Spotlight on Regulatory Risk in Financial Services

This edition of our FSR Australia Notes focuses on the concept and dimensions of regulatory risk.

We see this as an increasingly important area of financial services regulation, as following the Financial Services Royal Commission, a financial institution’s relationship with the regulators is particularly paramount.

There are many factors underpinning this observation, including the more prominent role of community expectations and the related issue of regulatory reputation. This latter concept has been given legislative recognition under the Banking Executive Accountability Regime (BEAR) (with the accountability obligation to deal with APRA in an open, constructive and co-operate way) and will likely also be reflected in similar terms in the proposed Financial Accountability Regime (FAR). This recognition was without precedent in Australian statute law.

Concept of Regulatory Risk

We start the discussion by tackling the concept of “regulatory risk” itself.

“Regulatory risk” for these purposes is the uncertainty associated with whether a regulator will take an interest in particular activities of a financial institution, leading to the possibility of action by that regulator.

The term can be defined with more granularity by reference to, and contrast with, the concept of “legal risk”.

Legal risk is, of course, the risk in relation to whether certain activities comply with the relevant legal requirements.

By contrast, regulatory risk encompasses legal risk but transcends legal risk in one of at least four major respects as follows:

  • the regulator could disagree with a particular legal interpretation and adopt a contrary or different legal interpretation;
  • the regulator could focus on criteria beyond the legal position, such as customer centricity or community expectations;
  • outside of either of the above scenarios, the regulator seeks to enforce its particular view of conduct of the financial institution, regardless of the actual legal position; or
  • reputational risk, where the relevant regulator is looking into the conduct or activities of the relevant financial institution.

Drill-down into Regulatory Risk

The different limbs of regulatory risk canvassed above require further consideration.

With respect to the risk that a regulator will take a different legal interpretation, the way in which financial institutions engage and react with the regulator will depend on the particular matter. This is a particularly important area of regulatory risk, noting an increased desire from regulators after the Royal Commission to run “test cases” on points of financial services law.

The strength of the relevant legal opinion/interpretation held by an institution is a useful starting point. The greater the strength of the legal opinion, the greater the way in which the institution can engage in good faith with the regulator to seek to arrive at common ground.

Sometimes, it will make sense for the institution to obtain an opinion from Senior Counsel, which may or may not then be provided to the regulator, noting the legal privilege dimensions here.

In general terms, a bona fide and strong legal opinion provides a good basis for engaging with the regulator, and seeking to arrive at a consensual outcome. This applies regardless of whether the regulator is projecting an image of “toughness” or focussing on enforcement: no regulator can act outside its powers, and a financial institution having a strong legal opinion about its position starts engagement with a regulator from a position of equivalent strength.

The second scenario relates to where the regulator might seek to look beyond the legal position, regardless of whether it agrees with the legal interpretation of the financial institution. In particular, there is an increasing trend for the relevant regulator to look beyond the strict black letter legal position. Further, this focus might be expressed in terms of the need for the institution to focus on customer’s interests, often expressed as customer centricity.

Naturally, as lawyers, we cannot help but consider whether such a focus has a wider legal foundation. In this context, concepts such as “community expectations” can be examined, although this latter concept is still not tied to an enforceable legal obligation.

One needs to go to the next level and consider whether the regulatory point connects to, and is supported by, a more fluid legal obligation, such as the obligation of the financial services licensee to carry out the relevant financial services, efficiently, honestly and fairly in accordance with section 912A of the Corporations Act. It is true that an obligation such as efficiency, honesty and fairness can be affected and moulded by community expectations.

Similarly, where legal remedies are conferred on consumers by pieces of legislation, such as under the AFCA jurisdiction, then obligations such as the obligation to act fairly and reasonably might be seen as interacting in this space.

This discussion then leads into the third limb raised above, which is where the relevant regulator may seek to enforce a position without specific reference to either a legal interpretation or a wider concept of fairness. This scenario really enters into the realm of negotiation with the regulator. The relevant financial institution may be influenced to resist or not resist the regulatory standpoint based on a whole range of considerations, including other current or historical engagement pieces with the regulator as well as whether the financial institution believes that the regulator’s requirement should be met based on the desire or need to look after the interests of the relevant customers, such as whether those requirements are consistent with any customer charter the institutions may have.

