Financial Services in Focus – Issue 14

Funds and financial products

ASIC again warns financial firms to join Australian Financial Complaints Authority

On 25 October, ASIC reminded those financial firms who are yet to join the Australian Financial Complaints Authority (AFCA) to act immediately.

According to ASIC, more than 35,000 financial firms required to join AFCA have now joined the scheme, while there are more than 300 licensed financial firms who are still to join.

ASIC stated that if licensees were not a member of AFCA as at 21 September 2018 they are in breach of their licence obligations and ASIC can immediately commence action to suspend or cancel their licence.

Government releases draft Design and Distribution Obligations and Product Intervention Powers Regulations

On 23 October, the Government released for public consultation exposure draft regulations to support the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill 2018 and a draft Explanatory Statement.

According to the draft Explanatory Statement, the purpose of these draft regulations is to enhance the design and distribution obligations and product intervention regimes by altering the products and persons in relation to which the design and distribution obligations regime applies and the products that may be subject to a product intervention order by ASIC.

According to the Assistant Treasurer, the Hon Stuart Robert MP, the regulations support the Government’s proposed reforms which are designed to ensure that financial products are targeted and sold to the right consumers and allow ASIC to intervene where there is evidence of significant detriment to consumers.

Consultation closes on 13 November.

Government consults on exemptions to gift card reforms

On 22 October, the Government has released for public consultation exposure draft regulations to support Competition and Consumer Amendment (Gift Cards) Bill 2018 (Cth) and a draft Explanatory Statement.

According to the draft Explanatory Statement, the purpose of the regulations is to insert provisions into the Competition and Consumer Regulations 2010 (Cth) to:

  • specify items that are not gift cards;
  • provide which fees can continue to be charged after a gift card is supplied; and
  • exempt gift cards, persons or gift cards supplied in circumstances from some or all of the requirements.

The Assistant Treasurer, the Hon Stuart Robert MP, stated that these reforms will look after consumers, and make sure that many essential business activities can continue.

Consultation closes on 31 October.

ASIC updates guidance as crowd-sourced funding regime extends to proprietary companies

On 18 October, ASIC released updated regulatory guides to coincide with the extension of the crowd-sourced funding (CSF) framework to eligible proprietary companies, which commences on 19 October 2018.

The updated regulatory guides are as follows:

ASIC announces review of school banking

On 18 October, ASIC announced that it will conduct a review of school banking programs in primary schools.

According to ASIC, its review will:

  • seek to understand how these programs are implemented and how they are marketed to school communities;
  • consider how students are engaging with these programs and the accounts established through these programs while they are at school and after they leave school; and
  • assess the benefits as well as the risks of school banking programs, and will set out principles for appropriate conduct and good practice in this area.

The review is expected to be completed in mid-2019.

Anti-money laundering

Financial Action Task Force sets sights on crypto-assets

On 19 October, the Financial Action Task Force (FATF) stated that it has adopted changes to the FATF Recommendations and Glossary that clarify how the FATF Recommendations apply in the case of financial activities involving virtual assets.

The FATF stated that these changes:

  • add to the Glossary new definitions of “virtual assets” and “virtual asset service providers” – such as exchanges, certain types of wallet providers, and providers of financial services for Initial Coin Offerings (ICOs); and
  • make clear that jurisdictions should ensure that virtual asset service providers are subject to AML/CTF regulations, for example conducting customer due diligence including ongoing monitoring, record-keeping, and reporting of suspicious transactions, and that these providers should be licensed or registered and subject to monitoring to ensure compliance.

The FATF stated it will further elaborate on how these requirements should be applied in relation to virtual assets.

AUSTRAC releases information paper to outline enforcement policy

On 15 October, AUSTRAC has published an information paper to provide reporting entities and other stakeholders with insights into how AUSTRAC views its regulatory and enforcement role and financial intelligence functions.

