Regulations
The latest regulatory changes, updates, and decisions impacting the alternative investment sector.
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China’s State Administration for Market Regulation (SAMR) announced Thursday an investigation into Alibaba’s (NYSE: BABA) allegedly monopolistic practice of barring its merchants from selling on competing e-commerce platforms. Merchants must agree to sell their products only on the behemoth’s online shopping platform.
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Digital Assets: SEC Has Ripple In The Dock; Garlinghouse Fires Back
The SEC on Tuesday charged Ripple and two executives for raising over $1.38 billion via an unregistered securities offering.
The SEC filed the complaint in the federal district court in Manhattan alleging that the defendants violated the registration provisions of the Securities Act. It prayed for injunctive relief, disgorgement with prejudgment interest, and civil penalties. The two executives named in the complaint are Christian Larsen, Ripple’s co-founder, executive chairman of its board, and former CEO; and Bradley Garlinghouse, the company’s current CEO.
FinTech: Large Chinese Fintechs Stop Taking Online Deposits For Banks
On Friday, the Jack Ma-controlled Ant Group’s Alipay platform, which offers an impressive array of financial products to its customers, removed online deposits that it was accepting on behalf of several banks. The reason – regulatory restrictions.
Digital Assets: Clayton’s Parting Shot At Crypto – SEC To Sue Ripple
The SEC will likely sue Ripple, CEO Brad Garlinghouse, and co-founder Chris Larsen, according to Fortune. The SEC will charge the defendants for selling XRP tokens, which it alleges are unlicensed securities. XRP ranks third in the pecking order of cryptocurrencies with a market cap of $23 billion. The SEC would make the case that XRP is a security and it needed to be registered as an investment contract prior to its sale.
FinTechs: Call For Regulating Australian Buy-Now-Pay-Later Fintechs
In an article titled “Fintech Risk in 2021,” Halverson warns of heightened fintech risk in 2020 following free central bank “helicopter” money, overenthusiastic private equity and venture capital firms, and exuberant stock markets. In particular, he points to fintechs offering buy-now-pay-later (BNPL) products that have captured consumers’ fancy and encouraged them to increase their indebtedness.
FinTech: Chinese Regulators Keep Up Rhetoric Against (Very Large) Fintechs
The barrage of regulatory voices against the “fintech-that-shall-not-be-named” continues. In the latest call to hobble giant fintechs such as the Ant Group, former finance minister Lou Jiwei said regulators should restrict the number of banks that they can partner with.
Digital Assets: OSL The First Crypto Exchange To Be Licensed By Hong Kong’s SFC
The Securities and Futures Commission (SFC) licensed OSL Digital Securities to operate a regulated brokerage and automated trading service for digital assets. OSL is now the world’s first SFC-licensed, listed, digital asset wallet-insured, Big-4 audited digital asset trading platform for institutions and professional investors, it said in an announcement.
FinTech: Top Chinese Regulatory Watchdog Airs Fintech Concerns
In an article in a newly released book from the central government explaining the country’s economic priorities and development plan for 2035, Guo warned of a disturbance in global financial markets if the United States stepped up its strategic containment and rivalry with China. Given this circumstance, China is taking steps to address financial vulnerabilities that could stem from fintech giants such as the Ant Group.
Digital Assets: Gazprombank (Switzerland) FINMA-Cleared For Crypto Bank Accounts
Gazprombank (Switzerland), the wholly-owned Swiss arm of Russia’s Gazprombank (JSC), announced October 29 that it had received regulatory clearance from the Swiss Financial Market Supervisory Authority to offer crypto custody and trading services to its institutional and corporate clients.
Digital Assets: The U.K.’s Financial Conduct Authority (FCA) Bans Crypto Derivatives For Retail
After an 18-month study of the cryptoassets market, followed by a consultation, the U.K’s Financial Conduct Authority banned the sale of crypto-derivatives to retail customers on grounds they were “ill-suited for retail consumers due to the harm they pose.”
Digital Assets: State Regulators Roll Out Multi-State Compliance For Crypto and FinTech Firms
Nationwide payments firms now have to undergo a single comprehensive exam to effectively satisfy all states’ regulatory compliance requirements. The Conference of State Bank Supervisors (CSBS) announced Tuesday its “MSB Networked Supervision” initiative in this regard, effective 2021.
Alternative Investments: SEC Revamps Definition of “Accredited Investor” For Private Capital Markets
The SEC on Wednesday amended its definition of “accredited investor,” a term that drew a line between high-earning, deep-pocketed investors and retail investors for access to often lucrative opportunities in the private capital markets. Also known as “alternative investments,” these markets include, for example, venture capital, hedge funds, private equity, and real estate.
Venture Capital: VCs And Startups Rejoice – The NYSE Has An Alternative To IPOs
In a ruling Wednesday, the SEC gave the New York Stock Exchange the green light to let companies raise capital through a “Primary Direct Floor Listing” process. Before this decision, private companies could use the direct method to list their shares on the stock exchange but did not themselves receive any of the proceeds from the IPO. That’s because this route allowed existing investors in those companies to sell their shares on the market (“Selling Shareholder Direct Floor Listing”), with no new capital being raised by the company itself.
Digital Assets: Hong Kong’s SFC Greenlights Arrano’s Bitcoin-tracking Fund
Founded in 2019, Arrano Capital is the blockchain arm of Venture Smart Asia Limited. On April 20, Venture Smart Asia got the approval from the Hong Kong Securities and Futures Commission to launch the territory’s first regulated virtual-assets fund. The approval let Arrano Capital set up its bitcoin tracking fund, one that could invest 100% in virtual assets.
Liquid Alternatives: What the Proposed New Regulations on Leveraged ETFs Mean for Investors
The SEC’s proposed regulations have triggered widespread opposition, particularly those relating to leveraged (geared) ETFs.
The public has until March 24, 2020, to submit its comments on the proposals.
Digital Assets: Blockchain Securities May See New Dawn in 2020
Regulatory progress may lay the base for a revival of blockchain-based securities such as tokens and ICOs. According to Aaron Kaplan, the SEC’s strategy to crack down on digital assets and apply the rigor of traditional securities’ regulation to blockchain securities is a welcome move.
He likened it to the days of old when the criminal excesses of “bucket shops” yielded to regulation through securities law.
Digital Assets: German Banks Line Up for Licenses to Offer Crypto-Custody Services
About 40 banks have applied to Germany’s Federal Financial Supervisory Authority, or BaFin, for licenses to operate custody services for digital assets. (Coingeek)
Bafin last month released new guidelines that will impact firms offering or intending to offer custody services for digital assets such as cryptocurrencies and tokens. Effective January 1, 2020, depository or custody services for crypto assets stand classified as a financial service under the German Banking Act.
FinTech: Australian Legislators Pass Law to Enhance ASIC’s Fintech Regulatory Sandbox
Australian Legislators Pass Law to Enhance ASIC’s Fintech Regulatory Sandbox. The amendments passed on Monday extend the scope and timeframe fintechs can spend on the existing ‘sandbox.’ The ‘Treasury Laws Amendment (2018 Measures No. 2) Bill 2019‘ allows more businesses such as fintechs to test a wider range of new financial and credit products and services without a licence from ASIC for up to 24 months.
Digital Assets: In Reforms Push, China Mulling Rules for New Digital Banks, Including by Foreigners
China is working on guidelines for the establishment of online-only banks.
Chinese regulators are pushing for the establishment of new, 100% digital banks to reduce risk in the country’s financial sector. They also want to broaden Chinese banking by allowing participation from new players including foreigners.
Hedge Fund Citadel Distances Itself from Ex-Employee over Illegal Trading
Hedge fund Citadel issued a statement last week that distanced itself from a former trader who profited from non-public information. Michael Mindlin worked for Citadel between June 2016 and June 2018. However, U.S. regulators just fined him for illegally profiting from tips tied to the Affordable Healthcare Act in 2014. At the time, Mindlin worked for Stelliam Investment Management.
ESG: The SEC’s Scrutiny of ESG Investing Could Be a Blessing, Say Advisers
According to the Wall Street Journal, regulators are questioning the methodologies and criteria for the selection of companies by funds that tout ESG portfolios. ESG is an acronym for environmental-social-and governance observances. ESG investing is also known as impact, or socially responsible investing.
The SEC’s move may not be such a bad thing according to advisers, says InvestmentNews.
Alternative Investments: SEC to Redefine The Term “Accredited Investor”
The SEC is proposing to amend the rules that define the term “accredited investor,” a class of investors allowed to invest in private market investments such as hedge funds and startups. The threshold to qualify as an accredited investor is currently $1 million.
Digital Assets: Jay Clayton – SEC Hastens Slowly on Digital Assets
Jay Clayton said in testimony to the Senate that the SEC was taking a measured approach to regulation of digital assets.
Jay Clayton was very positive on the prospects of distributed ledger technology, or the blockchain, in his testimony to the Senate. He also stated that the SEC was a “measured approach” to regulation of digital assets.
Digital Assets: The SEC Thaws; Approves Bitcoin Futures Fund
In what Commissioner Hester Peircetook hailed as “a bit of progress,” the SEC cleared the decks for the launch of a bitcoin futures fund.
The SEC last week approved the launch of the futures-based NYDIG Bitcoin Strategy Fund. The regulator cleared the Form N-2 filed by Stone Ridge Trust VI on October 2 with amendments on October 16 and November 26.
Sen. Ron Wyden Demands Study on Opportunity Zone Management
Opportunity Zones have become topics of interest among institutional investors. The passage of the 2017 Tax Cuts and Jobs Act pushed through opportunity zones as potential long-term investments.