Financial Services in Focus – Issue 102

ASIC consults on regulation of employee redundancy funds

On 24 June, ASIC released Consultation Paper 384 ‘Employee redundancy funds’ (CP 384) seeking feedback on the approach to the regulation of employee redundancy funds under the Corporations Act once the transitional relief ASIC granted expires on 1 April 2026. 

ASIC considers it is an opportune time to re-assess the relief given the significant growth in funds under management, range of activities now being undertaken by fund operators beyond redundancy entitlements, and feedback received by ASIC during prior consultation in 2024. 

CP 384 seeks feedback on changes to the definition of ‘employee redundancy funds’, as well as the three options for the regulation of employee redundancy funds going forwards:

• to allow the relief to expire and require full compliance with the Corporations Act;
• grant relief from specific obligations in the Corporations Act; and
• remake the existing relief with additional conditions.

Consultation closes 22 July 2025. ASIC intends to announce its final position on its approach to regulation by late 2025. 

ASIC shares industry feedback on and next steps for the future of Australia’s public and private markets 

On 4 June, ASIC published all of the industry feedback (over 80 responses) it received in response to its discussion paper on the evolving dynamics between the public and private markets (released in February 2025). The discussion paper examined the status and future of Australia’s markets, including the growth in private markets, decline in public listings, and the growing significance of superannuation funds on capital markets. 

In summary, the feedback highlighted:

• The growth in private markets is a significant and structural global trend, with adjustments needed to the public market (ie streamlining IPOs) to improve its attractiveness.
• Private markets provide both investors and issuers with significant benefits that are not always accessible in public markets and play an important capital allocation function that is complementary to public markets.
• Private market offerings are increasingly targeting retail and less sophisticated wholesale investors, requiring closer regulatory scrutiny, particularly in private credit. While the regulatory framework is generally sound, there is scope for some targeted uplift and for more active and ongoing monitoring and supervision. Some feedback even called for raising the wholesale investor threshold to mitigate risks for retail investors in traditionally wholesale markets.
• Private credit is good for the economy but there are calls for increased supervision. ASIC’s private credit markets funds surveillance is underway in wholesale and retail private markets to assist the agency to better understand current disclosure, distribution, conflicts of interest, valuation, conduct practices, and use of ratings.
• It was also recognised that the super industry plays an important role in intermediating retail investor participation in capital markets, and that APRA has an important role in its setting and supervising standards for superannuation trustees.  

ASIC reports widespread compliance plan deficiencies in the managed investment industry

On 2 June, ASIC released the findings of its review of managed fund compliance plans, which you can read about in our article Take note: ASIC reviewing fund compliance plans.

ASIC assessed 50 compliance plans used by responsible entities (REs) in the operation of a combined 1471 funds and found that most of the compliance plans failed to adequately address the most important requirements across the design and distribution obligations (DDO), internal dispute resolution (IDR) and reportable situations (RS) regimes.   

ASIC has written to some REs about their concerns, but implores all REs to address any inadequacies and gaps in their compliance plans based on the findings in its review. ASIC has also published longstanding guidance on how REs should address their compliance plan obligations.

ASIC noted that compliance plan auditors were not within the scope of this review.

APRA releases CPS 230 notification forms

On 27 June, APRA published the electronic forms that should be used by regulated entities when notifying APRA of an operational risk incident, a breach of critical operation tolerance, and a new or change to a material arrangement and/or offshoring under the Prudential Standard CPS 230 Operational Risk Management.

APRA focuses on retirement product performance

On 26 June, APRA published its inaugural data on superannuation retirement products, capturing key performance data for 600 multi-sector investment options where the trustee sets the investment strategy or manages the investments. The key data includes a breakdown of product fee structures, investment strategies, and associated strategic asset allocations. 

APRA intends to provide further insights on this data in due course. 

The data can be found under the Quarterly Superannuation Product Statistics publication. 