AUSTRAC states that its approach to regulation includes:

  • AUSTRAC’s vision and purpose, and how its regulatory function combines with its financial intelligence function to achieve this;
  • the significance of reporting entities as the first line of defence in protecting Australia’s financial system from criminal abuse;
  • AUSTRAC’s regulatory approach and principles, including its commitment to collaboration, outcome-orientation, efficiency and continuous improvement;
  • AUSTRAC’s responsive approach to regulation, whereby it engages in a range of different regulatory activities depending on reporting entity needs and risks; and
  • how AUSTRAC’s exercises its enforcement powers when it identifies serious or systemic non-compliance, including the factors it takes into account when choosing an intervention.

Banking

Senate announces inquiry into non-bank lenders

On 17 October, the Senate announced an inquiry into “credit and financial services targeted at Australians at risk of financial hardship”, which continues the current forensic examination into the state of financial services in Australia.

More information is available in our full-length article.

APRA releases information paper to assist ADIs in meeting their obligations under BEAR

On 17 October, APRA released an information paper to assist ADIs to meet their obligations under the Banking Executive Accountability Regime (BEAR).

APRA states that the information paper clarifies APRA’s expectation of how an ADI can effectively implement the accountability regime on matters including:

  • identifying and registering accountable persons;
  • creating and submitting an accountability statement for each accountable person, and an accountability map for the ADI;
  • establishing a remuneration policy requiring that a portion of accountable persons’ variable remuneration be deferred for a minimum of four years, and reduced commensurate with any failure to meet their obligations; and
  • notifying APRA of any accountability-related changes or breaches of accountability obligations.

BEAR came into force for the largest banks from 1 July and will apply to all other ADIs from 1 July 2019.

Other financial services regulation

Legislation passes regarding unfair contract terms and unconscionable conduct

On 25 October, the Treasury Laws Amendment (Australian Consumer Law Review) Bill 2018 (Cth) (Bill) received royal assent.

Among other things, the Bill amends the ASIC Act and Competition and Consumer Act 2010 (Cth) to extend the unconscionable conduct protections to publicly listed companies and enable the ACCC and ASIC to investigate possible unfair contract terms.  The Treasurer, the Hon Josh Frydenberg MP, states that ASIC and the ACCC will have stronger powers to ensure consumers and small and family businesses are given a fair go and protected from the repeated or widespread use of unfair contract terms.

According to the Revised Explanatory Memorandum, this Bill amends the ASIC Act and Competition and Consumer Act 2010 (Cth) to give effect to a number of proposals suggested in the Australian Consumer Law Review – Final Report and clarify and strengthen consumer protections relating to consumer guarantees, unsolicited consumer agreements, product safety, false billing, unconscionable conduct, pricing and unfair contract terms.

Government to review extension of unfair contract terms to small business

On 23 October, the Assistant Treasurer, the Hon Stuart Robert MP, announced that the Government will review the effectiveness of protections for small business against unfair contract terms (UCTs).

The UCT protections for small business have been in place since 12 November 2016.  The Assistant Treasurer states that, two years on, the Government wants to ensure that the framework is operating effectively and that appropriate levels of protection are afforded to small businesses.

The review will commence in November 2018 and report to the Government by 1 February 2019.  The review will be conducted by the Australian Treasury.  Experience and views of stakeholders about the legislative settings will be sought during the review process.

APRA releases new reporting standard on life insurance claims

On 24 October, ARPA released the Life Insurance Reporting Standard LRS 750.0 Claims and Disputes.

APRA states that the standard makes it mandatory for life insurers to report data on claims and disputes, and is a critical milestone on the path to delivering enhanced transparency and accountability through the regular publication of credible, reliable and comparable data.

Miscellaneous amendments to Treasury portfolio laws 2018

On 22 October, the Treasury released an exposure draft of the Treasury Laws Amendment (Measures For A Later Sitting) Bill 2018: Miscellaneous Amendments and draft regulations, and supporting draft explanatory materials cover proposed miscellaneous amendments to the Treasury portfolio laws.

Treasury states the amendments seek to ensure the law operates as intended by correcting technical or drafting defects, removing anomalies and addressing unintended outcomes, and that the amendments are part of the Government’s commitment to the ongoing care and maintenance of Treasury laws.

Consultation closes on 2 November.


For further information please contact: