In the news this week

Author: John Crabb, Karry Lai, Olly Jackson | Published: 27 Apr 2018
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Asia Pacific: in wooing mode

The most dramatic change to the Hong Kong stock exchange’s (HKEx) listing rules in 30 years is set to take place April 30. Under new chapters added to the rules, the HKEX will be permitting listings of biotech issuers that do not meet the HKEX Main Board’s financial eligibility tests, allowing listings of companies with much-debated weighted voting rights structures and creating a new concessionary secondary listing route. The new rules aim to encourage overseas listed companies to list on HKEX as a secondary listing venue while boosting the number of biotech listings.

Conclusions from the HKEX’s dual-class listings were published this week. Proposed measures to cap holders of special voting rights to less than 50% of total issued shares will not be adopted. Additionally, confidential filings by eligible applicants under the new concessionary secondary listing route will be permitted. A further consultation will be launched before July 31 to seek feedback on legitimate commercial and competitive reasons to permit corporate to hold WVRs.

Staying in the region, the new anti-money laundering (AML) regime gives local law enforcement agencies easier access to information about the beneficial owners of Hong Kong companies, a move which has been lauded for its focus on transparency. But areas of uncertainty remain for those companies that don’t have a standard corporate structure, raising new questions as to where compliance should come from.

Americas: makes rules great again

The Securities and Exchange Commission’s (SEC) latest proposals for new legislation on a standard of conduct for investment advisers, which come with a request for public comment in the next 90 days, has been met with some skepticism by market participants. The proposals have been in the pipeline for a while, and were released amid growing uncertainty that the Department of Labor’s (DoL) own rule, the fiduciary standard rule, which applies only to retirement brokers, will be stricken from the records on the May 8.

Despite being readily anticipated, early responses have reportedly not been positive overall. The SEC commissioners themselves voted by a margin of 4-1 to release the proposals, with Democrat Kara Stein - the dissenting vote - suggesting that the suggestions did not go far enough or provide comprehensive enough coverage or protection.

IFLR’s coverage of the Isda annual general meeting in Miami has outlined the Commodity Futures Trade Commission’s (CFTC) chairman Christopher Giancarlo’s plans for a proposed reform of the swaps framework to better balance systemic risk mitigation with healthy market activity. The announcement coincided with the release of a white paper on swaps regulation at the event on April 26.

Secretary general Bill Coen told delegates that 10 years on, the Basel Committee on Banking Supervision has yet to finalise its post-crisis reform agenda, specifically market risk structure aspects. Coen’s speech addressed three specific questions: why has the committee revised the market risk framework; why has it taken so long to complete and how can it get the framework finished in a timely manner. Coen suggested that an important consideration for the committee is whether the framework adequately balances simplicity, comparability and risk sensitivity and asked if the committee needs to consider if a simpler and more robust approach should be included in the revised market risk framework.

EMEA: crypto fever

The European Union updated its latest Anti-Money Laundering Directive (5AMLD) to include crypto exchanges and custodian wallet providers. This is their first major move into crypto regulation and plans to regulate initial coin offerings (ICOs) are expected later this year. London Block Exchange founder and chief executive Benjamin Dives said that added EU regulation is a positive for investors and gives them reassurance that they are investing safely. He also said he is unaware of any exchange that doesn’t conduct KYC and AML checks already and therefore the rules are not expected to have too much of an impact on established exchanges.

ICO regulation in the US is becoming more confusing. IFLR has previously reported that ICO issuers are avoiding the US because of unclear and strict regulation and this is an issue that does not appear to be improving. Securities and Exchange Commission chairman Jay Clayton has shifted from his previous hardline stance that ICOs cannot be anything other than a security. Clayton has suggested in recent weeks that they could be considered something other than securities and enthused about the underlying technologies – blockchain and distributed ledger technology. This will no doubt satisfy ICO issuers who may not need to comply with onerous regulation.

The General Data Protection Regulation could cause blockchain technology a number of issues, particularly in relation to the right to be forgotten. If data is deleted in a blockchain, the data will still be present in an old block. This means that, in effect, personal data cannot be completely deleted and the right to be forgotten cannot be followed through completely. Information cannot even be edited when it has been recorded.

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