APRA releases superannuation expenditure outcomes: putting members' best financial interests first

On 24 June, APRA released a letter to all registrable superannuation entity (RSE) licensees titled ‘Expenditure outcomes: putting members' best financial interests first', setting out initial observations, examples of better practice, and areas for improvement regarding superannuation fund expenditure. The letter followed APRA’s review of 14 RSE licensees who were observed as having comparatively higher levels of expenditure or where the member benefit of specific expenditure was not immediately apparent. 

This review and its findings comes off the back of APRA's previous letter in October 2024 which advised RSE licensees that it would be intensifying scrutiny of fund-level expenditure. 

AFCA provides guidance on when SMSFs can be treated as a wholesale investor

On 19 June, AFCA released a statement clarifying when an SMSF can be treated as a wholesale investor. 

AFCA considers that if an advisor provides advice to a trustee in relation to an SMSF, it must be treated as a retail investor unless the SMSF itself has $10 million or more in assets.  

AFCA also noted that SMSF trustees can pursue complaints through AFCA if the fund has less than $10 million in assets. However, if a complaint is upheld, investor sophistication may reduce compensation but does not alter the retail classification.

APRA proposes changes to capital framework for annuity products

On 12 June, APRA issued a consultation paper regarding modifying the capital framework for annuities. 

The proposed changes would allow for reduced capital requirements for annuity products in return for enhanced risk management by life insurers, including closer matching of assets and liabilities. APRA’s aim is to help life insurers offer more competitively priced annuities without unduly increasing risks to policyholders.  

The changes come in response to calls from industry to better align APRA's requirements with those of other jurisdictions, creating a more competitively priced environment for the provision of annuity products without unduly increasing risks to policyholders. 

APRA seeks feedback in response to this paper by 25 July 2025. 

APRA reinforces expectations on authentication controls in superannuation sector and requires specific action to be taken

On 10 June, APRA released a letter to all RSE licensee board chairs reinforcing expectations around information security and the implementation of robust authentication controls against their obligations under Prudential Standard CPS 234 Information Security (CPS 234). 

APRA has observed that current industry practice showed weaknesses in authentication controls, indicating a gap between APRA's expectations (including CPS/CPG 234 and previous guidance on multi-factor authentication (MFA)) and the industry standard.  

As a result of its observations, APRA has outlined a set of specific actions that it requires each RSE licensee to undertake by 31 August 2025. A summary of the actions are as follows:

• perform a self-assessment of the entity's existing information security controls (or perform a special purpose engagement);
• where robust authentication controls (including requiring MFA or equivalent controls for high-risk activities and privileged access) have not been implemented or are deficient:
  • notify APRA of a material control weakness; and
  • conduct a breach assessment; and
• advise of the RSE licensee's accountable person(s) under the Financial Accountability Regime with responsibilities related to CPS 234 compliance.

APRA noted that it remains firmly focused on this issue and will continue to pursue it through supervisory and other regulatory actions as necessary. It is APRA’s expectation that all trustees treat this matter with the urgency and priority it demands, in line with the risks they manage and their duty to protect member interests.

AFCA publishes new and updated approaches to general insurance complaints

On 27 June, AFCA released in respect of general insurance complaints:

• an updated approach to non-disclosure and misrepresentation, which now reflects legislative changes implemented since its previous approach was published. These changes encompass legislative amendments to the Insurance Contracts Act 1984 (Cth) that came into effect in 2021; and
• a new approach to the duty to take reasonable care not to make a misrepresentation, which explains how AFCA will consider complaints involving the duty to take reasonable care not to make a misrepresentation in general insurance.

AFCA releases an updated insurance premium increase factsheet and new EDR Response Guide

On 23 June, AFCA published an updated factsheet and a new External Dispute Resolution (EDR) Response Guide regarding general insurance premium increase complaints. The factsheet was updated following an increase in general insurance premium increase complaints to help clarify what types of complaints AFCA can and cannot consider under the rules. The EDR response guide was developed to support firms in responding to complaints about general insurance premium increases.

ASIC and APRA provide joint update on review of life insurance premium practices

On 5 June, ASIC and APRA released a joint letter on the progress of life companies in addressing issues related to premium increases, product design and disclosure, and marketing materials. This comes after the regulators had concerns about frequent, large and unexpected premium increases that may not have been applied in accordance with policy terms and may not have met reasonable policyholder expectations. 