In this last regard, we note that abstract interests of the customer usually should not be considered, at least initially, as interests. Relevant case law supports the position that the relevant interests of customers are to be defined by the constituent documents of the financial product that confer rights on the customers, such as a contract or trust deed. This will be contrasted with a view that equates customer interest to any conceivable advantage to the customer without regard to what provisions or benefits the relevant financial product is said to confer on the customer.

Increasingly, financial services legislation contains requirements for financial institutions to prioritise the interests of the relevant clients.

Several observations can be made in this regard:

  • the concept of “interests” should be as suggested above; and
  • prioritisation duties of this nature in many cases will not prevent the financial institution from acting in its own interests, but are only activated if there is a conflict between the interests of clients and the interests of the financial institution. Exceptions of course exist to this proposition, such as where fiduciary/equitable obligations require the holder of the obligation to only act in the client’s interests and/or preclude the institution from acting in its own interests.

Turning to the fourth limb, reputational risks are often a very powerful reason why a financial institution may not wish to, or has reduced appetite to, challenge a regulator’s standpoint formally.

Regulatory Engagement Strategy (RES)

It is clear that in accordance with the above analysis and trends, there is an increased need for financial institutions to institute, evolve, update or refine their RES, depending on where they may be up to in their development of an RES.

In particular, the following areas might be relevant:

  • Focus on community expectations, efficiently, honestly and fairly and fit and proper
    1. Has the RES got enough detail around how ASIC’s increased interest in this area is being addressed?
    2. How is your RES addressing APRA fit and proper requirements, noting that this goes beyond honesty and also covers competence, diligence and judgement?
    3. What governance structures, compliance processes and procedures underpin/support this area?
  • Focus on reputation generally and regulatory reputation more specifically
    1. With the introduction of a specific accountability measure under the BEAR/FAR, does the RES deal sufficiently with this area?
    2. What is meant by prudential reputation and being open, constructive and co-operative with a relevant regulator under the BEAR/FAR in different contexts which the institution is likely to face (eg requests for waiver of legal privilege as part of openness)?
  • Dealings with the regulator(s)
    1. Given the introduction of a new duty of transparency vis-à-vis APRA in the BEAR legislation, as well as the joint regulatory role of ASIC in the FAR, does the RES deal sufficiently with what we will call the “duty of candour” towards the regulator(s)?
    2. Is there a new duty of transparency when dealing with the regulators?
    3. What does this duty involve beyond breach reporting?
    4. Is there now a duty to report events which might transcend breach reporting?
    5. How does any such duty of candour interact with the area of legal professional privilege?
    6. How does a RES seek to preserve legal professional privilege (eg in briefing of experts in regulatory matters)?
  • Arms’ length dealings
    1. Given the increased focus in the Royal Commission and ensuing focus by the regulators, does the RES deal sufficiently with how the intra-group dealings of an organisation can be explained and justified in the event of a regulator focussing specifically at the institution or at an industry level more generally?

 

Michael Vrisakis
Michael Vrisakis
Partner
+61 2 9322 4411
Fiona Smedley
Fiona Smedley
Partner
+61 2 9225 5828
Charlotte Henry
Charlotte Henry
Partner
+61 2 9322 4444
Tony Coburn
Tony Coburn
Consultant
+61 2 9322 4976
Steven Rice
Steven Rice
Special Counsel
+61 2 9225 5584
Tamanna Islam
Tamanna Islam
Senior Associate
+61 2 9225 5160

Unfair contract terms and ‘transparency’ in small business loans

Written by James Rigby

Australian Securities and Investments Commission v Bendigo and Adelaide Bank Limited [2020] FCA 716, Federal Court of Australia, Gleeson J (28 May 2020)

The full text of this judgment is available at: https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2020/2020fca0716.

(a) Summary

Following joint submissions by the parties, Gleeson J accepted that certain terms in the defendant bank’s loan facility standard form contracts were ‘unfair terms’ for the purposes of Pt 2 Div 2 Subdiv BA of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act). The unfair terms were:

  • broad indemnities in favour of the bank;
  • event of default clauses with very limited opportunity to remedy defaults;
  • unilateral variation and termination clauses; and
  • conclusive evidence clauses.

The litigation was brought by ASIC following lengthy engagement with various banks over 2017 and 2018, culminating in its publicly-stated position in ASIC Report REP 565, which identified clauses of concern and set out (at [89]) ASIC’s intention to ‘examine small business loan contracts from other lenders to ensure that these contracts do not contain unfair terms.’ This case is one result of that examination.

(b) Facts  

The defendant, Bendigo and Adelaide Bank, offered loan facilities through two of its divisions, Delphi Bank and Rural Bank. These were on terms set out in standard form contracts, described as the Delphi Conditions and Rural Conditions, respectively.

On 12 November 2016, amendments to the ASIC Act commenced, expanding the unfair contract terms regime to protect ‘small businesses’ in addition to individual consumers: Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Act 2015 (Cth).

Between 12 November 2016 and 30 June 2019, the bank entered into at least 600 facilities covered by the Delphi Conditions and 3,000 facilities covered by the Rural Conditions which were below the monetary thresholds in the second limb of the ‘small business contract’ test in s. 12BF(4) of the ASIC Act:

  • not exceeding $300,000; or
  • for longer than 12 months and not exceeding $1 million.

It was also found to be likely that a significant number of those contracts were with borrowers that employed fewer than 20 persons, the other limb of the test.

(c) Decision 

(i) Standard form contracts for financial products or services

ASIC alleged – giving rise to a rebuttable presumption under s. 12BK(1) – and the bank accepted that the facilities were ‘standard form contracts’.

The bank also accepted that each facility was a financial product or contract for financial services, as required for the terms to fall within the ASIC Act regime (as opposed to the general equivalent unfair contract terms regime in Pt 2-3 of the Australian Consumer Law in Schedule 2 to the Competition and Consumer Act 2010 (Cth) (the ACL regime)).

(ii) Terms

Four categories of terms were impugned. (These terms, and the entire contracts, are in a schedule to the published judgment.)

First, indemnities in clause 14 of the Delphi Conditions and clause 12.1 of the Rural Conditions required customers to indemnify the bank, including for losses not caused by the customer, losses caused by the bank’s own errors or negligence, and losses which could have been avoided or mitigated by the bank.

Second, some listed events of default in sub-clauses 10.1(c), (j), (k) and (n) of the Delphi Conditions and sub-clauses 8.1(c), (p), (q) and (v) of the Rural Conditions were triggered by:

  • events which did not involve any credit risk to the bank (for example, non-material errors in information given to the bank);
  • unilateral opinions formed by the bank, including in ‘vague and largely undefined circumstances’; and
  • defaults which were capable of remedy but without an opportunity to do so.

Upon default, the bank was entitled to cancel the facilities and claim break costs and an indemnity for enforcement costs, with no right of set-off for the customer and a very limited right for the customer to prevent those actions by remedying the default.

Third, unilateral variation clauses 11.1 and 22.1 of the Delphi Conditions and 2.3, 2.4, 4.2 and 4.4 of the Rural Conditions permitted the bank to unilaterally vary the price, services and other terms of the contract, with less than a month’s notice.

Fourth, conclusive evidence clauses 17.6 of the Delphi Conditions and 13.1 of the Rural Conditions provided that certificates by the bank of amounts stated to be owing would be conclusive evidence of the debt unless the customer could disprove them.

(iii) Unfairness

Section 12BG of the ASIC Act (and the corresponding ACL regime) deems a term unfair if:

  • it would cause a significant imbalance in rights and obligations;
  • it is not reasonably necessary to protect the legitimate interests of the advantaged party (which is presumed and for the advantaged party to prove otherwise); and
  • it would cause detriment to a party if applied or relied on.

(Gleeson J usefully summarises the entire statutory regime and case law at [7]-[36].)

Courts are required to take into account the extent to which the term is ‘transparent’: in reasonably plain language, legible, presented clearly and readily available.

In this case, each of the impugned terms fell within the ‘grey list’ of example terms that may be unfair in s. 12BH, which, although not automatically giving rise to a presumption of unfairness (Australian Competition and Consumer Commission v Chrisco Hampers Australia Limited (2015) FCR 33 at [44]), courts  ‘cannot ignore’.

