Q1 2023 Global Regulatory Update
The first quarter of 2023 saw a multitude of regulatory updates across many key jurisdictions. Those range from ESG, digital assets, AML/CFT as well as changes to several major regulations.
Environmental, social, and corporate governance (“ESG”):
- ESG remained at the top of the EU’s agenda, as ESMA hosted an open hearing consultation on ESG terms in fund’s names.
- The European Securities and Markets Authority (“ESMA”) published its opinion on the first draft of the European Financial Reporting Advisory Group (“EFRAG”) proposals for on European Sustainability Reporting Standards.
- The SFDR RTS nuclear and gas activities amendments were published in the EU Official Journal.
Financial service regulatory and directives updates:
There were several noteworthy updates on some of the EU’s key regulations:
- On February 15. 2023, MEPs approved new rules applicable to European Long Term Investment Funds (ELTIFs). Those rules are set to come into force in Q1 2024.
- In Q1 ESMA updated its AIFMD Annex IV reporting technical guidance. In addition, EU’s Committee on Economic and Monetary Affairs issued a report on the amendment of the AIFMD and UCITS Directives.
- The EBA issued its final Regulatory Technical Standards defining the homogeneity of the underlying exposures in STS securitisations.
- ESMA and NCAs announced they would look at marketing of financial products under MiFID II. ESMA also launched a consultation on rules for passporting investment firms, as well as issued a final report on guidelines on MiFID II product governance requirements.
- ESMA announced a consultation on post-trade transparency.
- Other updates included the updating of several Q&As by ESMA: UCITS Directive, DLTR and Prospectus Regulation, CSDR, EuSEF and EuVECA, and on AIFMD. Also, ESMA together with EBA and EIOPA, issued updated Q&As on Securitisation Regulation.
- The EU Parliament approved amendments to the ATAD 3 directive. We also saw the EU update its list of non-cooperative jurisdictions for tax purposes, adding the British Virgin Islands, Costa Rica, Marshall Islands and Russia to the list.
- In Q1 2023, the EU published a study about EU/UK regulatory divergence.
- The Digital Operational Resilience Act (DORA) was published in the Official Journal of the European Union as Regulation (EU) 2022/2554.
- Q1 2023 saw several key updates in relation to the UK’s Consumer Duty regulatory framework. The FCA highlighted areas of focus for firms implementing the Consumer Duty and subsequently issued a press release supporting firms through the transition to implementing the Consumer Duty.
- The asset management sector was also at the centre of the regulator’s attention, notably through a consultation paper on updating and improving the UK regime for asset management, as well as a Dear CEO letter on the FCA’s asset management supervision strategy.
- The UK launched a consultation on a future regulatory regime for crypto assets. Please read our Insights for further details.
- The HM Treasury released of draft version of the Financial Services and Markets Act 2000 (Financial Promotions) Amendment Order 2023, bringing certain crypto assets within the scope of financial promotions.
- After the Long-Term Asset Fund Regime came into force in October 2021, the FCA authorised the first LTAF.
- Keeping in check with the UK’s momentum on ESG in its financial sector, the Bank of England issued a report on climate-related risks and regulatory capital frameworks in the UK.
- Other news included: a PRA issued consultation on Moving Senior Managers regime forms from the PRA Rulebook, updates to MiFID transparency calculations, the FCA releasing its updated regulatory grid and the Joint Money Laundering Steering Group (JMSLG) releasing revisions to its guidance.
- The Commission de Surveillance du Secteur Financier (“CSSF”) issued the outcome of its AML/CFT thematic reviews on fund managers’ trust and company service providers.
- The regulator also released a Circular to remind market participants of their 2022 Financial Crime Questionnaire obligations.
- The CSSF issued its own Communiqué on SFDR data collection applicable to IFMs and IORPs.
- The CSSF also updated the Reporting Handbook for Investment Firms under the Investment Firm Directive and Regulation frameworks.
- The Malta Financial Services Authority (MFSA) announced its Supervisory Priorities for 2023. Please see our Insights for further details.
- FINRA issued 2023 a report on its examination and risk monitoring program.