The latest review by the regulators identified improvements in re-rating practices, marketing and disclosure materials, as well as product governance. The regulators noted that actions to address premium volatility were still at an early stage, making it difficult to assess their effectiveness in reducing the frequency and size of premium increases. 

The regulators will continue to engage with individual life companies where the need for further uplift has been identified.

ASIC announces limited no-action position for deficient advice fee written consents

On 6 June, ASIC announced it has granted a limited no-action position in response to a specific issue raised by the advice industry regarding the inclusion of account numbers in a client’s written consent for the deduction, or arranging of the deduction, of ongoing advice fees. ASIC confirmed that it does not intend to take action for breaches of section 962S of the Corporations Act and section 99FA of the Superannuation Industry (Supervision) Act 1993 (Cth) where:

• written consent was given by a client under section 962S of the Corporations Act for the fee recipient to deduct or arrange to deduct fees under an OFA from 10 January 2025 until 5 September 2025;
• an account number was not included in the consent; and
• in the case of superannuation, a trustee deducted from the relevant member’s account the advice fees as set out in the consent. 

However, this does not prevent an ongoing fee arrangement (OFA) from being terminated under section 962WA where a written consent was not compliant because it did not include an account number. In order to rely on the no-action position, the AFS licensee or representative must enter into a new OFA with the client and seek a new written consent for the fee recipient to deduct or arrange to deduct ongoing fees, including to cover the period where any fees were deducted under a non-compliant written consent. 

ASIC has warned that if the revised OFA is not in place by 5 September 2025, the fee recipient must take steps to stop receiving fees. 

ASIC renews warning for AFS licensees ahead of deadline for financial advisers

On 3 June, ASIC released a statement ‘urging’ relevant providers and their authorising AFS licensees to check all relevant information on the Financial Advisers Register. This comes after ASIC conducted a spot check of the Financial Advisers Register, focusing on the accuracy of relevant provider qualifications, which is critical in the lead up to 1 January 2026, when all relevant providers must meet certain qualification standards. 

ASIC’s recent spot check highlighted the following errors in information submitted by AFS licensees:

• instances where relevant providers have declared they are relying on the experienced provider pathway when they do not appear eligible;
• relevant providers whose qualifications have been marked as going toward meeting the qualifications standard when the course has not yet been completed or is not an approved course of study; and  
• information about a relevant provider’s authorisation history, including periods of time when they were not a relevant provider.   

ASIC has reiterated that:

• It is a serious offence to knowingly provide false or misleading information to ASIC or fail to take reasonable steps to ensure the information provided is correct.
• It is also an offence to fail to update the Financial Advisers Register within 30 business days of a change to a relevant provider’s details. 

Treasury launches new Foreign Investment Portal

On 28 May, Treasury launched the full functionality of the new Foreign Investment Portal, replacing the FIRB Application Portal. The new portal will make the processing of foreign investment proposals faster and easier and can be used to, among other things, submit a compliance report, communicate with the Treasury in-system, and pay fees.

Instructions and guidance materials regarding the new portal.

FATF publishes updates on global ML/TF risk – June 2025

On 23 June, AUSTRAC published that the Financial Action Task Force (FATF) had published two recent updates relating to international money laundering, terrorism financing and proliferation financing (ML/TF/PF) risk:

• High-risk jurisdictions subject to a call for action which notes calls for action in relation to the Democratic People’s Republic of Korea, Iran and Myanmar, which have been identified as high-risk jurisdictions with significant strategic deficiencies in their AML/CTF/CPF regimes.

• Jurisdictions under increased monitoring which lists jurisdictions that have strategic deficiencies in their AML/CTF/CPF regimes and are actively working with the FATF to address them.

APRA consults on proposals for instruments relating to section 66 of the Banking Act

On 18 June, APRA announced it is consulting on a set of minor proposals to the legislative instruments that grant relief from section 66 of the Banking Act 1959 (Cth) (which restricts the use of certain words and expressions). 