The Court accepted the joint submissions that all four impugned terms were unfair.

Of greater interest were comments made about the contested issue of transparency. Gleeson J found that the indemnities were also not transparent because they were drafted in legal language, and ultimately referred to 35 different defined terms, with liberal use of the phrase ‘without limitation’, and including the concept of ‘legal expenses on a full indemnity basis’.

However, her Honour was not persuaded that the event of default clauses lacked transparency, apparently because, although extremely broad, they were clearly drafted.

The unilateral variation clauses lacked transparency for a number of reasons, including that a term defined as a ‘Periodic Review’ misleadingly did not have any periodic aspect, and that a title to one clause, ‘Changes’, did not suggest the breadth of the term.

In terms of conclusive evidence, her Honour found that ‘determination of any amount … is conclusive in the absence of manifest error’ was too legalistic, however that a ‘certificate signed by us… is conclusive evidence… unless proved incorrect’ was sufficiently transparent.

(iv) Relief

The Court made declarations that the impugned clauses were ‘unfair terms’ and void ab initio, and ordered that certain indemnity and unilateral variation clauses be varied to new drafting that the parties agreed would avoid the impugned unfairness. For the terms deemed unfair, only the particular sub-clauses impugned were declared void, and the rest of each clause was undisturbed. The bank was also required to undertake not to use or rely upon certain contract terms.

(v) Implications

The decision is a timely reminder to pursue continuous improvement and proactive review of standard form contracts to modify potentially unfair terms particularly given that, ultimately, the term may not be able to be relied upon. In addition, it provides useful guidance around which regularly used legal phrases and drafting techniques in banking documents will endanger clauses by rendering them not ‘transparent’. It is also a reminder that, although clauses on the ‘grey list’ are not necessarily void (if the court can be persuaded otherwise), they are an attractive (and potentially easy) target for the regulators.

In this case there was no evidence that the bank had previously relied upon any of the unfair contract terms, and therefore orders in relation to remediation were not sought, however that remains a danger for banks that fall foul of the regime.

Finally, this case highlights how adopting the right strategy in reaction to regulators’ pursuit of legacy issues can minimise the pain while producing workable outcomes. The entire litigation was resolved in 7 months. In a sign of current global circumstances, but also an impressive result for the parties seeking to avoid unnecessary costs, the decision was made on the papers without the need for a hearing.

 

Michael Vrisakis
Michael Vrisakis
Partner
+61 2 9322 4411
Charlotte Henry
Charlotte Henry
Partner
+61 2 9322 4444
Tony Coburn
Tony Coburn
Consultant
+61 2 9322 4976

ASIC spotlight on client money

In the wake of ASIC’s recent announcement on enforcement in this area, we thought that it would be timely to set out:

  • some key points about how the client money provisions operate, particularly with respect to application money;
  • the pitfalls to look out for; and
  • how some of the more technical provisions interact with each other.

To this end, we adopt a “Ten Point Synthesis” to hone in on the most pertinent points.

Point 1

The client money provisions apply not just to money paid to acquire an interest in a product, but also to client payments that top up an existing investment (see section 1017E(1)(c) of the Corporations Act viz payments to acquire an interest or an increased interest in a financial product).

Point 2

The provision is activated when the product issuer does not immediately issue the relevant interests after receiving the money (section 1017E(1)(d) of the Corporations Act). For these purposes, an issue arises as to what “receiving the money” means. The Corporations Act seems to contemplate that money means the amount paid by the client. For example, where the money is paid as a cheque, the question is whether the issuer can wait until the cheque clears. In this example, this issue is resolved by Corporation Regulation 7.9.61C, which provides that payment equates to when the cheque is honoured.

Point 3

Probably the lynchpin requirement is that which provides that the money must be paid into an account which is held with an Australian ADI (section 1017E(2)(a) of the Corporations Act) and importantly, the only money that can be paid into the account is money to which section 1017E applies. This means it can apply to money attributable to multiple financial products issued by a single product issuer (for example, money with respect to different superannuation and investment products issued by the relevant product issuer). Of course, with the recent proposed reforms requiring separation of RSE functions and other fiduciary functions, separation of the 1017E account is also likely to be required.