- The SEC had several key updates such as an FAQ on the Marketing Rule, proposals for enhanced safeguarding rule for Registered Investment Advisers (read our Insights for further details) as well as proposed rules to prohibit conflicts of interest in certain securitizations.
- The SEC’s Division of Examinations also announced its 2023 priorities. (Read our Insights for further details).
- Other notable updates included the US Treasury’s remarks Under Secretary for International Affairs on digital asset, payments, cyber and operational resilience, as well as the SEC’s proposal of new requirements to address cybersecurity risks to the US securities markets.
- At the end of Q1 2023, FinCEn published its first set of guidance materials to aid the public in understanding upcoming beneficial ownership information (“BOI”) reporting requirements taking effect on January 1, 2024.
- The government published the Anti-Money Laundering Regulations Revision.
- Announcement of the Accountants (Amendment) Act, 2022, and two regulations that support its provisions; and the Accountants (Quality Assurance) (Amendment) Regulations, 2023, came into effect on February 1, 2023.
- On March 9, 2023, the Cayman Islands Monetary Authority (“CIMA”) launched its first ever Financial Stability Report
- The Bermuda Monetary Authority (“BMA”) updated guidance on AML/CFT and annexes.
- The regulator also published a stakeholder letter of its consultation paper: Conduct of Business Regulatory Regime: Digital Asset Business Act 2018: Code of Practice & Digital Asset Business (Client Disclosure) Amendment Rules 2023.
- The Hong Kong Monetary Authority (“HKMA”) issued the conclusions of its discussion paper on crypto-assets and stablecoins, Please read our Insights for further details. This was then followed by the Securities and Futures Commission (“SFC”) consulting on proposals to regulate virtual asset trading platforms.
- The HKMA updated its climate-related financial risks FAQs.
- Other updates included the SFC issuing latest Q4 2022 report, publishing a quick reference guides for licensing requirements for family offices, private equity firms, hedge fund managers, overseas practitioners and mainland practitioners as well as the Financial Services and the Treasury Bureau (“FSTB”) launching a consultation on enhancing crowdfunding activities.
- The Monetary Authority of Singapore (“MAS”) issued changes to the Code of Corporate Governance.
- The MAS also released two key updates, the first being an updated Code on Collective Investment Schemes (please read our Insights for further details) as well as FAQs on Disclosure and Reporting Guidelines for Retail ESG Funds.
- The Green Finance Industry Taskforce launches its third consultation on green and transition taxonomy for Singapore based Financial Institutions.
- The MAS issued a letter reminding Financial Institutions in the wealth management sector to review their AML/CFT frameworks. Please see our Insights for further details.
- The Accounting and Corporate Regulatory Authority (“ACRA”) issued its Financial Reporting Surveillance Programme Report.
- In Australia, the Government released a consultation paper which outlines the background of Australia's superannuation system.
- The Government also completed a token mapping consultation paper - a foundational step in the Government's multi-stage reform agenda committed to developing appropriate regulatory settings for the cryptocurrency sector.
- The minister’s treasury portfolio announced a Review of the Regulatory Framework for managed investment schemes.
United Arab Emirates
- The Dubai Financial Services Authority (“DFSA”) launched a consultation on Family Office regulation.
- The UAE’s Securities and Commodities Authority (“SCA”) introduced important changes to its rules on the distribution of foreign funds in the country.
- Dubai’s Virtual Asset Regulatory Authority (“VARA”) issued Regulations and Compulsory Rulebooks applicable to its regime.
- Other noteworthy updates from the DFSA included amendments to the general module, authorised market institution module, AML/CFT module, insurance business module and glossary module.
- Elsewhere in the world, we took note of the FATF issuing its 2021-2022 annual report, as well as the outcome of the plenary, jurisdictions under increased monitoring. Read our nsights for further details.
- Other FATF related updates included its latest recommendations and updates to guidance on beneficial ownership of legal persons.
- The OECD released guidance on Pillar 2 GloBE rules.
- The International Sustainability Standards Board (“ISSB”) announced it had agreed the substance of its inaugural standards, with a likely issuance expected in Q2 2023. Q1 2023 also saw a consultation on climate risk supervisory guidance from the International Association of Insurance Supervisors.
- The FSB issued a Proposed framework for international regulation of crypto asset activities.