Australia: Financial services wrap up

In August 2019, ASIC announced plans to review the transition away from grandfathered conflicted remuneration and has proposed to use its new product intervention powers with respect to binary options and contracts for difference (CFDs). APRA and the Treasury have also provided an update on the implementation of recommendations made from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

Treasury releases implementation roadmap on the Royal Commission

On 19 August 2019, the Treasury released its Financial Services Royal Commission Roadmap summarising the Government's actions to date and explaining how it will deliver in its response to the Royal Commission's recommendations. The Government has committed to take action in relation to all 76 recommendations and has made 18 additional commitments.

Currently, the Government has completed 15 of the recommendations with another 5 in progress. By the end of 2019, the Government intends to have introduced legislation in response to another 6 recommendations to improve consumer protections and 4 additional commitments to strengthen financial regulators. Further information, including the implementation timeline for the Government, Financial Regulators and Industry actions can be found in the Roadmap here.

ASIC proposes ban on the sale of binary options to retail clients and restrictions on the sale of CFDs

On 22 August 2019, ASIC released Consultation Paper 322 Product Intervention: OTC binary options and CFDs (CP 322) as part of its new market wide product intervention powers. Accompanying CP 322 were two draft legislative instruments and a report Consumer harm from OTC binary options and CFDs (REP 626).

As part of the Consultation Paper 322, ASIC proposes to:

  • prohibit the issue and distribution of OTC binary options to retail clients; and
  • impose 8 conditions on the issue and distribution of CFDs to retail clients, comprising:
    1. leverage ratio limits;
    2. margin close-out protection;
    3. negative balance protection;
    4. prohibition on inducements including 'free' gifts, bonus credits and spread rebates;
    5. risk warnings;
    6. real-time disclosure of total position size;
    7. real-time disclosure of overnight funding costs; and
    8. transparent pricing and execution.

ASIC believes that unlike binary options, CFDs can serve legitimate trading, investment and risk management purposes provided that appropriate protections are put in place through the introduction of such conditions.

Comments on Consultation Paper 322 are due by 1 October 2019, with more information available in ASIC's Media Release.

ASIC to review industry transition towards ending grandfathered remuneration for financial advice

On 21 August 2019, ASIC announced it is monitoring the transition away from grandfathered conflicted remuneration arrangements for financial advisers. ASIC will review the steps taken by industry participants to end these arrangements and investigate the extent to which benefits are being passed on to affected clients.

This comes after the Government announced on 30 July 2019 legislation that will end the practice of grandfathering arrangements by 1 January 2021. This move was recommended in the final report of the Financial Services Royal Commission.

ASIC will conduct quantitative reviews including a survey of entities known to pay grandfathered conflicted remuneration to Australian financial service licensees. The review will require them to provide data initially for a 12-month period (from 1 July 2018 – 30 June 2019) and thereafter on a quarterly basis. Qualitative analysis of a smaller sample of entities who pay and receive grandfathered remuneration will also be conducted. Information from both quantitative and qualitative reviews will be reported to the Treasurer by 30 June 2021 and released publicly. More information can be found here.

ASIC releases corporate plan for the next four years

On 28 August 2019, ASIC released its corporate plan for 2019 - 2023 outlining its strategies for supervision and enforcement of the industry whilst also promising a greater use of regulatory tools. Seven key priorities were outlined by the regulator, including:

  1. high-deterrence enforcement action;
  2. prioritising recommendations and referrals from the Financial Services Royal Commission;
  3. delivering as a conduct regulator for superannuation;
  4. addressing harms in insurance;
  5. improving governance and accountability;
  6. protecting vulnerable consumers; and
  7. addressing poor advice outcomes.

ASIC has received additional funding in the form of $404 million over the next 4 years. ASIC intends to create more competition among fund managers and strengthen their regulation over superannuation funds. For more information, a full copy of ASIC's Corporate Plan is available here.

ASIC updates guidance on the Markets Disciplinary Panel's policies and procedures

On 7 August 2019, ASIC updated its Regulatory Guide 216 Markets Disciplinary Panel in order to simplify and streamline the Markets Disciplinary Panel's (MDP) policies and procedures following a public consultation late in 2018. The MDP makes decisions about whether infringement notices should be given for alleged contraventions of ASIC's market integrity rules. Some of the key changes include:

  • the consolidation of RG 216 and RG 225 into a single, shorter guide;
  • using any published infringement notice as the main method for relaying the MDP's reasons to the market participant and the market generally;
  • replacing the table of factors with 4 key factors which include the character of the conduct, the consequences of the conduct, compliance culture and remediation; and
  • excluding market operators from the MDP's remit.

