On October 30, 2023, President Joe Biden issued an executive order (EO or the Order) on Safe, Secure, and Trustworthy Artificial Intelligence (AI) to advance a coordinated, federal governmentwide approach toward the safe and responsible development of AI. It sets forth a wide range of federal regulatory principles and priorities, directs myriad federal agencies to promulgate standards and technical guidelines, and invokes statutory authority — the Defense Production Act — that has historically been the primary source of presidential authorities to commandeer or regulate private industry to support the national defense. The Order reflects the Biden administration’s desire to make AI more secure and to cement U.S. leadership in global AI policy ahead of other attempts to regulate AI — most notably in the European Union and United Kingdom and to respond to growing competition in AI development from China.
The European Commission issued the Financial Data Access Act (FIDA) proposal in June this year. FIDA will create a legislative framework that aims to “bring payments and the wider financial sector into the digital age” by facilitating the sharing of and access to customer financial data (whether of businesses or consumers).
The National Association of Insurance Commissioners (NAIC) held its Summer 2023 National Meeting (Summer Meeting) from August 12–16, 2023. Highlights include continued development of accounting principles and investment limitations related to certain types of bonds and structured securities, continued discussion of considerations related to private equity ownership of insurers, a proposed model bulletin addressing the use of artificial intelligence by the insurance industry, and continued development of a new consumer privacy protections model law.
This week, two committees in the House of Representatives will mark up legislation intended to clarify the regulatory framework applicable to digital assets in the United States. Earlier this month, leaders in the U.S. Senate also introduced legislation to establish a comprehensive and unified regulatory scheme for digital assets and digital asset derivatives.1 Both the House and Senate bills seek to integrate the regulation of digital assets and digital asset derivatives into the existing U.S. regulatory framework — primarily that of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) — rather than create a standalone framework, but both bills face significant barriers to enactment.
Just before Americans began their Fourth of July holiday, the U.S. Commodity Futures Trading Commission (CFTC) Division of Enforcement Director announced that the division has established two key task forces: the Cybersecurity and Emerging Technologies and the Environmental Fraud Task Force.1 Both task forces will be staffed with attorneys and investigators across the Division of Enforcement with the goal of serving as subject matter experts and prosecuting cases. As a result, CFTC registrants should be prepared for heightened focus on cybersecurity and environmental fraud, particularly in the derivatives and relevant spot markets.
Since China’s Personal Information Protection Law (PIPL) came into effect in November 2021, there has been widespread uncertainty amongst offshore fund managers and investors with entities outside Mainland China as to how and whether the regime applies to them. Given the potential for foreign asset managers to overlook or misinterpret PIPL, this brief update outlines some guidance as to how PIPL can apply, and to whom, in a practical context.
The committee of government and regulatory authorities responsible for open banking in the UK has set out its plans and timeframes for expanding and developing infrastructure, standards, and processes for the sector. Central among these are proposals to improve the performance of interfaces among relevant firms, mitigate financial crime risks, and ensure that end users receive sufficient information and are protected if something goes wrong. This Sidley Update summarises the proposals and key points for firms.
On December 5, 2022, the Division of Examinations of the Securities and Exchange Commission (SEC) released a Risk Alert discussing its observations on Regulation S-ID (Reg. S-ID) from recent examinations of SEC-registered investment advisers and broker-dealers. Reg. S-ID, the SEC’s implementation of the identity theft red flags rule, requires SEC-regulated financial institutions and creditors to develop and implement an identity theft prevention program (Program) with written policies and procedures that are updated periodically. The requirements for the Program are outlined in the text of Reg. S-ID, and there are guidelines in Appendix A to assist firms in creating and maintaining a compliant Program. As Reg. S-ID applies to both SEC and Commodity Futures Trading Commission-regulated entities, financial institutions and creditors should consider their compliance programs accordingly.
On November 9, 2022, the New York Department of Financial Services (DFS) published its proposed second amendment to its cybersecurity regulations (23 NY CRR Part 500). This proposal follows a July 29 pre-proposal and comment period. The amendment is available for a sixty-day comment period – until January 9, 2023 – after which the agency may adopt final regulations or issue a further revised version.