Global Trustee and Fiduciary Services Bite-Sized Issue 8 2023

Global Trustee and Fiduciary Services Bite-Sized | Issue 8 | 2023 17 QUICK LINKS ANTI-MONEY LAUNDERING CBDC COSTS & CHARGES CRYPTOASSETS CULTURE & CONDUCT CYBERSECURITY EMIR FINTECH FSB FUND LIQUIDITY MIFID II/MIFIR SUSTAINABLE FINANCE/ ESG AUSTRALIA ASIA IRELAND NORTH AMERICA UNITED KINGDOM SEC Proposes Rule Amendments to the Broker-Dealer Customer Protection Rule On 12 July 2023 the SEC proposed amendments to Rule 15c3-3 (the Customer Protection Rule) to require certain broker-dealers to increase the frequency with which they perform computations of the net cash they owe to customers and other broker-dealers (known as PAB account holders) fromweekly to daily. Net cash owed to customers and PAB account holders must be held in a special reserve bank account. The SEC states that broker-dealers occasionally may have substantial deposit requirements as a result of customer and PAB reserve computations. The proposal would require broker-dealers with average total credits (the amount of cash they owe customers and PAB account holders) equal to or greater than $250 million to make the computations necessary to determine the amounts required to be deposited in the customer and PAB reserve bank accounts daily, as of the close of the previous business day. By reducing the timeframe between computations, the SEC says that the proposal would assist broker-dealers in more dynamically matching the net amount of cash owed to customers and PAB account holders with the amount on deposit in the broker-dealer’s customer and PAB reserve bank accounts. The daily customer and PAB reserve computations would safeguard customers and PAB account holders by lessening the potential for large mismatches to build over time, thereby increasing the likelihood that they are made whole even if a broker-dealer fails. The proposing release will be published in the Federal Register. The public comment period will remain open for 60 days following publication of the proposing release on the SEC website or 30 days following publication of the proposing release in the Federal Register, whichever period is longer. Link to Proposed Rule here Link to Fact Sheet here Link to Statement by SEC Chair Gary Gensler here Link to Statement by SEC Commissioner Jaime Lizárraga here Link to Statement by SEC Commissioner Hester M. Peirce here Link to Statement by SEC Commissioner Caroline A. Crenshaw here Link to Statement by SEC Commissioner Mark T. Uyeda here SEC Adopts MMF Reforms and Amendments to Form PF Reporting Requirements for Large Liquidity Fund Advisers On 12 July 2023 the SEC adopted amendments to certain rules that govern Money Market Funds (MMFs) under the Investment Company Act of 1940. The SEC’s amendments will increase minimum liquidity requirements for MMFs to provide a more substantial liquidity buffer in the event of rapid redemptions. The amendments will also remove provisions in the current rule that permit a MMF to suspend redemptions temporarily through a gate and allowMMFs to impose liquidity fees if their weekly liquid assets fall below a certain threshold. The SEC states that these changes are designed to reduce the risk of investor runs on MMFs during periods of market stress. To address concerns about redemption costs and liquidity, the SEC amendments will require institutional prime and institutional tax-exempt MMFs to impose liquidity fees when a fund experiences daily net redemptions that exceed 5% of net assets, unless the fund’s liquidity costs are de minimis. In addition, the amendments will require any non-government MMF to impose a discretionary liquidity fee if the board determines that a fee is in the best interest of the fund. These amendments are designed to protect remaining shareholders from dilution and to more fairly allocate costs so that redeeming shareholders bear the costs of redeeming from the fund when liquidity in underlying short-term funding markets is costly. Separately, the SEC says the amendments will also modify certain reporting forms that are applicable to money market funds and large private liquidity funds advisers. The rule amendments will become effective 60 days after publication in the Federal Register with a tiered transition period for funds to comply with the amendments. The reporting form amendments will become effective on 11 June 2024. Link to Final Rule here