treasury is interested in understanding the opportunities and risks posed by AI, including the potential impact on consumers, investors, financial institutions, and businesses. Specifically, the Treasury is seeking feedback on the definition of AI under President Biden’s Executive Order on Safe, Secure, and Trustworthy Development and Use of AI, the types of AI models and tools used by financial institutions, and the general accessibility of AI.
Of particular interest is the Treasury’s query regarding a potential “human capital shortage” in financial organizations. This concerns the scenario where companies utilize AI tools without sufficient employees that fully understand their mechanisms. Additionally, the request solicits perspectives on model risks, operational risks, compliance risks, and third-party risks, among others.
This request for information shows that the Treasury is looking to augment the efforts of the CFTC, Securities and Exchange Commission (SEC), and banking agencies, which have also requested similar AI-related information. It remains to be seen the extent to which federal agencies such as the Treasury coordinate their rulemaking processes and how any such rules will fit together.
By: Pablo J. Man, TJ Bright, Kenneth Holston, Christopher W. Phillips-Hart, and Tristen C. Rodgers
Earlier today, 5 June 2024, the US Fifth Circuit Court fully vacated the Private Fund Adviser Rules (PFAR) in a unanimous and highly anticipated decision curbing the Securities and Exchange Commission’s authority to regulate private funds. Absent a successful appeal of the decision, the PFAR will not come into effect.
Read MoreBy: Rich Kerr, Sasha Burstein, and Brian Doyle-Wenger
On 16 May 2024, the US Securities and Exchange Commission (SEC) adopted amendments to Regulation S-P’s safeguards and disposal rules. The amendments are designed to address the expanded use of technology and corresponding risks that have emerged since the original adoption of Regulation S-P in 2000. The amendments expand the scope of information and broaden the number of customers protected under both rules. The safeguards and disposal rule will apply to “customer information”, which includes records that contain “nonpublic personal information” as defined in the existing rule. Additionally, the amended rule expands the applicability of the safeguards rule to include transfer agents, and the disposal rules to include all transfer agents including those registered with appropriate regulatory authorities other than the SEC.
Read MoreBy: Philip Morgan, Andrew Massey, and Omega Modi
An anti-greenwashing rule comes into force in the UK on 31 May 2024. This is the first part of the FCA’s Sustainability Disclosure Requirements.
Read MoreBy: Richard F. Kerr, Jennifer L. Klass, C. Todd Gibson, and Kenneth Holston
On 13 May 2024, the Securities and Exchange Commission (SEC) and the Department of the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) jointly proposed rulemaking to implement section 326 of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (CIP Rulemaking), which would require SEC-registered investment advisers (RIAs) and exempt reporting advisers (ERAs) to establish written customer identification programs (CIP).
Read MoreBy: Matthew J. Rogers and Maxwell J. Black
On 2 May 2024, the Commodity Futures Trading Commission’s (CFTC) Technology Advisory Committee (Committee) released a report entitled Responsible AI in Financial Markets: Opportunities, Risks & Recommendations. The report discusses the impact and future implications of artificial intelligence (AI) on financial markets and further illustrates the CFTC’s desire to oversee the AI space.
Read MoreBy: Tsuguhito Omagari, Yuki Sako, Jason Nelms and Charmaine Mok
Financial Services Agency of Japan (FSA) proposed amendments to its supervisory guidelines applicable to managers of investment trust (toshin) funds and real estate funds, and is currently accepting comments until May 13. Of those, amendments relating to real estate funds would require managers to take additional measures to manage transactional conflicts of interest, specifically:
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