The update also reflects amendments made to the Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019 (Cth) resulting in a potential $3.15 million infringement notice for any alleged contravention of the market integrity rules occurring on or after 13 March 2019. More information can be found here.

ASIC enforcement update - January to June 2019

On 18 August, ASIC released its bi-annual enforcement update Report 625 covering the period 1 January 2019 to 30 June 2019. The report provides an update on key actions taken by ASIC over the last 6 months to enforce the law and support enforcement objectives. 77 investigations were commenced and 48 investigations were completed in the 6 month period, with 51 financial services-related outcomes recorded. The report specifically addresses the corporate governance, financial services, markets and small business sectors.

Report 625 is available on ASIC's website.

ASX cryptocurrency guidance

On 1 August 2019, the ASX released further guidance to listed companies who are engaged in cryptocurrency-related activities. This follows earlier guidance from ASX to the market of its concerns about listed entities who were engaged in conduct involving cryptocurrency. In those earlier updates, ASX noted that cryptocurrency related activities 'raise significant legal, regulatory and public policy issues'.

The ASX has strongly encouraged any listed companies engaging in or proposing to engage in cryptocurrency-related activities to read ASIC's Information Sheet 225 Initial coin offerings and crypto-assets and to seek legal advice from a reputable Australian law firm about its application to the company's activities.

The guidance emphasised compliance with the ASX's listing rules as well as other important issues including:

  • claims made by listed companies that their cryptocurrency-related activities are regulated or have been approved by ASX or that they are regulated by AUSTRAC;
  • the use and issue of Simple Agreements for Future Equity (SAFEs) and Simple Agreements for Future Tokens (SAFTs) by listed entities in conjunction with or as a precursor to an Initial Coin Offering or Initial Exchange Offering, which may raise issues under the ASX listing rules; and
  • consultation with ASX and new listings of Listed Investment Companies (LICs), Listed Investment Trusts (LITs) and Exchange Traded Funds (ETFs).

The ASX's guidance can is available here.

APRA provides six-monthly update on royal commission recommendations

APRA released a six-monthly update on 7 August 2019 on the status of the recommendations from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. APRA has stated that out of the 10 recommendations from the Royal Commission directed at APRA, 9 will be completed by the end of 2020, with 4 expected to be completed by the end of 2019. These four include responses in relation to:

  • valuations of land (recommendation 1.12);
  • Banking Executive Accountability Regime (BEAR) product responsibility (recommendation 1.17);
  • co-operation memorandum (recommendation 6.10); and
  • application of the BEAR to regulators (recommendation 6.12).

Additionally, APRA's examination of each of the 12 matters in relation to individual entities referred to it by the Royal Commission are advanced. Further information about APRA's update on the implementation of the recommendations can be found here.

APRA publishes Chair Mr Wayne Byres speech on self-regulation

On 8 August 2019, APRA published Chairman Wayne Byres' speech to the Banking and Finance Oath conference titled 'Is self-regulation dead?'.

Mr Byres emphasised the key role that boards and executives play in the guiding the activities of their companies and that they must better regulate their own behaviour despite 'after-the-event' punishment acting as a general deterrent against illegal behaviour. Mr Byres particularly emphasised that the responsibility for delivering better community outcomes should not fall entirely upon the regulators, Government and industry generally, but a focus on higher standards of governance, empowering boards to effectively govern the firms they oversee.

A full copy of Mr Byres' full speech is available on APRA's website.

APRA commences a cross-industry consultation on amendments to margin requirements

On 14 August 2019 ASIC released a consultation letter on updates to Prudential Standard 226 Margining and risk mitigation for non-centrally cleared derivatives in response to the decision of the Basel Committee on Banking Supervision and the International Organisation of Securities Commissions to delay the final implementation phase for margin requirements by 1 year. The changes will apply to all ADIs, general insurers, life companies and registrable superannuation entities who transact in material levels of non-centrally cleared derivatives.

APRA proposes to delay the final implementation phase by one year to 1 September 2021 and also proposes to increase the qualifying level of aggregate average notional amount (AANA) of non-centrally cleared derivatives applicable from 1 September 2020 from AUD 12 billion to AUD 75 billion. The application of margin requirements to APRA covered entities with an AANA of non-centrally cleared derivatives greater than AUD 12 billion will be deferred to 1 September 2021.

APRA also made some other minor amendments which can be found in the consultation letter here.

APRA strengthens rules to combat contagion risk

On 20 August 2019 APRA updated Prudential Standard 222 Associations with Related Entities in an attempt to reduce the risk that problems in a certain part of a corporate group may impact an ADI in the same group. The updates will include:

  • A broader definition of related entities that includes board directors and substantial shareholders;
  • Revised limits on the extent to which ADIs can be exposed to related entities;
  • Minimum requirements for ADIs to assess contagion risk;
  • Removing the eligibility of ADIs' overseas subsidiaries to be regulated under APRA's Extended Licensed Entity framework; and
  • A requirement for ADIs to report on their exposure to the risk of having to 'step-in' to support an entity to which they are not directly related.

Deputy Chair John Lonsdale emphasised that these updates will reinforce financial system stability in an attempt to learn lessons from the global financial crisis where deficiencies in governance or internal controls in part of a corporate group quickly spread causing damage to the ADI. The updated APS will come into effect from 1 January 2021 and the response to submissions can be found here.

APRA releases the Financial Sector (Shareholdings) Rules 2019 (FFSA Rules)

APRA released on 1 August 2019 new rules which will provide clarity to owners of new entrant financial sector companies on whether they are likely to be approved under the 'fit and proper test' in accordance with the Financial Sector (Shareholdings) Act 1998 (Cth) ("the Act"). A person applying for approval to hold more than 20 per cent shareholding in a financial sector company may apply for approval under a 'national interest' test or by satisfying the decision maker that the applicant is a fit and proper person.

The new rules set out matters that must be considered in determining whether a person is fit and proper under subsection 14A(2) of the Act. The FFSA Rules and explanatory material can be found on APRA's website.

APRA releases its corporate plan for 2019-2023

On 29 August 2019, APRA released its corporate plan for the next 4 years. APRA's 4 key areas of strategic focus have been identified in the plan, including:

  • maintaining financial system resilience;
  • improving outcomes for superannuation members;
  • improving cyber-resilience across the financial system; and
  • transforming governance, culture, remuneration and accountability across all regulated financial institutions.

The corporate plan comes into effect immediately and can be found here.

ASIC consults on new guidance for companies

ASIC released Consultation Paper 321 Whistleblower policies on 7 August 2019, calling for industry views about the proposed regulatory guide on the obligation for companies to implement a whistleblower policy. Public companies, large proprietary companies and corporate trustees of registrable superannuation entities must implement a whistleblower policy and make the policy available to their officers and employees by 1 January 2020.

Whistleblower policies aim to provide stronger rights and protections for whistleblowers. Commissioner John Price has stated that 'transparent whistleblower policies are essential to good risk management and corporate governance.'

Industry feedback and submissions are due by 18 September 2019, with more information available here. If you need assistance with preparing or reviewing a whistleblower policy, please do not hesitate to contact us

ASIC updates guidance on climate change related disclosure

On 12 August 2019, ASIC published updates in Regulatory Guide 228 Prospectuses: Effective disclosure for retail investors and Regulatory Guide 247 Effective disclosure in an operating and financial review in order to clarify the application of their existing guidance to the disclosure of climate change related risks and opportunities. ASIC has updated its guidance to, amongst other matters:

  • incorporate the types of climate risks developed by the G20 Financial Stability Board's Taskforce on Climate Related Financial Disclosures into the list of examples of common risks that may need to be disclosed in a prospectus;
  • highlight climate change as a systematic risk that may need to be disclosed in an operating and financial review (OFR);
  • reinforce that disclosures made outside the OFR should not be inconsistent with disclosures made in the OFR; and
  • make a minor update to ASIC Information Sheet 203 to highlight climate change and other risks that may be relevant in determining key assumptions that underlie impairment calculations.

ASIC has stated that in the coming year they will conduct surveillance of climate change related disclosure practices by selected listed companies. More information about these changes are available here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions