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On May 29, the Department of Treasury announced the establishment of a Financial Innovation Partnership (FIP) between the U.S. and the UK. The FIP will focus on expanding bilateral financial services collaborative efforts to study emerging fintech innovation trends and share information and expertise on regulatory practices. Specifically, the FIP will focus on (i) regulatory engagement, including building upon “existing regulatory cooperation by discussing regulatory developments and sharing experiences on technical issues related to innovation in financial services,” and (ii) commercial engagement, such as providing cross-border opportunities for private sector companies to engage with industry associations as well as market participants. The FIP was announced during a meeting of the U.S.-UK Regulatory Working Group, which, a week earlier, held discussions in Washington, D.C. on the outlook for financial regulatory reforms, future priorities, regulatory cooperation, and possible implications of the UK’s exit from the EU on financial stability and cross-border financial regulation.
On March 29, the SEC and the United Kingdom (UK) Financial Conduct Authority (FCA) signed two updated Memoranda of Understanding (MOU) to continue their cooperation and information sharing with respect to the “effective and efficient oversight of regulated entities across national borders.” The MOUs will come into force on the date EU legislation ceases to have direct effect in the UK, should the UK withdraw from the EU.
The first MOU is a supervisory arrangement covering regulated entities operating across national borders. The MOU—originally signed in 2006—includes updates to increase the scope of covered firms under the MOU to include firms that carry out derivatives, credit rating, and derivatives trading repository businesses. The update will reflect “the FCA’s assumption of responsibility from the European Securities and Markets authority for overseeing credit rating agencies and trade repositories in the event of the UK’s withdrawal from the EU.”
The second MOU—originally signed in 2013—provides a supervisory cooperation and exchange of information framework related to the supervision of covered entities operating within the alternative investment fund industry. The updates ensure that covered entities including investment advisers, fund managers, and private funds “will be able to continue to operate on a cross-border basis without interruption” in the event of a withdrawal.
On March 15, five federal agencies—the FDIC, FHFA, Federal Reserve Board, OCC, and Farm Credit Administration (collectively, the “Agencies”)—adopted an interim final rule amending the agencies’ regulations that require swap dealers and security-based swap dealers under the Agencies’ respective jurisdictions to exchange margin with their counterparties for swaps that are not centrally cleared (Swap Margins Rule). The interim final rule seeks to address the situation where the United Kingdom withdraws from the European Union without a negotiated agreement and entities located in the U.K. transfer existing swap portfolios that face counterparties located in the E.U. over to affiliates located in the U.S. or the E.U. Specifically, the interim final rule provides that certain swaps under this situation will not lose their “legacy” status—will not trigger the application of the Swap Margin Rule—if carried out in accordance with the conditions of the rule. The interim final rule is effective immediately and the Agencies are accepting comments for 30 days after publication in the Federal Register.
U.K. oil and gas services company sets aside $280 million for bribery settlements with multiple countries
On February 20, a London-based oil and gas services company, reported in a filing with the SEC that it has set aside $280 million as an estimate for the settlement of investigations by U.S., Brazilian, and French law enforcement authorities regarding potential violations of anticorruption laws in several countries. The company’s predecessor previously paid $338 million to settle FCPA charges brought by the DOJ and the SEC in 2010.
On February 6, the U.K. SFO announced that a former sales executive of an oil-services company had pleaded guilty in the U.K. to 11 counts of bribery regarding payments made in exchange for winning oil-services contracts in Iraq and Saudi Arabia. The executive – a British citizen and the former global head of sales for a subsidiary of the company – pleaded guilty to participating in payments of more than $6 million to agents to win contracts worth more than $4 billion in Iraq and Saudi Arabia. The SFO’s investigation of the company regarding suspected bribery and money laundering, which was announced in May 2017, is ongoing, but no other officers or employees are currently charged.
On February 19, the U.S. Commodity and Futures Trading Commission (CFTC) and the United Kingdom’s Financial Conduct Authority (FCA) released the Cooperation Arrangement on Financial Technology Innovation (Agreement). The Agreement outlines a commitment to collaborate and support each regulator’s efforts to encourage responsible fintech innovation; monitor development and trends; and obtain more effective and efficient regulation and oversight of the market. The Agreement specifies how program officials with LabCFTC in the U.S. and FCA Innovate in the U.K. will collaborate to share information, provide regulatory support to fintech businesses, and refer fintech businesses that wish to operate in the other jurisdiction to each other. In the announcement for the Agreement, CFTC Chairman J. Christopher Giancarlo stated, “we believe that by collaborating with the best-in-class FCA FinTech team, the CFTC can contribute to the growing awareness of the critical role of regulators in 21st century digital markets.”
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