In the news this week

Author: John Crabb, Karry Lai, Olly Jackson | Published: 23 Mar 2018
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Americas: technical difficulties

It’s been a pretty bad week for the seemingly unstoppable tech industry in the US. Uber was forced to suspend testing on its self-driving cars after a 49-year old woman was struck and killed in Tempe, Arizona.

Facebook stock has fallen to its lowest levels since its initial public offering after it emerged that data company Cambridge Analytica was able to obtain the personal data of millions of the social media website’s users. The company has been accused of manipulating users with targeted campaigns based on the acquired data.

If the Department of Justice (DoJ) is successful in its attempt to prevent AT&T’s $85 billion acquisition of Time Warner, this could have a serious impact across the finance industry. The deal would be the first example of a vertical merger that is successfully blocked by antitrust authorities under section 7 of the Clayton Act.

In US regulatory news, the House Financial Services Committee passed a proposal on Wednesday that would put the Federal Reserve in charge of enforcing the Volcker rule, rather than the five agencies that are currently jointly responsible. Depending on your outlook it will either make the rule easier in terms of compliance, or easier to deconstruct.

The Securities and Exchange Commission (SEC) confirmed at the Securities Industry and Financial Markets Association’s C&L Annual Seminar that its pending best interest standard rule will be uninfluenced by the Department of Labor’s (DoL) fiduciary standard rule. A determination made easier by last week’s decision by the fifth circuit Court of appeals to vacate the DoL’s rule. The SEC also confirmed that it intends to continue its efforts to implement the Consolidated Audit Trail surveillance system database, despite calls for a delay across the industry.

Asia: a new era

China’s Two Sessions came to an end this week after 16 days. Over the course of the past two weeks, President Xi Jinping’s power has further been solidified following a constitutional change removing presidential term limits. 

A number of important appointments were also made. Wang Qishan, who previously led corruption investigations and was Hu Jintao’s chief negotiator in US trade talks, will serve as vice-president. Yi Gang, who served as the vice governor of the People’s Bank of China (PBOC), has been appointed as the new governor of the PBOC. He has said the most important task is to implement prudent monetary policy while pushing forward financial reform and opening. 

Liu He, President Xi Jinping’s key economic adviser, will serve as vice premier overseeing the economy and financial sector and Guo Shuqing, who was in charge of the China Banking Regulatory Commission, will take charge of the newly formed China Banking and Insurance Regulatory Commission. 

Following changes made to financial regulatory bodies, the PBOC will be taking on the role of policy making in the financial sector. Another change is the integration of China’s three anti-trust authorities into a single department that will be overseen by the National Administration for Market Supervision, a newly created body within the State Council.

EMEA: chop and change 

In an attempt to accelerate green bond growth, a High-Level Expert Group was formed on sustainable finance and it recommended changes to stimulate the market. Jane Wilkinson, head of Sustainable Finance at the Luxembourg Stock Exchange, told IFLR there is an increasing interest in green investment vehicles and platforms asking investors about their sustainability preferences, one of the recommendations, is only going to help. But any regulation must not deter issuers like in the US. Stringent documentation requirements have acted as a deterrent and the EU must ensure that the focus is purely on investor protection.

Companies are considering switching away from English law after Brexit. Axiom Executive Vice President Chris DeConti said that Germany is the member state most likely to benefit. Financial services firms tend to be more regulated than firms in other industries and therefore will have the most challenging task in restructuring contracts because of Brexit. DeConti says that firms have started to scope the problem but as yet have generally not started repapering. A minority of firms however have begun the process.

Big exchanges are one step ahead of smaller exchanges in regards to KYC and background checks and must catch up quickly when ICOs are inevitably regulated. ICOs themselves could be regulated as a utility or as a security but if they are regulated as the former exchanges would need to do no more than conduct KYC checks. But ICOs are expected to be regulated in a spectrum of possibly three categories and hybrid versions within that, depending on what the token is supporting.  

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