In the news this week

Author: John Crabb, Karry Lai, Olly Jackson | Published: 16 Mar 2018
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Asia: shifts and shocks

China has announced plans to merge its banking and insurance regulators. The plan is to combine the China Banking Regulatory Commission and the China Insurance Regulatory Commission into a single body overseen by the State Council. While the body will oversee the supervision of the banking and insurance sectors, the role of drafting regulation will be shifting to the People's Bank of China.

Hong Kong is continuing with its consultation for dual-class shares as it targets to allow firms with weighted voting right structures and pre-profit biotechnology companies to list on the Hong Kong Stock Exchange and allowing qualified issuers to seek a secondary listing on the HKEx. It is aiming to accept applications for dual class shares listings at the end of April. 

On the other side of the Chinese border, the Shanghai Stock Exchange has indicated that it is developing a package of services that aim to attract more technology unicorns, those that are unlisted and valued at more than $1 billion. The exchange is engaging with multiple technology firms to access the Shanghai capital markets. Over in Shenzhen, which is home to numerous Chinese technology companies, the Shenzhen Stock Exchange is also in conversation with the Chinese Securities and Regulatory Commission to get the ball rolling on drafting new rules to attract more domestic technology company listings. 

Turning offshore, Chinese acquisitions of foreign targets are facing an increasing amount of hurdles including regulatory obstacles, capital outflow and approval restrictions, and deal approval uncertainty from the US Committee on Foreign Investment in the United States (Cfius). Deal activity in this area has slowed down, with buyers thinking twice about snapping up US targets.

Americas: in with the new

President Trump fired his secretary of state Rex Tillerson, replacing the ex-Exxon man with CIA director and former Tea Party congressman Mike Pompeo. In the following days, the President held back no punches on the international scene, dropping a new round of sanctions on Russia for its role in cyber attacks and election meddling. 

Trump also moved to block Broadcom's bid for Qualcomm, an unprecedented move by the government which usually waits for the deal to be announced and undergo a full review by Cfius. He cited national security concerns as the reason, although the decision came across as a sure signal of economic protectionism.

In the Senate, the banking bill that will loosen much of the restrictions put in place by the Dodd-Frank act in 2010 was passed, giving breaks to small institutions with less than $250 billion in assets. The bill gained bipartisan support; further moves to roll back the act will no doubt feature in future weekly accounts going forward. 

The Department of Labor had an important victory in the US Court of Appeals for the 10th Circuit against Market Synergy Group, an insurance distributor, who had claimed that it treated fixed indexed annuities differently from fixed annuities under its fiduciary standard rule. Elsewhere Securities and Exchange Commission (SEC) commissioner Hester Peirce suggested that the SEC's own version of the much-maligned rule is due this year, and it will require all brokers to make disclosures. 

EMEA: a tight grip

A US district court judge has ruled that cryptocurrencies can be regulated as commodities, bringing them into the remit of the Commodities Futures Trading Commission's (CFTC). This means that the CFTC can go ahead and investigate Coin Drop Markets and New York resident Patrick McDonnell on fraud charges involving the trade of virtual currencies bitcoin and litecoin. The decision is expected to see an increase in enforcement action from the CFTC, following two high-profile actions brought recently. The news echoes advances made in France last week, as the EU member state's financial regulator announced that cryptocurrency derivatives should be regulated just like any other financial instrument and therefore online platforms offering these are included under the new Markets in Financial Instruments Directive (Mifid II).

It is almost two years since the Senior Managers Certification Regime (SMCR) was implemented. In conversation with IFLR, Fox Williams partner Joanna Chatterton said that some senior managers are accelerating retirement plans because of the regime. Bankers are said to be uncomfortable stepping into the shoes of regulators and the documentation required could potentially make breaches under the General Data Protection Regulation (GDPR) are the more likely.

With just over two months until the implementation date for the General Data protection Regulation, businesses are racing to finish preparation. But many non-EU firms do not realise that they also have to prepare just as much as EU firms and probably do not have the time to meet the deadline. Global head of Axiom's regulatory practice, Mathew Keshav Lewis, said that data centres are being set up in Europe because of the onerous and complex requirements. If all FTSE 100 companies would be polled on their compliance, Lewis predicts none would be fully compliant currently.

See also

In the news this week (week c/ March 5) 

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