It should also be noted that several exemptions to this rule apply under the applicable regulations. In particular, where the money is paid to a life insurer, then a statutory fund may be used as a section 1017E account (Corporations Regulation 7.9.08).

Point 4

Money paid into the account is to be treated as trust money (section 1017E(2A) of the Corporations Act). This is important as such money is impressed with trust characteristics and obligations. Notably, such money is to be held on trust for the person paying the money and hence, any interest on that money would, under ordinary trust principles, also be held on trust for that person. However, the Corporations Regulations modify this usual position by providing that the product issuer “is entitled to the interest on the account” where “the product provider discloses to the person who paid the money that the product provider is keeping the interest (if any) earned on the account.” This is often disclosed to investors via a product’s disclosure documents.

Point 5

Restrictions apply as to when the account money can be withdrawn (section 1017E(3) of the Corporations Act). Primarily, the money can only be withdrawn to pay back the payer of the money or to issue the product in accordance with the instructions of the payer (or otherwise in accordance with applications of the money provided for in the Corporations Regulations).

Here, it should be noted that there may be money which is received by the product issuer that is not actually being paid to acquire an interest in the product (or an increased interest in the product). Such money may have been paid as inbuilt commission to a third party adviser for example. There is an issue here as to whether this type of money can be paid into a section 1017E account on the basis that it is not paid for the acquisition of a financial product. However, if combined money is paid by a single cheque (ie application money and third party commission), then under Corporations Regulation 7.9.61C, the total amount is deemed to be received by the by the product provider where the cheque is honoured. So the cheque could be banked into a non-1017E account. Under section 1017E(2), the product provider would then have to deposit the application money into the section 1017E account on the day of deemed receipt or the next business day.

Point 6

The Corporations Act provides a strict regime for the permissible period during which account money can remain in the section 1017E account (section 1017E(4) of the Corporations Act). Within one month of the money being received, it must be returned to the payer or applied towards the relevant acquisition. The exception to this is where it is not reasonably practical to return or apply the money by the end of that month. In such a case, it can be maintained in the account until the end of such period as is “reasonable” in the circumstances (see Point 7!).

Point 7

Case law sheds light on what is “reasonable” in the circumstances and has taken a strict view in this regard (see Basis Capital Funds Management Ltd v BT Portfolio Services Ltd [2008] NSWSC 766).

Point 8

A product provider can utilise multiple accounts to comply with the relevant requirements (section 1017E(5) of the Corporations Act).

 Point 9

As noted above, interest on a section 1017E account can only be retained by the product issuer if properly disclosed (see Corporations Regulation 7.9.08A).

 Point 10

There is an interplay between section 981B and section 1017E of the Corporations Act in a number of ways. For example, money received in respect of section 1017E can be paid into a section 981B account (under Corporations Regulation 7.8.01(6)). In this case, it is important to remember that where this is done, Part 7.8 of the Corporations Act applies (Corporations Regulation 7.8.01).

However, if section 1017E money is paid into a section 981B account, then one needs to consider how the money can be applied (see Corporations Regulation 7.8.02(1)), as there is no explicit reference to section 1017E money being applied for the purposes contemplated under section 1017E.

 

Michael Vrisakis
Michael Vrisakis
Partner
+61 2 9322 4411
Fiona Smedley
Fiona Smedley
Partner
+61 2 9225 5828
Charlotte Henry
Charlotte Henry
Partner
+61 2 9322 4444
Tamanna Islam
Tamanna Islam
Senior Associate
+61 2 9225 5160

ASIC continues its focus on advertising and disclosure

Yesterday, ASIC provided an update on its surveillance activity on advertising and disclosure by investment funds, emphasising the importance of investment fund disclosure not being misleading and adequately addressing risk.

It is important for licensees to bear in mind that the stance and views taken by ASIC can be applied equally to other products, such as superannuation products (particularly on platforms) and insurance products. Accuracy of disclosure and advertising materials continue to be a key focus area for ASIC, particularly during COVID-19, where market conditions are rapidly evolving.

In particular, there is a very important provision contained in the PDS disclosure regime in section 1013D of the Corporations Act, which is relevant in this regard. This is section 1013D(1)(c), which requires disclosure of significant risks associated with holding the product. In the current market, COVID-19 has created new risks.

