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Prosek’s Financial Regulation Roundup: April 7, 2017

Rupert Eyles

U.S. News

 Dodd-Frank Reform

  •  In his confirmation hearing before the Senate Banking Committee, Jay Clayton, SEC Chairman nominee, said he does not have “specific plans for attacking a particular provision” of the Dodd-Frank Act, but that the act should be reviewed nonetheless (read here).
  • President Trump’s push to roll back Wall Street regulations is slowing due to the open seats at the two main agencies charged with overseeing the financial industry. The White House’s inaction has left the SEC and CFTC with just two members apiece, one from each political party. That’s given the lone Democrats at each regulator the unusual power to block policy moves they disagree with (read here).

 Fiduciary Rule

  •  Earlier this week, the Department of Labor released a final rule that delays implementation of the fiduciary regulation for 60 days, pushing it from April 10 to June 9. In doing so, however, it indicated that the two provisions that were due to become applicable next week — one expanding the definition of fiduciary for advisers to retirement accounts and another outlining impartial conduct standards — will go into force in June (read here). Delays to the rule are ultimately unlikely to prevent the industry from moving to a business model where advisers are required to put their clients’ interests first (read here).

 Equity Market Structure Rules

  •  The Securities Industry and Financial Markets Association (SIFMA) called for a comprehensive review of a key rule governing US equity trading. Known as Reg NMS, the rule aims to ensure that trades occur at the best-quoted price by forcing trading venues to quote equivalent prices for a security (read here).


  •  Asset-managers in Europe and the U.S. will probably cut more than $300 million from research budgets in anticipation of regulations aimed at rooting out conflicts of interest in the market for investment information (read here). The European Union’s MiFID II regulations could have a negative impact on the amount of commission money that is spent on research and advisory services.

 Pay Ratio Rule

  • A coalition of institutional investors including the California Public Employees’ Retirement System is calling on SEC not to delay the rule requiring companies to disclose the pay gap between their CEOs and rank-and-file workers (read here). The coalition claims that the disclosure would help shareholders assess companies in their portfolios.

 WhatsApp and Signal on Wall Street

  • Although SEC and FINRA rules requiring that financial firms and asset managers keep records of all written business communications, traders and money managers are circumventing compliance by communicating over encrypted messaging services like WhatsApp and Signal. This is in spite of claims by Wall Street banks that they have various policies in place to prevent unmonitored communications and unauthorized access to confidential information (read here).

Volcker Rule

  • Federal Reserve governor Daniel Tarullo said there is scope to reform the so-called Volcker rule on proprietary trading because it is damaging market-making activities at banks, even as he defended the broad thrust of post-crisis regulation (read here). The Fed’s top bank supervisor leaves on Wednesday following eight years in which he earned a reputation as a tough enforcer and key player in the ramping up of regulatory requirements following the financial crash. 

Europe/International News

Bank of England warns global financial system at ‘fork in the road’

  • Today Bank of England governor Mark Carney warned about the impact of Brexit on global financial stability and the importance ensuring regulatory collaboration. He advised against countries taking a "low road" where they turn inwards, cut back on regulations and do not work with other regulators. He said such an approach would lead to fewer jobs, lower growth and higher domestic risks (read here).\

FCA plans three-year delay for non ­EU firms

  • The UK Financial Conduct Authority’s (FCA’s) latest document on MiFID II contains a clause for a three-year delay for non-EU firms providing direct electronic access to UK trading platforms (read here).

FCA sets out Brexit wishlist

  • CEO of the FCA Andrew Bailey has advised the Treasury select committee that there needs to be a transitional arrangement as the UK exits the EU. Mr Bailey said that it is important the UK retains control of financial services within its own borders, suggesting he is not in favour of the UK remaining within the single market and following EU standards without a voice at the table (read here).

PIF seeks clarification on PSD2*

  • In a response letter to HM Treasury’s request for industry consultation on its PSD2 implementation plan, the Prepaid International Forum (PIF) expressed support for the government’s strategy. The UK-based prepaid industry association also encouraged regulators to take advantage of certain exemptions in PSD2 to benefit UK payment services providers facing uncertainty during the ongoing Brexit process, but has requested clarification on several points, including the interpretation of which types of products would be exempt from certain requirements of PSD2, and those that can only be used at a specific retailer or retail chain (read here).

*EU Directive aimed to regulate payment services and payment service providers throughout the EU and European Economic Area 

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