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Financial Regulation Roundup: August 24, 2018

Emma Townsend  Follow

Here are the top stories on the financial regulatory landscape in the U.S., EU and around the world over the past two weeks.

U.S. News:

Senate Panel Approves Trump’s Nominee for Consumer Watchdog

  • The Senate Banking Committee on Thursday approved Kathy Kraninger as director of the Consumer Financial Protection Bureau, as Republicans overlooked the protests of Democrats who said President Donald Trump’s nominee is unqualified to lead the consumer watchdog. Kraninger’s nomination received approval in a 13-12 party-line vote. The nomination now goes to the full Senate for a vote, where Senate Democrats like Elizabeth Warren, arguably Kraninger’s biggest critic, has vowed to block her nomination. (AP: read more)

Banks Say No Thanks to Volcker Rule Changes

  • Trump-appointed financial regulators set out to ease the Volcker rule—a controversial postcrisis restriction for banks—and instead have drawn the industry’s ire. Last week, lawyers representing JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc., Wells Fargo & Co. and six other banks met with the Federal Reserve to complain about the recent proposal to revise the regulation designed to curb risky trading by banks, people familiar with the matter said. The banks said the proposal, dubbed Volcker 2.0 by financial regulators, could complicate compliance and hamper trading in asset classes not currently covered by the rule. (The Wall Street Journal: read more)

Trump Asks SEC to Consider Ending Required Quarterly Reports

  • President Donald Trump is calling on federal regulators to consider scrapping the requirement for public companies to report quarterly results, after business executives told him twice-yearly reports would make better economic sense. In a tweet early Friday, Trump said that after speaking with several top business leaders, he’s asking the Securities and Exchange Commission to determine whether shifting to a six-month reporting requirement would help companies grow faster and create more jobs. (AP: read more)

Companies Shouldn’t Be Accountable Only to Shareholders

  • Corporate profits are booming, but average wages haven’t budged over the past year. The U.S. economy has run this way for decades, partly because of a fundamental change in business practices dating back to the 1980s. On Wednesday I’m introducing legislation to fix it. The Accountable Capitalism Act restores the idea that giant American corporations should look out for American interests. Corporations with more than $1 billion in annual revenue would be required to get a federal corporate charter. The new charter requires corporate directors to consider the interests of all major corporate stakeholders—not only shareholders—in company decisions. Shareholders could sue if they believed directors weren’t fulfilling those obligations. (The Wall Street Journal: read more)

SEC Rejects Bitcoin ETFs

  • The SEC has again disapproved several proposals for a bitcoin ETF. The latest rejection involves two ETFs filed by ProShares that would track bitcoin futures contracts, another from GraniteShares, and five leveraged and inverse ETFs from Direxion. This follows on the heels of the SEC's rejection of the Winklevloss ETF in July that would have traded physical bitcoin. (CNBC: read more)

EU News:

UK Government publish No Deal Brexit Contingency Guidelines

  • Yesterday, the government published the first of series of whitepapers designed to provide clarity and reassurance to the public should Brexit negotiations result in a ‘no deal’ scenario. The 25 documents of guidance for people and businesses across sectors is designed to prevent the "short-term disruption" which the Government admits could be possible if a deal is not reached. Guidance for the City states its plans for a Temporary Permissions Regime to allow EU firms currently passporting services into the UK to continue to operate while they secure the necessary authorization from City regulators. (BBC: read more)

FCA Plans to Quiz Insurance Brokers on Due Diligence

  • “We are planning to do further work to verify that insurance brokers are conducting appropriate due diligence on the insurers they use.” Those were the words of the Financial Conduct Authority (FCA) as it hammered home the importance of due diligence following the failures of several insurers, stressing the vital role played by insurance brokers. The FCA said these intermediaries should be able to demonstrate that they have carefully considered the providers that they place their customers’ business with. (Insurance Business: read more)

FCA Innovation Department Grows 350% in Race to Keep Up with Robos

  • The FCA’s Project Innovate team has grown by over 350% over four years as it races to catch up with the digital revolution in financial services. Project Innovate was established by the FCA in 2014 to support firms bringing tech-based services to market and has grown the team to work across all ‘innovation services’. Its work can be split in to five key areas, one of which focuses solely on financial advice. (Citywire New Model Adviser: read more)

International News:

 U.S. Moves Toward New Tariffs on China Despite Fresh Round of Trade Talks

  • The Trump administration is moving closer this week to levying tariffs on nearly half of Chinese imports despite broad opposition from U.S. business and the start of a fresh round of talks between the U.S. and China to settle the trade dispute. The twin administration initiatives—pursuing tariffs on $200 billion of Chinese goods while relaunching talks to scrap tariffs—underscore a split within the U.S. administration, with negotiators in the U.S. Treasury Department offering a carrot, while the office of the U.S. trade representative threatens with a stick, both with the approval of President Trump, according to people familiar with the administration’s internal deliberations. (The Wall Street Journal: read more)

Some Australian Pension Funds May be Derelict in Duty, Inquiry Hears

  • Some of the firms that manage funds within Australia’s A$2.6 trillion ($1.9 billion) pension system may not be complying with their legal duty to put the interests of customers ahead of their own, a powerful inquiry into financial misconduct heard. Over the past two weeks, the Royal Commission has revealed examples of major breaches of responsibility, dishonorable conduct and fee-gouging by institutions that hold workers’ retirement accounts, known as superannuation locally. The Commissioner may conclude that “some (superannuation managers) are not, as they are obliged to do, prioritizing the interests of their members over the interests of others, including themselves and the groups of which they are parties,” said Michael Hodge, a barrister assisting the year-long investigation. (Reuters: read more)

China Rating Firm Banned as Regulators Cite Fake Info, Chaos

  • Dagong Global Credit Rating Co. issued an apology after it was banned by Chinese regulators from assessing bonds for a year, the most severe punishment ever doled out to a ratings company. Dagong’s management was "chaotic", the China Securities Regulatory Commission said on Friday, when it announced the penalty. The National Association of Financial Market Institutional Investors, which oversees short- and medium-term notes in China also handed out a ban, said the company provided fake information to the regulator and charged borrowers high fees for consulting services, which “seriously violated" its independence as a ratings firm. (Bloomberg: read more)

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