The instruments currently allow persons or classes of persons to use restricted words or expressions. The instruments are due to sunset later this year. APRA proposes to deal with the instruments as follows:

• Banking exemption No. 1 of 2018 – remake the instrument to expand exempt classes to include foreign bank holding companies and multilateral development banks;
• Banking (restricted word or expression) determination No. 1 of 2015 – remake the instrument without change; and
• Banking (restricted word or expression) No. 2 of 2015 – allow the instrument to sunset.

Consultation closes 15 August 2025. 

ASIC gives further relief for licensees under the reportable situations regime

On 27 June, ASIC provided Australian financial services licensees and Australian credit licensees additional targeted relief from the reportable situations regime, by way of the ASIC Corporations and Credit (Amendment) Instrument 2025/289. 

The new relief:

• extends the length of investigations that are reportable to ASIC from 30 days to 60 days;
• clarifies that a report is taken to be lodged with ASIC, if a licensee has submitted a breach report to APRA that contains all the information APRA has requested; and
• exempts industry from reporting breaches of the misleading and deceptive conduct provisions, and certain contraventions of civil penalties, where:
  • the underlying circumstances in relation to the breach would only give rise to a single reportable situation or a single group of reportable situations;
  • the breach does not infringe sections 828C and 981M of the Corporations Act;
  • the breach impacts (or is likely to impact) no more than 10 clients;
  • the total financial loss or damage to all persons resulting from (or likely to result from) the breach does not exceed $1000; and
  • the breach has been rectified and remediated within 60 days after it first occurred.

ASIC launches inquiry into ASX

On 16 June, ASIC announced it had launched an inquiry into Australian Securities Exchange (ASX) group, focusing on governance, capability and risk management frameworks and practices across the group. The inquiry has been driven by ASIC’s concerns over the ASX’s ability to maintain a stable, secure and resilient critical market structure following ‘repeated and serious failures’. 

The inquiry will be asked to make recommendations to address any identified shortcomings or deficiencies in relation to governance, capability and risk management within ASX group. It will then provide a report to ASIC by 31 March 2026 (which will be made public), which will inform the next steps ASIC may take.

ASIC focusing on unlawful finfluencers 

On 12 June, ASIC announced that it is boosting its focus on unlawful ‘finfluencers’. This announcement comes after ASIC issued warning notices to 18 social media ‘finfluencers’ suspected of unlawfully promoting high-risk financial products and providing unlicensed financial advice to Australians. 

ASIC acknowledged that since the release of INFO Sheet 269 Discussing financial products and services online in 2022, many finfluencers changed what they were saying or became licensed or authorised representatives to comply with the law. However, ASIC’s current concerns involve finfluencers positioning themselves as trading experts and providing unauthorised financial product advice or promoting high-risk, complex investment products that can cause real consumer harm. ASIC has found that these finfluencers are often producing misleading or deceptive representations about the prospects of success from the products or trading strategies they promote. 

ASIC has said that it will continue targeted monitoring of financial discussion by finfluencers and will take enforcement action where harm is occurring. 

APRA publishes updated frequently asked questions for licensing

On 2 June, APRA released that it has incorporated some minor amendments to frequently asked questions (FAQs) for APRA's licensing process. The minor changes reflect the introduction of the Financial Accountability Regime and removal of duplicate commentary. The updated licensing FAQs can be found here.

ASX enhances transparency in new pricing policy for cash equities clearing, settlement and issuer services 

On 30 May, the ASX released a response to consultation on the proposed pricing policy for cash equities clearing, settlement and issuer services (CS services) that aims to enhance transparency for the market. The new policy is due to be finalised and take effect from 1 July 2025. 

A key component of the new policy is the introduction of the regulatory pricing model, the Building Block Method (BBM). The BBM calculates a maximum allowable revenue figure to provide the CS services and this in turn informs pricing. This methodology ensures charges are based on efficient costs and a fair return on capital, aligning pricing with the costs and risks of delivering the service.

The new policy also incentivises the ASX to pursue efficiency gains by reducing operating costs over time. