德勤：2023年资本市场监管展望_16页_3mb

2023 Capital Markets Regulatory Summary

Core Content

The 2023 capital markets regulatory landscape is characterized by a significant volume of proposed changes, increased enforcement activity, and evolving expectations around digital practices. These developments present both challenges and opportunities for firms as they navigate a complex and uncertain regulatory environment.

Main Themes

1. Regulatory Churn

• Volume of Proposals: In 2022, the SEC approved 39 proposals to amend or create new regulations, marking a substantial increase in regulatory activity.
• Impact on Firms: These proposals introduce new reporting requirements and expand the scope of entities required to register with the SEC, increasing uncertainty and risk for certain firms.
• Uncertainty and Risk: Legal challenges and overlapping implementation timelines may delay or alter the finalization of rules, requiring firms to prepare for multiple possible outcomes.
• T+1 Settlement Cycle: This proposal is notable for its unanimous support and significant operational impact, likely to be finalized in 2023.

2. Reinvigorated Enforcement

• Increased Activity: Enforcement actions against capital markets firms rose by 9% in 2022, with regulators focusing on compliance with existing standards and taking strategic actions in contested areas like digital assets.
• Cybersecurity Focus: The SEC and CFTC have imposed recordkeeping and monitoring fines, highlighting the importance of cybersecurity and electronic communications compliance.
• Regulatory Pressure: Firms are under heightened pressure to ensure their compliance programs are robust and adaptable to new enforcement expectations.

3. Regulatory Horizon

• Upcoming Proposals: Several topics are expected to be on the regulatory agenda in 2023, including digital engagement, complex products, and market data fees.
• SEC Leadership: The SEC is anticipated to lead in the breadth and volume of regulatory changes, while other regulators are also considering impactful issues.

Key Regulatory Proposals

Amendments to the Definition of Broker-Dealer

• Scope Expansion: Two proposals expand the definition of broker-dealer to include new entities, such as principal trading firms and private funds.
• Registration and Compliance: These entities will need to register with the SEC and a self-regulatory organization and comply with federal securities laws, including reporting and capital requirements.
• Actions for Firms: Firms should assess their current status, evaluate technology and compliance capabilities, and develop a plan to meet the new requirements.

Best Execution

• SEC Standard: The SEC approved a new standard for best execution, similar to FINRA Rule 5310, requiring robust policies and quarterly reviews of customer execution quality.
• Conflicted Transactions: The rule applies to broker-dealers receiving payment for order flow, setting more prescriptive standards for their operations.

Market Structure Proposals

• Three Major Proposals: These include amendments to Reg NMS, the Order Competition Rule, and new disclosures of order execution information.
• Order Competition Rule: The most controversial, requiring market participants to route orders to national exchange auctions, potentially disrupting existing business models.
• Implementation Window: Firms have until the end of March 2023 to respond to the proposals, after which SEC staff will evaluate comments and recommend final rules.

Electronic Recordkeeping

• New Format Options: The SEC introduced amendments to recordkeeping rules, allowing audit-trail formats as an alternative to WORM.
• Compliance Dates: Amendments to Rule 17a-4 take effect in May 2023, and amendments to Rule 18a-6 in November 2023.
• Actions for Firms: Conduct gap assessments, update policies for providing electronic records, and upgrade systems accordingly.

Reg S-P and Reg S-ID Actions

• Reg S-P: Requires firms to adopt written policies for protecting customer records and information.
• Reg S-ID: Mandates Identity Theft Prevention Programs, which must be tailored to the firm.
• Enforcement Focus: The SEC is expected to enforce these rules rigorously before new regulations are finalized.

Digital Assets

• Enforcement Blitz: The SEC and CFTC intensified their efforts to regulate digital assets, especially following the market downturn in 2022.
• Legal Classification: Uncertainty remains around the classification of digital assets and the regulatory framework for stablecoins and exchanges.
• Enforcement Outlook: Firms may continue to face enforcement actions until the industry demonstrates compliance with existing standards.

Branch Office Inspections

• Remote Work Trends: FINRA is considering updating its definition of branch offices to include employees' homes, reflecting the shift to remote work and digital transformation.
• Regulatory Perimeter: This change extends the regulatory perimeter beyond traditional office locations, requiring firms to adapt their oversight practices.

Complex Products

• Retail Investment Growth: With the rise in retail investing in complex products, FINRA is reviewing its rules to ensure suitability for retail investors.
• Proactive Measures: Firms should evaluate their screening and approval processes for complex products to demonstrate adequate due diligence.

Looking Forward

• Transformative Period: The regulatory agenda is expected to be a deeply transformative period for financial services regulation.
• Strategic Investment: Firms must invest in systems and teams to support regulatory compliance despite the uncertainty.
• C-Suite and Board Attention: Regulatory change should be a top priority for C-suite and board-level decision-making.

Conclusion

The regulatory environment in 2023 will be marked by significant changes, increased enforcement, and a broader regulatory perimeter. Firms must prepare for these shifts by developing comprehensive strategies, enhancing compliance programs, and investing in technology and personnel to meet evolving requirements.