PRESS RELEASE

The digitalization of the financial sector offers opportunities for savers and investors, but it is also a "new frontier" with unprecedented risks, from the challenges of cyber security to the world of crypto assets, that national and international regulators have to deal with.

The point was made today, in Rome, in a Conference on The New Frontiers of Digital Finance, organized by CONSOB, which brought together some of the leading subjects of European supervision around the same table. The President of CONSOB, Paolo Savona and the Commissioners Carlo Comporti and Paolo Ciocca did the honours.

“Digitalization brings benefits but risks altogether, such as the growing cyber security threats to the financial sector,” said Verena Ross, President of ESMA (the European financial markets regulating Authority). "The digitized and mutually interconnected financial infrastructures increase - she added - the vulnerability to the risks of cyber attacks" also due to the increasingly common recourse by market operators to outsourced suppliers.

The new European regulation MICAR (Markets in Crypto Assets Regulation), according to Ross, “is an significant milestone in the regulation of crypto assets”. In terms of the cyber-resilience, the DORA (Digital Operation Resilience Act) has entered into force, to which the financial services industry and supervisory authorities will have to quickly adapt. However, she cautioned, "there's a lot to do in a very short time."

“With the arrival of MICAR – said Elisabeth McCaul, of the ECB Banking Supervisory Council – Europe places itself at the forefront in the regulation of crypto assets. But MICAR alone will not be sufficient to bridge the regulatory gaps between the various juridical systems” with the following risk of “regulatory arbitrage” towards the more accommodating countries.

“The risks implied by the recent crypto asset stress have remained low due to the still small size of this market and the limited interconnection with systemically important financial institutions,” added Carmine Di Noia, Head of the Financial and Corporate Affairs Directorate of OECD. But “in a future perspective, with an extensive adoption of decentralized finance and greater interconnectedness, traditional markets would be infected more easily”.

However, in the face of these risks there are also new opportunities for savers, underlined John Berrigan, Director General of DG FISMA (European Commission). “Digitalisation favours financial inclusion, helps to support small and medium-sized enterprises, promotes sustainable growth”. The core argument, he stressed, is to ensure that " the same rules and the same supervision correspond to the same risks".

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PRESS RELEASE

Consob has ordered the black-out of 5 new websites that offer financial services illegally.

The Authority availed itself of the powers deriving from the “Decreto crescita” ("Growth Decree"; Law no. 58 of 28 June 2019, Article no. 36, paragraph 2-terdecies), on the basis of which Consob can order internet service providers to block access from Italy to websites offering financial services without the proper authorization.

Below are the websites Consob has ordered to be blacked out:

• Flack Consulting LLC (website https://arkcoin.live and related page https://webtrader.aktrade.cc);
• Shlack Consulting LLC (website https://tradegenics.co);
• Florishing Group LLC (website https://bstrade.world and related page https://webtrader.bstrade.top);
• Broker Capitals Ltd (website https://brokercapcfd24.com and related page https://platform2.brokercapcfd24.com);
• “VirtuFinance” (www.virtufinance.come and related page https://webtrader.virtufinance.com).

The number of websites blacked out since July 2019, when Consob got the power to order that the websites of fraudulent financial intermediaries be blacked out, has thus risen to 850.

The measures adopted by Consob can be consulted on the website www.consob.it.

The black-out of these websites by Internet service providers operating on Italian territory is ongoing. For technical reasons, it can take several days for the black-out to come into effect.

Consob draws investors' attention to the importance of adopting the greatest diligence to make informed investment choices, adopting common sense behaviors, essential to safeguard their savings: these include, for websites that offer financial services, checking in advance that the operator with whom they are investing is authorized, and, for offers of financial products, that a prospectus has been published.

To this end, Consob would remind you that on the website www.consob.it there is a section on the homepage, "Watch for Scams!", providing useful information to warn investors against financially abusive initiatives.

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Please note that Consob has launched a consultation with the market (available only in Italian) for the adoption of a Regulation implementing the provisions of Regulation (EU) 2020/1503, which introduced a single regulatory regime for European crowdfunding service providers for companies. The authorization issued in the framework of the European Regulation will allow European crowdfunding service providers to operate under a passporting regime in all EU Member States.

The provisions set up for consultation, for a period of 15 days, will involve the definition of some detailed features of the European regulation on the provision of crowdfunding services in consideration of the future completion of the adaptation process of the national legislation to Regulation (EU) 2020/1503.

