AML/CTF, Sanctions and Insider Trading
Final Draft EU Standards on Cooperation of National Regulators and the European Securities and Markets Authority with Other EU Authorities under Market Abuse Regulation
On February 6, 2018, the European Securities and Markets Authority published a final report and final draft Implementing Technical Standards on forms and procedures for cooperation of National Regulators and ESMA with other EU Authorities under the Market Abuse Regulation. MAR, which entered into force on July 3, 2016, requires national regulators and ESMA to cooperate and exchange information with certain EU authorities in investigations and on supervision and enforcement matters by exchanging information, taking statements from individuals and conducting on-site inspections or investigations. The other authorities are the European Commission, the Agency for Cooperation of Energy Regulators, national regulatory authorities responsible for related spot markets and, in relation to emission allowances, the auction monitor and relevant auction national regulators. The final draft ITS describe the procedures to be followed for making, acknowledging, processing and replying to requests for assistance and when unsolicited assistance is provided and contain standard forms to be used when doing so. The European Commission has three months to consider whether to adopt the ITS.
The final report and draft ITS are available at: https://www.esma.europa.eu/press-news/esma-news/esma-provides-standards-supervisory-cooperation-market-abuse-investigations?_sm_au_=iVVt05sJZkpNWMWN.
Bank Prudential Regulation & Regulatory Capital
US Federal Financial Regulators Propose Amendments to Swap Margin Rule
On February 5, 2018, the U.S. Office of the Comptroller of the Currency, the U.S. Board of Governors of the Federal Reserve System, the U.S. Federal Deposit Insurance Corporation, the U.S. Farm Credit Administration and the U.S. Federal Housing Finance Agency issued a joint notice of proposed rulemaking seeking comment regarding the minimum margin requirements for covered swap entities (the “Swap Margin Rule”). The proposed rule would amend swap margin requirements to ensure conformity with rules recently adopted by the Federal Reserve Board, the OCC and the FDIC, which impose restrictions on certain swap and other financial contracts that are deemed to be qualified financial contracts. The proposed rule would amend the definition of “Eligible Master Netting Agreement” to align with the revised definition of “Qualifying Master Netting Agreement” in the recent rules adopted by the Federal Reserve Board, the OCC and the FDIC, and would ensure that a netting agreement for a firm subject to the Swap Margin Rule is not excluded from the definition of “Eligible Master Netting Agreement” solely on the basis of the firm’s compliance with the recently promulgated qualified financial contract rules. The proposed rule would also provide that certain legacy agreements would not become subject to the Swap Margin Rule solely on the basis of their amendment to comply with the qualified financial contract rules recently promulgated by the Federal Reserve Board, the OCC and the FDIC. Comments to the proposed rule are due no later than 60 days following publication in the Federal Register.
The interagency notice of proposed rulemaking is available at: https://www.occ.treas.gov/news-issuances/news-releases/2018/nr-ia-2018-12a.pdf.
US Board of Governors of the Federal Reserve System Issues Cease-and-Desist Order Against Large US Financial Institution
On February 2, 2018, the U.S. Board of Governors of the Federal Reserve System issued a cease-and-desist order against a large U.S. financial institution. The order requires the institution to utilize its resources to ensure compliance with consent orders issued by other U.S. federal financial regulators. The order also requires the institution to submit written plans to its applicable Federal Reserve Bank that are designed to further enhance board-level oversight and governance of the institution and further improve the institution’s compliance and operational risk management program. These plans must be approved by the relevant Federal Reserve Bank and are subject to third-party review once implemented. In addition, the institution may not grow until the requirements of the cease-and-desist order are satisfied, absent specific Federal Reserve Board approval. Concurrently with the release of the cease-and-desist order, the Federal Reserve Board sent letters addressed to the institution’s board of directors, its former lead independent director, and its former Chair describing governance deficiencies identified by the Federal Reserve Board. The Federal Reserve Board press release accompanying the publication of the order also noted upcoming changes in the composition of the institution’s board of directors.
The Federal Reserve Board announcement is available at: https://www.federalreserve.gov/newsevents/pressreleases/enforcement20180202a.htm.
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