The PDS disclosure regime is not static. Rather, it is a dynamic one that requires product issuers to reflect on the dynamic content of their PDSs. The requirement of section 1013D is subject to the overriding requirement expressed in the preamble to section 1013D(1), which is to disclose such information that a retail client would reasonably require for the purposes of making a decision on whether to acquire the financial product. In the present circumstances, prima facie, changing risks in relation to illiquidity, other withdrawal restrictions and investment all seem relevant to a client’s acquisition decision.

It may be that some of these developments may fall within the exception to disclosure contained in section 1013F of the Corporations Act, which provides an exclusion from disclosure where it would not be reasonable for a retail client considering whether to acquire the product to find the information in the PDS and in this case, “the kinds of things such persons may reasonably be expected to know.” It is probable that while clients may be expected to know, in general terms, issues of illiquidity, there will be specific product aspects of general market conditions that will not be within the assumed knowledge of a client and therefore, will require specific disclosure.

This then reverts to the issue of whether ASIC Instrument relief can be utilised, or whether an SPDS or new PDS is required.

For more commentary on disclosure obligations and reliance on ASIC Instrument relief, see our articles here and here.

In addition to the above risks which materialise more frequently during COVID-19, it is important to note that there is always a degree of risk associated with product comparisons, which should be undertaken on a whole of product basis (rather than simply focusing on particular features).

 

Michael Vrisakis
Michael Vrisakis
Partner
+61 2 9322 4411
Tamanna Islam
Tamanna Islam
Senior Associate
+61 2 9225 5160

ASIC’s 2020/21 timetable released

Today, ASIC published its Interim Corporate Plan for the 2020–2021 financial year and an updated timetable of its ongoing work up to the second quarter of 2021.

Key dates with respect to legal and regulatory reform in the financial and credit services industries are set out in the table below:

Project Indicative timing
Product intervention power – regulatory guidance

ASIC will publish a regulatory guide in June 2020 on how it will use the product intervention power.

June 2020
Mortgage brokers best interest duty – regulatory guidance

ASIC will publish a new regulatory guide on how ASIC will assess compliance with the best interest obligations in National Consumer Credit Protection Act 2009 (Cth) Part 3-5A.

June/July 2020
Internal dispute resolution (IDR) – updated requirements

ASIC will publish an update to Regulatory Guide 271 Internal dispute resolution, outlining revised updated IDR standards and requirements for financial services and credit licensees.

RG to be published July 2020

New requirements to commence from 5 October 2021

Design and distribution obligations (DDO) – regulatory guidance

ASIC will publish its regulatory guide on DDO, following consultation on its draft regulatory guide that was released in December 2019.

RG to be published in Q3 2020

ASIC plans to respond to industry requests for guidance ‘as soon as possible’

Regulatory guidance on client review and remediation – consultation

ASIC will consult on extending Regulatory Guide 256 Client review and remediation conducted by advice licensees (RG 256) beyond financial advice.

ASIC’s timetable also states that it started an internal review of RG 256 in 2019, with a focus on ‘extending the application of the policy, including greater transparency on the progress and outcomes of remediation, and providing best practice guidance for designing and conducting consumer-centred remediation’.

Q3 2020
PDS disclosure requirements for managed funds and superannuation – commencement

As we mentioned in an earlier update, ASIC will amend the transitional arrangements PDSs to ‘allow entities to come into the new disclosure regime from 30 September 2020 and require any PDS given on or after 30 September 2022 to comply with the new disclosure regime’.

No changes have been announced to commencement of the new regime for periodic statements.

Opt-in from 30 September 2020

Required for PDSs given on or after 30 September 2022

Removal of claims handling exemption – consultation

ASIC may engage in targeted consultation on a new information sheet for entities involved in claims handling, on ‘how to apply for an Australian financial services licence and comply with licence obligations’.

September 2020 or upon the introduction of legislation into Parliament (whichever is later)
Review of the ePayments Code – consultation

ASIC will consult on the ePayments Code as part of its review to assess its ‘its fitness for purpose, noting significant developments in financial technological innovation and the need to ensure the Code is simple to apply and easy to understand’.

