On March 31, the Board of Governors of the Federal Reserve System (Federal Reserve Board) published six sets of responses to Frequently Asked Questions (FAQs) consisting of existing legal interpretations regarding Regulations H, K, L, O, W and Y. Additional FAQs will be released periodically and posted to the agency’s website as part of an ongoing effort to increase transparency and enhance accessibility to Federal Reserve Board legal interpretations. Release. FAQs.
On September 1, 2016, the U.S. Commodity Futures Trading Commission (“CFTC”) announced that it is “requesting public comment on proposed amendments to the Whistleblower Rules found in Part 165 of the CFTC’s regulations.” The amendments would, among other things, “enhance the process for reviewing whistleblower claims and make related changes to clarify staff authority to administer the whistleblower program.” Comments are due on or before September 29, 2016. Press release.
On June 16, 2016, the Securities and Exchange Commission (“SEC”) announced that it had proposed rules to update the disclosure requirements for mining properties. The proposed revisions are meant to align disclosure requirements with “current industry and global regulatory practices and standards.” The proposed rules would, among other updates, revise Regulation S-K to include in a new subpart the SEC’s mining property disclosure requirements. The proposed rules would also rescind Industry Guide 7. Release.
On June 2, 2016, the European Commission published a press release announcing that it had adopted a proposal for a Council decision on the position to be taken by the EU on the incorporation of the Regulations on the European Supervisory Authorities (ESAs), and some of the related Regulations and Directives, into the Agreement on the European Economic Area (EEA).
The acts to be incorporated into the EEA Agreement include the ESAs Regulations (EBA, EIOPA and ESMA Regulations), the European Systemic Risk Board Regulation, the Alternative Investment Fund Managers Directive and related Delegated Acts, the Short Selling Regulation and related delegated acts, the European Markets Infrastructure Regulation (‘EMIR’) and the Credit Ratings Agency Regulations.
This is an important step towards the extension of the European System of Financial Supervision (ESFS) to the EEA EFTA countries: Norway, Iceland and Liechtenstein. The Commission explained that incorporating these acts into the EEA Agreement would ensure strong and co-ordinated financial supervision throughout the EEA.
On May 5, 2016, the U.S. Department of the Treasury announced several actions to strengthen financial transparency. Treasury announced a Customer Due Diligence (CDD) Final Rule, proposed Beneficial Ownership legislation and proposed regulations related to foreign-owned, single-member limited liability companies (LLCs).
CDD Final Rule
The CDD Final Rule adds a new requirement that financial institutions – including banks, brokers or dealers in securities, mutual funds, futures commission merchants, and introducing brokers in commodities – collect and verify the personal information of the beneficial owners who own, control, and profit from companies when those companies open accounts. The Final Rule also amends existing Bank Secrecy Act (BSA) regulations to clarify and strengthen obligations of these entities.
Specifically, the rule contains three core requirements: (1) identifying and verifying the identity of the beneficial owners of companies opening accounts; (2) understanding the nature and purpose of customer relationships to develop customer risk profiles; and (3) conducting ongoing monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update customer information. With respect to the new requirement to obtain beneficial ownership information, financial institutions will have to identify and verify the identity of any individual who owns 25 percent or more of a legal entity, and an individual who controls the legal entity. The final rule extends the proposed implementation period from one year to two years, expands the list of exemptions and makes use of a standardized beneficial ownership form optional as long as a financial institution collects the required information.
Beneficial Ownership Legislation
Treasury announced it is sending beneficial ownership legislation to Congress. As part of the legislation, companies formed within the United States would be required to file beneficial ownership information with the Treasury Department, and face penalties for failure to comply.
Foreign-Owned Single-Member LLC Proposed Regulations
Treasury also announced proposed regulations to require foreign-owned “disregarded entities,” including foreign-owned single-member limited liability companies (LLCs), to obtain an employer identification number (EIN) with the IRS.
On April 15, 2016, the Securities and Exchange Commission adopted final rules modifying regulations “for security-based swap dealers and major security-based swap participants (security-based swap entities).” The final rules address conduct and compliance officer issues. Release.
On August 15, the FSA published a short selling edition of its Market Watch newsletter. Newsletter No. 42, August 2012.
Although the EU Short Selling Regulation (the ‘Regulation’) will have direct effect in the UK from November 1, certain aspects of it afford discretion to, or impose obligations on, member states to introduce operational procedures to ensure compliance by market participants.
The newsletter, which does not constitute formal FSA guidance, sets out the FSA’s proposed approach to how it will exercise that discretion in six areas of the Regulation including:
The FSA will issue a formal consultation on proposed changes to the FSA Handbook shortly.
On August 13, HM Treasury published a letter that it received from the U.S. Department of the Treasury relating to the Office of Foreign Assets Control’s (OFAC) Iran sanctions regulations. Letter.
The letter was sent in response to a request by HM Treasury for clarification about the sanctions regulations and how they apply to international payments, specifically the obligations of foreign banks operating in the US before and after 2008 in respect of transactions involving Iranian counterparties.
On August 9, the OFT published a press release stating that it had imposed a £544,505 fine on MCO Capital Ltd (MCO), an online payday lender, for breaching the Money Laundering Regulations 2007 (MLRs) and had also revoked MCO’s consumer credit licence. Press Release.
MCO had failed to adequately verify the identities of loan applicants, which led to it being targeted by fraudsters who used the details of over 7,000 individuals to apply for loans. MCO was also found to be engaged in unfair business practices by writing to people who they were aware may not have taken out loans, asking unequivocally for repayment. MCO’s licence was revoked as the OFT found it lacked the necessary skills, knowledge and experience to run a consumer credit business.
MCO has a right to appeal the OFT’s decision.
On August 12, the Fed issued an interim final rule establishing regulations for savings and loan holding companies (SLHCs) in connection with the transfer of supervision and regulation of SLHCs from the OTS to the Fed pursuant to Section 312 of the Dodd-Frank Act. The interim final rule will be effective upon publication in the Federal Register. Comments must be submitted by October 27. Fed Release. Interim Final Rule.
