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Regulatory Update: February 2023


By FactSet Insight  |  February 7, 2023

Learn about the most important compliance and regulatory news developments courtesy of FactSet's Regulatory team.

Sustainable Finance – EU

  • EBA published its ESG Roadmap outlining its three-year approach covering its objectives and timeline for delivering mandates and tasks in the area of sustainable finance and ESG risks

  • The European Parliament and the Council reached an agreement on the Carbon Border Adjustment Mechanism (CBAM) as part of the European Green deal setting the landmark tool to put a fair price on the carbon emitted during the production of carbon-intensive goods that are entering the EU, and to encourage cleaner industrial production in non-EU countries.

  • The EU Commission published two sets of Frequently Asked Questions (FAQs) to facilitate the application of the EU Taxonomy including:

    • An FAQ covering the Climate Delegated Act on mitigation, adaptationand Do No Significant Harm (DNSH)

    • And one about Article 8 Delegated Act on rules for CSRD in-scope entities, which are required to report on the EU Taxonomy-eligibility & alignment of their activities and assets

Sustainable Finance – UK

  • The UK Treasury has concluded its Future Regulatory Framework Review, which is being advanced by complementary legislation, the Financial Securities and Markets Bill (FSMA). In brief, the reform agenda involves repealing retained EU law and replacing it with UK law and regulation for the financial services industry. The work program is extensive; it will be accomplished over the coming years. A compendium of FRF resources is available on the FCA website. The FSMA is significantly adding to the UK regulators’ remit, with additions to both objectives and principles, including, among others, regard for the UK’s Climate Change Act of 2008.

Sustainable Finance – World

  • GRI – the Global Reporting Initiative published its exposure draft of the revised GRI Biodiversity Standard; it is now available for public comment. The objective is to test the clarity, feasibility, completeness, and relevance of the drafted standard. The consultation is open until February 28, 2023.

  • The Hong Kong Monetary Authority – HKMA published guidelines for banks setting up due diligence processes for green and sustainable products. The guidelines emphasize good practices to put in place proper systems of control to ensure that these products and the related funds are managed consistently with their climate strategies, thus reducing any potential greenwashing.

  • Australian Treasury is seeking comments on its proposed standards for disclosures of climate‑related financial risks and opportunities. Consultation is open until February 17, 2023

  • The Japan FSA has published its final Code of Conduct for ESG Evaluation and Data Providers after public consultation. The FSA calls for ESG evaluation and data providers to endorse this Code of Conduct and, if it is endorsed, to publish it on their websites.

  • The Thai Securities and Exchange Commission (SEC) has published Guidelines on Management and Disclosure of Climate-related Risk by Asset Managers. The Guidelines support asset managers’ assessment of climate-related risk when managing investment portfolios and address climate-related issues through the capital market mechanism in accordance with the UN Sustainable Development Goals (SDGs).

Sustainable Finance – U.S.

  • The Federal Reserve Board (Fed) proposed principles that would provide a high-level framework for the safe and sound management of exposures to climate-related financial risks for large banking organizations with more than USD 100 billion in total assets. Comments on the proposal must be submitted by February 6, 2022.

  • Additionally, the Fed is commencing a pilot climate scenario analysis exercise with six of the largest banks, analogous to the banking industry climate stress tests that have been conducted in the UK, EU, and elsewhere. The pilot exercise will deepen the Fed’s understanding of climate risk management and capacity building, while priming regulated entities by applying specific physical and transition risk scenarios, as specified in the Participant Instructions.

General – EU

  • Europol issued five recommendations for countering crypto assets-related crime and money laundering and highlighted broad approaches and related best practices

  • EBA consults on Guidelineson the management of money laundering and terrorist financing risks when providing access to financial services and primarily to ensure that customers are not denied access to financial services without valid reason. Consultation is open until February 6, 2023.

  • EU Council agrees on a strengthened rulebook on Anti Money Laundering and terrorist financing with a new regulation and a new AMLD6 to enlarge the scope of the existing regulatory framework and to close possible loopholes. The new framework will be extended to the entire crypto sector, obliging all crypto-asset service providers(CASPs) to conduct due diligence on their customers. The new package will also introduce an EU-wide maximum limit of €10.000 is set for cash payments.

  • The EC proposed new tax transparency rules for all service providers facilitating transactions in crypto-assets. These will complement the Markets in Crypto-assets (MiCA) Regulationand anti-money laundering rules.

  • Governors and Heads of Supervision (GHOS) endorsed the global bank prudential standard for crypto-assets and the work program of the Basel Committee. The standard aims to provide a robust and prudent global regulatory framework for internationally active banks' exposures to crypto-assets. The standard should be implemented by January 1, 2025.

  • The final vote for Markets in Crypto Assets (MiCA), EU’s crypto market regulation, has been postponed until April.

  • ESMA is launching a common supervisory action with national competent authorities (NCAs) on the application of MiFID II disclosure rules about marketingcommunications across the EU.  The CSA will be conducted over the course of 2023.

General – U.S.

On January 4, the SEC announced updates to its Fall 2022 Regulatory Flexibility Agenda, which can be reviewed here. The SEC has a substantial agenda for the calendar year 2023, including as series of significant rule finalizations in the ESG space, such as corporate climate risk and emission disclosures, enhanced fund and adviser ESG disclosures, and the fund Names Rule amendments.

On Dec. 14, the SEC published a set of four interrelated proposals, adumbrated below. 

  1. Regulation Best Execution. Enhancement to existing best execution regulatory framework by requiring detailed policies and procedures for all broker-dealers and more robust policies and procedures for broker-dealers engaging in certain conflicted transactions with retail customers

  2. Order Competition Rule. New rule that would prohibit a “restricted competition trading center” (wholesalers, internalizers, dark pools) from internally executing certain orders of individual investors at a price unless the orders are first exposed to competition at that price in a qualified auction operated by an “open competition trading center” (exchanges and NMS Stock ATSs)

  3. Regulation NMS Min Pricing Increments, Access Fees, and Transparency of Better Priced Orders. Amendments to Reg NMS to 1) adopt variable minimum pricing increments for quoting and trading NMS stocks, 2) reduce access fee caps, and 3) enhance transparency of better-priced orders

  4. Disclosure of Order Execution Information. Updates to existing Best Execution reporting by 1) expanding reporting base (to B-Ds with a lot of customers), 2) expanding reportable orders (e.g., outside trading hours orders), 3) updating reportable content, such as order sizes and types, NMLOs, and time-to-execution statistics incremented in “milliseconds or finer” and other changes

Marine Hutinel and Nels Ylitalo contributed to this article.

This blog post is for informational purposes only. The information contained in this blog post is not legal, tax, or investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.

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The information contained in this article is not investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.