Q4 2020
Royal Commission law reform for mortgage brokers – consultation

ASIC intends to consult on:

  • a draft legislative instrument and information sheet on a reference checking protocol for mortgage brokers and financial advisers;
  • updates to Regulatory Guide 104 Licensing: Meeting the general obligations; and
  • updates to Regulatory Guide 205 Applying for and varying a credit licence.
October 2020 or upon the introduction of legislation into Parliament (whichever is later)
Insurance in superannuation report – publication

ASIC states that its review is focused on ‘industry’s progress on improving insurance outcomes for consumers’.

December 2020
Royal Commission law reform on hawking – consultation

ASIC intends to consult in late 2020 on changes to Regulatory Guide 38 The hawking prohibitions (RG 38) to account for the legislative amendments recommended by the Royal Commission.

December 2020
Royal Commission law reform on a deferred sales model for add-on insurance – consultation

ASIC intends to consult on an information sheet about the deferred sales model for add-on insurance.

December 2020
Royal Commission law reform relating to financial advice – regulatory guidance and legislative instruments

ASIC will release an update to Regulatory Guide 245 Fee disclosure statements (RG 245) and make the relevant legislative instruments in December 2020, subject to the passage of legislation, in relation to the following Royal Commission recommendations:

  • Recommendation 2.1: Annual renewal and payment
  • Recommendation 2.2: Disclosure of lack of independence
  • Recommendation 3.2: No deducting of advice fees from MySuper accounts
  • Recommendation 3.3: Limitations on deducting advice fees from choice accounts
December 2020
Royal Commission law reform for breach reporting – regulatory guidance

ASIC intends to consult on:

  • an update to Regulatory Guide 78 Breach reporting by AFS licensees (RG 79) on the proposed breach reporting requirements; and
  • a new information sheet about new requirements for financial advisers and mortgage brokers to investigate misconduct and notify and remediate affected clients.
February 2021
Royal Commission law reform for enforceable code provisions – regulatory guidance

ASIC intends to consult on a draft update to Regulatory Guide 183 Approval of financial services sector codes of conduct (RG 183), in the context of the proposed law reform to facilitate enforceable code provisions.

Q2 2021, with an intention to commence targeted consultation at an earlier stage

 

Michael Vrisakis
Michael Vrisakis
Partner
+61 2 9322 4411

Fiona Smedley
Fiona Smedley
Partner
+61 2 9225 5828

Charlotte Henry
Charlotte Henry
Partner
+61 2 9322 4444

Consumer Data Right – The Rules Framework is out

Written by Amy Ciolek and Kiara Salvia

On 12 September 2018, the Australian Competition and Consumer Commission (ACCC) released for public consultation the Consumer Data Right (CDR) Rules Framework (Rules Framework) following the release of the exposure draft Treasury Laws Amendment (Consumer Data Right) Bill 2018 (the Bill) which proposes amendments to the Competition and Consumer Act 2010 (Cth), the Australian Information Commissioner Act 2010 (Cth), and the Privacy Act 1988 (Cth). Continue reading

The evolving role of the financial services regulator

By Amy Ciolek and Nicola Greenberg

The ABC news reports today that “for the first time, the Australian Securities and Investments Commission will have enhanced powers to place dedicated staff within the big four banks and wealth manager AMP to directly monitor governance and compliance and fight white-collar crime.” Continue reading

Mixers, cold storage and onions…cocktail party or digital money laundering?

By Amy Ciolek and Julia Massarin

With terminology such as mixers, cold storage, tumblers and Onions (Onion Routers) (TOR), one may be excused for overlooking the significance of money laundering the digital age.

FATF Report to G20 Finance Ministers and Central Bank Governors

In July 2018, the Financial Action Task Force (FATF) published its report to the G20 Ministers and Central Bank Governors on digital currency, which reports that:

  • the link between virtual currencies/crypto-assets and other predicate crimes appears to be growing;
  • countries have regulated crypto in various ways, from implementing a blanket ban against dealing, use, issue and settling, to regulating crypto exchanges; and
  • FATF will review its 2015 guidance about crypto currency, and will meet again in September 2018 to discuss crypto related money laundering in more detail.

Continue reading