Fintech
SEC Issues Substituted Compliance Order for Germany and Notice of Substituted Compliance Application and Proposed Substituted Compliance Order for France
Washington, D.C.–(Newsfile Corp. – December 22, 2020) – The Securities and Exchange Commission voted to take two actions to advance implementation of security-based swap regulation under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act. First, the Commission is publishing a final substituted compliance order in response to an application by Germany’s Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin). In addition, the Commission is publishing a notice of application and proposed substituted compliance order in response to an application by France’s Autorité des Marchés Financiers (AMF) and Autorité de Contrôle Prudential et de Résolution (ACPR).
“These actions reflect the latest of the Commission’s ongoing efforts, including engagement with multiple agencies and foreign counterparts, to stand up the Dodd-Frank Title VII regime and prepare for the registration of security-based swap dealers in 2021,” said SEC Chairman Jay Clayton. “I thank our German, French and EU colleagues for their tireless efforts to advance cross-border regulatory cooperation, and SEC Commissioner Hester Peirce for her leadership in advancing efforts to stand up the Dodd-Frank Title VII regime.”
The substituted compliance order for Germany provides that certain German firms that are registered with the Commission as security-based swap dealers and major security-based swap participants conditionally may satisfy certain requirements under the Securities Exchange Act of 1934 by complying with comparable German and European Union (EU) requirements. The Commission retains the authority to inspect, examine and supervise non-U.S. firms and take enforcement action as appropriate. The Commission and BaFin also have entered into a memorandum of understanding to address supervisory and enforcement cooperation and other matters arising under substituted compliance.
The French application similarly seeks substituted compliance for French security-based swap entities based on compliance with French and EU requirements. In contrast to the German order, the French proposed order also makes a proposed substituted compliance determination with respect to non-prudentially regulated firms’ capital, margin, recordkeeping, reporting, notification, and securities count requirements under the Exchange Act.
These actions reflect the Commission’s consideration of the comparability of applicable non-U.S. requirements, and incorporate conditions intended to help promote comparability in practice.
“Substituted compliance is a critical component to the workable yet effective regulation of the global OTC derivatives markets,” said SEC Commissioner Hester Peirce. “I am pleased that the Commission is taking these steps, including considering substituted compliance with respect to capital and margin requirements in connection with the French application. I look forward to considering applications for substituted compliance for additional jurisdictions in the near future.”
The public comment period for the French application will remain open for 25 days following publication of the notice and proposed order in the Federal Register. Additional information about substituted compliance applications is available at: https://www.sec.gov/page/exchange-act-substituted-compliance-and-listed-jurisdiction-applications-security-based-swap.
FACT SHEET
Commission Substituted Compliance Order for Germany and French Substituted Compliance Application and Proposed Commission Order
Dec. 22, 2020
Action
The Commission is taking two actions to advance the availability of substituted compliance for certain non-U.S. security-based swap dealers and major security-based swap participants, in anticipation of those firms’ registration with the Commission in 2021.
First, in response to an application by Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin), the Commission is publishing an order to conditionally permit certain German firms registered with the Commission as security-based swap dealers or major security-based swap participants to satisfy certain requirements under the Securities Exchange Act of 1934 by complying with comparable German and EU requirements. In connection with this order, the Commission and BaFin have entered into a memorandum of understanding to address supervisory and enforcement cooperation and other matters arising under substituted compliance.
Separately, the Commission is publishing notice of an application by the French Autorité des Marchés Financiers (AMF) and the Autorité de Contrôle Prudential et de Résolution (ACPR), requesting substituted compliance for French security-based swap dealers and major security-based swap participants. The Commission also is publishing a proposed order to conditionally provide substituted compliance to French firms.
Substituted Compliance Framework
Exchange Act rule 3a71-6 conditionally provides that non-U.S. security-based swap dealers and major security-based swap participants may satisfy certain requirements under Section 15F of the Exchange Act by complying with foreign requirements that the Commission has found to be comparable. The Commission’s comparability assessment must consider the scope and objectives of the foreign requirements and also the effectiveness of the foreign financial supervisory and enforcement frameworks.
Rule 3a71-6 further conditions substituted compliance on the Commission and the foreign financial regulatory authority entering into a supervisory and enforcement memorandum of understanding and/or other arrangement addressing supervisory and enforcement cooperation and other matters related to substituted compliance.
Substituted compliance does not constitute exemptive relief, but instead provides an alternative method by which non-U.S. dealers and major participants may comply with applicable U.S. requirements. The Commission retains the authority to inspect, examine and supervise those firms and take enforcement action as appropriate.
The registration compliance date for security-based swap dealers and major security-based swap participants is October 6, 2021, and market participants will begin counting security-based swap transactions and positions toward the registration thresholds on August 6, 2021. See “Key Dates for Registration of Security-Based Swap Dealers and Major Security-Based Swap Participants,” available at https://www.sec.gov/page/key-dates-registration-security-based-swap-dealers-and-major-security-based-swap-participants.
Substituted Compliance Order for Germany
The Commission’s order for Germany provides for conditional substituted compliance in connection with requirements under the Exchange Act regarding:
- Risk control – requirements related to risk management systems, trade acknowledgment and verification, portfolio reconciliation, portfolio compression and trading relationship documentation.
- Recordkeeping and reporting – requirements related to record creation, record maintenance, reporting and notices (with respect to prudentially regulated firms only).
- Internal supervision and compliance – requirements related to supervision, conflicts of interest and chief compliance officers, and certain related matters.
- Counterparty protection – requirements related to fair and balanced communications; disclosure of material risks and characteristics; disclosure of material incentives or conflicts of interest; daily mark disclosure; “know your counterparty;” and suitability.
Consistent with rule 3a71-6, the availability of substituted compliance reflects the comparability of applicable German and EU requirements, and the effectiveness of the German financial supervisory and enforcement frameworks. The order incorporates certain conditions and other limits to promote the comparability of regulatory outcomes, including:
- Portfolio reconciliation and dispute reporting – Firms would have to report counterparty valuation disputes directly to the Commission, based on EU timing requirements.
- Trading relationship documentation – Firms could not apply the MiFID “eligible counterparty” exception in connection with applicable German and EU requirements. Also, firms would not receive substituted compliance in connection with certain disclosure-related provisions except with respect to non-U.S. counterparties.
- Internal supervision requirements – Firms’ internal supervision framework must promote compliance with certain residual U.S. requirements and the conditions to the order.
- Compliance reports – Firms must provide compliance reports directly to the Commission. This condition does not require that the reports be provided to EU or German authorities.
- Suitability – The firm’s counterparty must be treated as a “per se professional client” under German and EU requirements and must not be a “special entity” as defined in Exchange Act section 15F(h)(2)(C) and Exchange Act rule 15Fh-2(d).
- Daily mark disclosure – The firm must be required to reconcile, and in fact reconcile, the portfolio containing the relevant security-based swap on each business day.
- Recordmaking – The firm would need to: (a) preserve the data elements to create certain records required by the Commission’s rule and furnish the record in the format (e.g., blotter or ledger) required by that rule; (b) make certain records related to the security-based swap dealer segregation rule if the firm is not exempt from that rule; and (c) make certain records related to business conduct requirements for which substituted compliance is not available.
- Record preservation – The firm would need to: (a) preserve records related to the security-based swap dealer segregation rule if the firm is not exempt from that rule; and (b) preserve certain records related to Regulation SBSR and business conduct requirements for which substituted compliance is not available.
- Financial and Operational Reporting – The firm would need to report financial and operational information in the manner and format specified by Commission order or rule and present the financial information in accordance with GAAP that the firm uses to prepare general purpose publicly available or available to be issued financial statements in Germany.
- Notification – The firm would need to: (a) simultaneously transmit to the Commission a copy of any notice required to be sent by comparable German and EU laws and include contact information of a person who can provide further details about the notice; and (b) comply with the requirement in the Commission’s rule to provide notice of failure to make a required deposit into the reserve account required by the segregation rule for security-based swap dealers.
German firms would remain subject to Exchange Act requirements to keep books and records open to inspection by the Commission and to furnish promptly to the Commission legible, true, complete, and current copies of those records of the firm that are required to be preserved. BaFin has provided adequate assurances that firms subject to the order can meet these Exchange Act requirements.
Substituted Compliance Notice and Proposed Order for France
The substituted compliance application for France generally addresses the same Exchange Act requirements that are the subject of the German substituted compliance order, but also encompasses non-prudentially regulated firms’ capital, margin, recordkeeping, reporting, and notification requirements under the Exchange Act.
The application includes analyses that compare French and EU requirements with relevant requirements under the Exchange Act, as well as information regarding the financial supervisory and enforcement frameworks in France. The application is available on the Commission’s website at https://www.sec.gov/files/full-french-application.pdf.
The French proposed order would be conditioned on compliance with relevant French and EU requirements and, in large part, incorporates similar conditions to those for Germany. Unlike the German order, the proposed French order also includes conditions addressing non-prudentially regulated firms’ recordkeeping and reporting requirements, including conditions regarding their audited financial statements.
The Commission is requesting comment on each of these proposed determinations and conditions.
Next Steps
The Germany order is effective immediately. The Commission will seek public comment on the French application and proposed order for 25 days following publication in the Federal Register.
Security-based swap market participants are urged to be mindful of the October 2021 registration compliance date for security-based swap dealers and major security-based swap participants, and relevant firms should take action to prepare for registration. For further information, firms may contact the Office of Derivatives Policy in the Commission’s Division of Trading and Markets, at 202-551-5870.
The financial technology sector continues to evolve at a rapid pace, offering innovations that disrupt traditional paradigms. Today’s briefing underscores fintech’s diverse growth avenues: from substantial venture capital plays and strategic partnerships to groundbreaking implementations in lending. Here’s a closer look at recent developments shaping the landscape.
Synapse’s Comeback and Andreessen Horowitz’s Strategic Bet
Source: Axios
Synapse, a financial infrastructure company previously embattled by controversy, is staging a remarkable comeback, backed by none other than venture capital heavyweight Andreessen Horowitz (a16z). With this new infusion of funds, Synapse aims to consolidate its position as a premier platform for building financial services tools.
This resurgence demonstrates the resilience of the fintech ecosystem, where innovation often prevails over turbulence. Synapse’s renewed vigor also signals that top-tier investors remain bullish on infrastructural solutions pivotal to the future of digital finance. Andreessen Horowitz’s participation not only validates Synapse’s model but also underscores the VC giant’s enduring interest in fintech infrastructure, even amid global economic uncertainties.
Analysis:
This partnership exemplifies the dynamism within fintech, highlighting the interplay of innovation, capital, and resilience. It also raises questions about the broader implications of giving second chances to firms with turbulent histories. While Synapse’s evolution could inspire others, it also places a spotlight on governance and accountability in high-growth sectors.
Israel’s Fintech Scene Gets a Boost with Investment in Finova Capital
Source: Calcalistech
Israeli fintech startup Finova Capital has raised an impressive $20 million in a funding round led by prominent institutional investors. This marks a significant milestone for the company as it seeks to expand its suite of financial solutions aimed at underserved markets.
Israel’s fintech ecosystem has long been recognized as a hub of innovation, and this latest investment only reinforces its global standing. Finova Capital’s focus on empowering smaller businesses and fostering financial inclusivity aligns with emerging trends where tech-driven solutions bridge critical gaps in financial services.
Analysis:
With this funding, Finova is poised to enhance its technological offerings while contributing to economic inclusion. However, the broader fintech industry will watch closely to see how the company leverages this capital amid increasing competition from regional and global players.
India’s Yubi Plans a Fundraising Push
Source: Bloomberg
Yubi, a prominent Indian fintech platform backed by Insight Partners, is reportedly preparing for a new fundraising round. Having already established itself as a leader in credit infrastructure, Yubi aims to bolster its offerings and expand its market footprint.
India’s fintech landscape is witnessing explosive growth, with platforms like Yubi playing a critical role in the credit ecosystem. Yubi’s planned fundraising reflects the broader appetite for scaling solutions that streamline credit access, particularly in emerging markets where traditional lending models often fall short.
Analysis:
This development highlights two key trends: the increasing reliance on credit platforms in high-growth economies and the strategic role of international investors like Insight Partners in driving fintech innovation. Yubi’s expansion plans could set a precedent for other regional fintech players seeking to scale amid global economic headwinds.
Provenir and Hastings Financial Services Win Global Recognition
Source: Business Wire
In a testament to the transformative power of digital lending solutions, Provenir and Hastings Financial Services have been jointly recognized for the Best Digital Lending Implementation at the IBSi Global Fintech Innovation Awards. This accolade underscores the success of their collaboration in modernizing the lending process through cutting-edge technology.
Provenir’s advanced decision-making platform and Hastings Financial Services’ lending expertise have delivered a solution that significantly enhances user experience, operational efficiency, and risk management. Such innovations highlight the increasing role of partnerships in advancing fintech’s digital transformation.
Analysis:
This recognition not only validates the efficacy of digital lending but also emphasizes the importance of partnerships in driving innovation. It signals to the industry that collaboration can be a powerful tool for staying ahead in a rapidly evolving marketplace.
Microf and Quantum Financial Technologies Forge New Alliances
Source: PR Newswire
Microf, a financial solutions provider, has announced a strategic partnership with Quantum Financial Technologies. This collaboration aims to expand lending solutions for contractors, providing streamlined access to capital for businesses in need of flexible financing options.
This partnership is a timely response to the growing demand for specialized financial products in niche markets. By leveraging Quantum’s technology, Microf can now offer more tailored solutions, particularly to contractors navigating complex financial requirements.
Analysis:
This development reflects a growing trend: the diversification of fintech offerings to serve specific market segments. As competition in mainstream fintech intensifies, targeting underserved niches could become a defining strategy for success.
Key Takeaways for the Fintech Ecosystem
- Resilience in Fintech Funding: Despite economic uncertainties, venture capital continues to fuel innovative fintech players like Synapse and Finova Capital.
- Regional Growth Stories: From Israel to India, fintech ecosystems are thriving, attracting global attention and investment.
- Collaboration as a Catalyst: The success of partnerships like Provenir-Hastings and Microf-Quantum underscores the importance of strategic alliances.
- The Power of Recognition: Awards like the IBSi Fintech Innovation Awards validate industry achievements, inspiring others to push the envelope.
- Focus on Inclusion: Whether through credit platforms or lending solutions, fintech is playing a pivotal role in fostering financial inclusivity worldwide.
Looking Ahead: Challenges and Opportunities
The fintech sector’s journey is far from linear. Regulatory complexities, technological disruptions, and market volatility remain persistent challenges. However, as seen in today’s developments, the opportunities far outweigh the risks. By prioritizing innovation, collaboration, and inclusivity, fintech players can navigate the complexities of the global financial landscape.
This moment in fintech history is pivotal. It’s a time for bold decisions, strategic partnerships, and a commitment to bridging financial divides. As industry players rise to the occasion, the road ahead promises a future where technology and finance intertwine to empower individuals and businesses alike.
The post Fintech Pulse: A Daily Dive into Industry Innovations and Developments appeared first on News, Events, Advertising Options.
Fintech
Fintech Latvia Association Releases Fintech Pulse 2024: A Guide to Latvia’s Growing Fintech Hub
The Fintech Latvia Association has launched the latest edition of its annual publication, Fintech Pulse 2024, unveiling insights and resources that position Latvia as a thriving hub for European fintech.
Announced at this year’s Fintech Forum, the magazine is now available in digital format, offering a comprehensive guide for fintech professionals and entrepreneurs navigating the Latvian market and exploring its advantages.
This issue covers essential topics, from support tools provided by Latvijas Banka and newcomer roadmaps to Riga’s investor resources and fintech education opportunities. Readers will find the latest fintech news from Latvia, coverage of this year’s key industry events, and member insights on the future of fintech. The Fintech Landscape section provides a comprehensive overview of the Latvian fintech ecosystem.
Tina Lūse, Managing Director of Fintech Latvia Association, expressed excitement about the ecosystem’s growth: “We are excited to unveil the third annual edition of Fintech Pulse. This year has been pivotal for our ecosystem, and together with public sector stakeholders, we are enhancing financial inclusion, democratizing investments, and driving innovation throughout the sector. This is a testament to Latvia’s emergence as a fintech hub, establishing itself as an equal partner in innovation and support within the Baltic region.”
Minister of Finance Arvils Ašeradens highlighted Latvia’s fintech potential in the magazine, stating: “Latvia has already made strides in adapting its regulatory framework to support a stable financial system. Now, we encourage financial market players to invest in modern technologies to meet the growing demand for inclusive financial services and solidify Latvia’s position in the fintech landscape. We are confident that with the combined offer of the government, Latvijas Banka and Riga city, we are a great place to start your next scalable European FinTech!”
Minister of Economics Viktors Valainis expressed Latvia’s ambition in the magazine, stating: “Latvia wants to become a WEB 3.0. innovation hub and solidify itself as one of the leaders of a newly regulated EU crypto-asset market. We welcome international companies to choose Latvia, a flexible and fast-paced country, where you can obtain a MICA license in just 3 months. Open your office in Latvia, receive a MICA license and serve the whole EU market!”
The Fintech Latvia Association brings together fintech and non-banking financial service providers to represent their interests at both the national and international levels. It promotes sustainable development in Latvia’s financial sector by fostering reliable, responsible, and long-term industry practices that earn trust from consumers and regulatory authorities. The association is committed to supporting innovation and growth opportunities within the fintech landscape.
The post Fintech Latvia Association Releases Fintech Pulse 2024: A Guide to Latvia’s Growing Fintech Hub appeared first on News, Events, Advertising Options.
The World Economic Forum (WEF) has released a pivotal white paper in collaboration with the Financial Conduct Authority (FCA), titled “Quantum Security for the Financial Sector: Informing Global Regulatory Approaches”. This January 2024 publication underscores the urgent need for global cooperation as the financial sector transitions from a digital economy to a quantum economy, highlighting both the immense opportunities and cybersecurity challenges posed by quantum computing.
Quantum: A Double-Edged Sword for Finance
Quantum computing offers transformative benefits for the financial sector, such as accelerated portfolio optimization, enhanced fraud detection, and improved risk management. Yet, it simultaneously threatens the very foundation of cybersecurity. With quantum’s ability to break traditional encryption methods, sensitive data and financial transactions face significant risks. The white paper warns that such vulnerabilities could erode trust in the financial system and destabilize global markets.
The urgency to prepare is evident, with some quantum threats, such as “Harvest Now, Decrypt Later” attacks, already emerging. Governments and regulators, including the United States with its National Security Memorandum on Quantum (2022), have begun advocating for quantum security readiness by 2035. However, as noted in the paper, transitioning to a quantum-secure infrastructure is a monumental task requiring unprecedented coordination between regulators, industry leaders, and technology providers.
A Collaborative Framework: Four Guiding Principles
To address the complex challenges posed by quantum technologies, the WEF and FCA have proposed four guiding principles to inform global regulatory and industry approaches:
- Reuse and Repurpose: Leverage existing regulatory frameworks and tools to address quantum risks, rather than creating entirely new systems.
- Establish Non-Negotiables: Define baseline requirements for quantum security, ensuring consistency and interoperability across organizations and jurisdictions.
- Increase Transparency: Foster open communication between regulators and industry players to share best practices, strategies, and knowledge.
- Avoid Fragmentation: Prioritize global collaboration to harmonize regulatory efforts and avoid inconsistencies that could burden multinational organizations.
These principles aim to create a unified, forward-looking strategy that balances innovation with security.
A Four-Phase Roadmap for Quantum Security
The white paper introduces a phased roadmap to help the financial sector transition toward quantum security:
- Prepare: Raise awareness of quantum risks, assess cryptographic infrastructure, and build internal capabilities.
- Clarify: Formalize engagement between stakeholders, map current regulations, and model the cost and complexities of transitioning to quantum-safe systems.
- Guide: Address regulatory gaps, translate technical standards into actionable frameworks, and develop industry-wide best practices.
- Transition and Monitor: Implement cryptographic management modernization and adopt iterative, adaptable regulatory approaches to remain resilient in the quantum economy.
This roadmap emphasizes adaptability, encouraging stakeholders to continuously refine their strategies as quantum technologies evolve.
The Path Forward: Collaboration as a Catalyst
The transition to a quantum-secure financial sector is not merely a technological shift but a comprehensive rethinking of how industries and regulators approach cybersecurity. The interconnected nature of global finance means that collaboration between mature and emerging markets is crucial to avoid vulnerabilities that could undermine the entire system.
Regulators and financial institutions must act with urgency. As Sebastian Buckup, Head of Network and Partnerships at the World Economic Forum, notes in the report:
“The quantum economy era is fast approaching, and we need a global public-private approach to address the complexities it will introduce. We welcome this opportunity to collaborate with the FCA to chart the roadmap for a seamless and secure transition for the financial services sector.”
Similarly, Suman Ziaullah, Head of Technology, Resilience, and Cyber at the FCA, emphasizes:
“Quantum computing presents considerable opportunities but also threats. The financial sector relies heavily on encryption to protect sensitive information, the exposure of which could cause significant harm to consumers and markets. Addressing this requires a truly collaborative effort to transition to a quantum-secure future.”
Global Impact: Ensuring Resilience in an Evolving Landscape
As quantum technologies mature, they will redefine the landscape of cybersecurity. The financial sector, as one of the most sensitive and interconnected industries, must prioritize preparedness to ensure stability, protect consumers, and maintain trust.
The Quantum Security for the Financial Sector: Informing Global Regulatory Approaches white paper offers an essential foundation for continued dialogue and action. By adhering to the guiding principles and roadmap outlined in the report, stakeholders can navigate this transformation with foresight and cooperation.
The full report, published by the World Economic Forum, highlights the need for a unified global approach to quantum security, serving as a rallying call for industry and regulatory leaders alike.
Source: World Economic Forum, “Quantum Security for the Financial Sector: Informing Global Regulatory Approaches”, January 2024.
The post Quantum Security and the Financial Sector: Paving the Way for a Resilient Future appeared first on News, Events, Advertising Options.
-
Fintech7 days agoFintech Pulse: Industry Updates, Innovations, and Strategic Moves
-
Fintech6 days agoFintech Pulse: Daily Industry Brief – A Dive into Today’s Emerging Trends and Innovations
-
Fintech PR6 days agoTAILG Represents the Industry at COP29, Advancing South-South Cooperation with Low-Carbon Solutions
-
Fintech PR7 days agoROLLER Releases 2025 Attractions Industry Benchmark Report, Unveiling Key Trends and Revenue Strategies
-
Fintech PR5 days agoAlkira Ranked 25th Fastest-Growing Company in North America and 6th in the Bay Area on the 2024 Deloitte Technology Fast 500™
-
Fintech PR7 days agoThe CfC St. Moritz Announces New Speakers from BlackRock, Binance, Bpifrance, Temasek, PayPal, and More for Upcoming 2025 Conference
-
Fintech PR5 days agoCorinex Ranked Number 331 Fastest-Growing Company in North America on the 2024 Deloitte Technology Fast 500™
-
Fintech PR6 days agoGift Card Market to Reach USD 1,897.46 Billion Globally by 2030, Driven by Digital Adoption and Corporate Gifting | Credence Research Inc.