Financial Industry Developments

CFTC Launches LabCFTC as Major Fintech Initiative

On May 17, 2017, the Commodity Futures Trading Commission ("CFTC") approved the creation of LabCFTC, which it describes as "a new initiative aimed at promoting responsible fintech innovation to improve the quality, resiliency and competitiveness of the markets the CFTC oversees." LabCFTC will also "look to accelerate CFTC engagement with fintech and RegTech solutions that may enable the CFTC to carry out its mission responsibilities more effectively and efficiently."

The CFTC intends for LabCFTC to be the agency's focal point to promote fintech innovation and fair competition by making the CFTC more accessible to fintech innovators and serve as a platform to inform the CFTC's understanding of new technologies. Moreover, the CFTC intends that LabCFTC will be an information source for the CFTC and its staff on responsible innovation that may influence policy development. For more information regarding LabCFTC click here.

The CFTC identified the following Core LabCFTC Components:

• GuidePoint: GuidePoint is a new dedicated point of contact for fintech innovators to engage with the CFTC, learn about the CFTC's regulatory framework and obtain feedback and information on the implementation of innovative technology ideas for the market. The CFTC believes that such feedback may include information that, particularly at an early stage, could help innovators/entities save time and money by helping them understand relevant regulations and the CFTC's oversight approach.
• CFTC 2.0: A new initiative to foster and help promote the adoption of new technology within the CFTC's own mission activities through collaboration with fintech industry and CFTC market participants.

The CFTC intends that LabCFTC will facilitate:

• Through proactive engagement with the innovator community, a better understanding in the CFTC of how new innovations interact with the regulatory and supervisory framework and identification of areas where the framework could better support responsible innovation.
• Collaboration among the fintech industry and CFTC market participants that facilitate responsible market innovation and promote the use of technology within the CFTC; CFTC participation in studies and research that facilitate responsible innovation in the markets and promote the use of technology within the agency.
• Cooperation with financial regulators at home and overseas.
• Monitoring of trends and developments to ensure that CFTC's regulatory framework supports – and does not unduly impede – responsible technological innovation.
• Information sharing about applications of fintech, including potential use cases, benefits, risks and solutions.
• Engagement with academia, students and professionals on applications of FinTech relevant in the CFTC space.

Rating Agency Developments

On May 17, 2017, Fitch issued a report entitled Switzerland Residential Mortgage Rating Criteria Addendum. Report.

On May 17, 2017, Fitch issued a report entitled Germany Residential Mortgage Rating Criteria Addendum. Report.

On May 17, 2017, Moody's issued a report entitled Unregulated Utilities and Unregulated Power Companies. Report.

On May 17, 2017, Moody's issued a report entitled Midstream Energy. Report.

On May 16, 2017, Moody's issued a report entitled Power Generation Projects. Report.

On May 15, 2017, DBRS issued a report entitled Rating European Non-Performing Loans Securitzations. Report.

On May 15, 2017, DBRS issued a report entitled Rating Canadian Provincial Governments Methodology. Report.

On May 15, 2017, DBRS issued a report entitled Rating Canadian Municipal Governments. Report.

On May 15, 2017, DBRS issued a report entitled Rating Canadian Provincial Agents of the Crown. Report.

On May 15, 2017, Fitch issued a report entitled Global Consumer ABS Rating Criteria – EMEA and APAC Auto Residual Value Addendum. Report.

On May 11, 2017, DBRS issued a report entitled Italian Salary-Assignment Loan Securitisations – Methodology. Report.

European Financial Industry Developments

European Commission to Publish CMU Midterm Review on June 7, 2017

On May 18, 2017, Ugo Bassi, Director of Financial Markets, European Commission DG FISMA, confirmed that the Commission will publish its midterm review of the capital markets union ("CMU") on June 7, 2017.

Mr. Bassi stated that the review would contain an action plan for "CMU 2.0" and would announce a number of additional initiatives. These initiatives include measures to make it easier to sell funds cross-border using passporting mechanisms and to strengthen supervisory powers at the EU level, potentially through increased supervisory powers for ESMA. The Commission will adapt the initiatives envisaged under the CMU to reflect the UK's decision to leave the EU.

New FCA Web Page on Cyber Resilience

On May 18, 2017, the FCA published a new Web page on cyber resilience.

The FCA notes that cyber risks pose a threat to all financial services firms. Firms should be aware of the threat, able to defend themselves effectively, and respond proportionately to cyber events.

The FCA's goal is to help firms become more resilient to cyberattacks while ensuring that consumers are protected and market integrity is upheld. To achieve this, firms of all sizes should:

• Develop a "security culture" from the board down to every employee.
• Be able to identify, prioritize and protect their information assets (that is, hardware, software and people).
• Detect breaches.
• Respond to and recover from incidents.
• Constantly evolve to meet new threats.

Under Principle 11 of the FCA's Principles for Businesses, firms must report material cyber incidents. A firm may consider an incident to be material if it:

• Results in significant loss of data or the availability or control of the firm's IT systems.
• Impacts a large number of victims.
• Results in unauthorized access to, or malicious software present on, the firm's information and communication systems.

These requirements will be updated in line with any future regulations.

Where a firm considers an incident to be material for Principle 11 purposes, it should report this to the FCA and other relevant authorities, including the PRA if the firm is dual-regulated, and to the Information Commissioner's Office (ICO) if the incident is a data breach.

The FCA states that cybersecurity is a shared responsibility. It takes a cooperative approach to address the threat, working with government and other regulators, nationally and internationally. The Web page contains a link to the National Cyber Security Centre (NCSC) website, together with links to relevant FCA publications.

European Parliament Adopts Resolution on FinTech

On May 17, 2017, the European Parliament voted in plenary to adopt a resolution on FinTech and the influence of technology on the future of the financial sector. The provisional text (P8_TA-PROV(2017)0211) of the resolution has been published.

The Parliament's Committee on Economic and Monetary Affairs (ECON) published a report on FinTech, which included the resolution, on May 3, 2017.

The Parliament has instructed its president to forward the resolution to the Council of the EU and the European Commission.