The regulatory scheme submitted to market consultation will refer to the regulation of the following aspects:

1) Procedure for release and revocation of the authorization,

2) Definition of information obligations for crowdfunding service providers,

3) Definition of domestic legislation applicable to marketing communications,

4) Definition of further obligations originating from the civil law regime.

The comments on the consultation document must reach Consob by 17 March 2023 online, through the Sipe (Integrated System for External Services).

Consultation document

Consob has launched a consultation with the market (available only in Italian) for the adoption of a Regulation implementing the provisions of Regulation (EU) 2020/1503, which introduced a single regulatory regime for European crowdfunding service providers for companies. The authorization issued in the framework of the European Regulation will allow European crowdfunding service providers to operate under a passporting regime in all EU Member States.

The provisions set up for consultation, for a period of 15 days, will involve the definition of some detailed features of the European regulation on the provision of crowdfunding services in consideration of the future completion of the adaptation process of the national legislation to Regulation (EU) 2020/1503.

The regulatory scheme submitted to market consultation will refer to the regulation of the following aspects:

1) Procedure for release and revocation of the authorization,

2) Definition of information obligations for crowdfunding service providers,

3) Definition of domestic legislation applicable to marketing communications,

4) Definition of further obligations originating from the civil law regime.

The comments on the consultation document must reach Consob by 17 March 2023 online, through the Sipe (Integrated System for External Services).

Consultation document

Consob has ordered the black-out of 6 new websites that offer financial services/financial products illegally: 5 illegal financial intermediation websites and 1 website through which an offer of financial products is carried out in the absence of a prospectus.

The Authority availed itself of the powers deriving from the "Decreto crescita" ("Growth Decree" Law no. 58 of 28 June 2019, Article no. 36, paragraph 2-terdecies), relating to the black-out of the sites of abusive financial intermediaries, as well as of the power introduced by the Law no. 8 of 28 February 2020, Article no. 4, paragraph 3-bis, with reference to the black-out of the website through which the illegal offer is carried out.

Below are the websites Consob has ordered to be blacked out:

• "Prime Invest" and "Primeinv.co" (website https://primeinv.co and related page https://webtrader.pinvest.cc);
• "FXBoxed" (website www.fxboxed.com and related page https://account.fxboxed.com);
• New Finance LLC and NewFx Limited (website www.newfx.us);
• "Axi24" (website www.axi24.com and related page https://platform2.axi24.com);
• "Evolve Consulting LCC" (website https://capitalbiz.ltd and page https://webtrader.c-base.co);
• Trustfund-Minning Global Pty Ltd (website www.trustfund-minning.com).

The number of websites blacked out since July 2019, when Consob got the power to order that the websites of fraudulent financial intermediaries be blacked out, has thus risen to 845.

The measures adopted by Consob can be consulted on the website www.consob.it.

The black-out of these websites by Internet service providers operating on Italian territory is ongoing. For technical reasons, it can take several days for the black-out to come into effect.

Consob draws investors' attention to the importance of adopting the greatest diligence to make informed investment choices, adopting common sense behaviors, essential to safeguard their savings: these include, for websites that offer financial services, checking in advance that the operator with whom they are investing is authorized, and, for offers of financial products, that a prospectus has been published.

To this end, Consob would remind you that on the website www.consob.it there is a section on the homepage, "Watch for Scams!", providing useful information to warn investors against financially abusive initiatives.

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PRESS RELEASE

The questionnaires adopted by financial intermediaries to assess the suitability of the financial instruments offered to customers have become more effective and comprehensible, over the past decade. However, some aspects can be improved, such as the still substantial influence of self-assessment in customer responses, or the number of questions aimed at detecting the understanding of the bail-in mechanism, still limited to 18% of cases, only.

This is the topic debated at the Conference "Customer profiling for the assessment of adequacy - Survey of a sample of Italian intermediaries", held today at Consob, in which the evolution of the questionnaires was reviewed, starting from the 2022 Discussion Paper: Customers’ profiling for the purposes of the adequacy assessment. Follow up of the 2012 study on a sample of Italian intermediaries : a document which resumes and extends the analysis already published in a 2012 Discussion Paper, widening the perimeter to include investor profiling algorithms and customers' environmental sustainability preferences.

In a decade, the quality of the questionnaires results as increased in terms of completeness and clarity of the contents, to the benefit of a more effective profiling. Due to the supervisory activity conducted by Consob, intermediaries also make a greater use of algorithms that may limit opportunistic customer profiling.

However, there remains room for improvement, from the weight assigned to self-assessment to key information, such as about the risk of bail-in. The information collected could be subjected to more severe internal consistency checks and verified in connection with the broader set of information available to the intermediary. Sometimes, the scores assigned to the questions are not commensurate with the complexity of the financial instruments. Consob has supervisory initiatives in progress on customer profiling, adopted by the subjects in the sample, to ensure better convergence towards market best practices.

"The results of the analysis suggest many positive elements", said Consob Commissioner Paolo Ciocca at the opening of the meeting. "But there is an area where a further improvement is possible, where challenges can be turned into opportunities", Ciocca explained, referring to the indications of the Consob report on the investment choices of Italian households and to the entrance of new types of investors, due to the recent technologies.

Consob's findings show "a still poorly structured investor decision-making process on which there is some work to be done", said Nadia Linciano, head of Consob's Research Division. “A theme that fits into the need to raise awareness of the advisory services: investors often don't fully understand its added value, nor the real effects of the information they transfer to the advisor.”

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Publicly listed companies should be prepared to release information on cybersecurity in their mandatory periodic reporting to the market, due to the interest had by investors in knowing how tough or vulnerable the company in which they invest their money is, with respect to the risk of hacker attacks.

This is the position expressed by Luna Bloom of SEC (Securities and Exchange Commission), the U.S. regulatory and supervisory authority on the financial markets, in her intervention at the Conference "Cybersecurity, market disclosure & industry", underway today and tomorrow at the Università Cattolica del Sacro Cuore.

Cyber risks are growing with their stepping up due to the digitalization of the economy and finance, with strong operational, legal and reputational impacts on listed companies, Bloom observed. The boards of listed companies must hold robust rules and skills, added Bloom, demanding that transparency in the field of cybersecurity must be mandatory and not discretionary.

"Cyber-risk has a potential systemic impact", observed Paolo Ciocca, CONSOB Commissioner. "The question is not whether to release information, but when and how to release it and what to convey to the market. This places a burden on the Boards".

"A consistent, comparable and decision-oriented disclosure of information on cybersecurity would put investors - commented Elena Beccalli, Dean of the Faculty of Banking, Finance and Insurance at Università Cattolica - in a better position to be aware of risks and incidents".

"The pandemic, the war in Ukraine and the frequent use of outsourced suppliers have increased the threat of systemic risks", observed Alexander Harris of ESMA, emphasizing that collaboration between regulators and other market players is necessary.

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Proceedings of the Conference "Independent Authorities, Anti-Corruption and Whistleblowing: the open issues" organised by Consob on 14 October 2022 together with the Italian Competition Authority (AGCM) and the University of Rome Tor Vergata, within the framework of the 7th Edition of the Anti-Corruption Master's Degree, have been published in Consob's Legal Research Papers Series.

The speakers attending the conference included Roberto Rustichelli, Elisabetta Iossa and Guido Stazi of AGCM; Vittorio Capuzza and Emiliano Di Carlo of the University of Rome Tor Vergata; Filippo Cucuccio of ANSPC; Giuseppe Busia and Renato Catalano of ANAC; Giulietta Gamba of the Italian Communications Regulatory Authority (AGCOM); Claudio Filippi of the Italian Data Protection Authority; Maria Antonietta Scopelliti of Consob; Gian Luca Trequattrini of the Bank of Italy.

The conference delved into the legislation on the prevention of corruption and the legal institution of Whistleblowing, introduced by Law no. 190 of 6 November 2012, with particular reference to the regulatory structure of the independent administrative authorities. This was an important opportunity for public discussion on the models and mechanisms for preventing corruption within the context of the main independent authorities, which allowed Consob to take stock of its most recent achievements with a view to guaranteeing organisational mechanisms capable of preventing the opacity of decision-making processes, favouring the possibility of receiving reports from employees regarding any unlawful conduct.

Legal Papers no. 26 - February 2023

On the occasion of the expiry of the mandate of Commissioner Dr. Giuseppe Maria Berruti, the Commission expressed its deep appreciation for the highly qualified professional contribution he made to the Institution over seven years of intense work. The Commission also emphasized the fundamental contribution he made on regulatory issues and, in particular, relations with the judiciary.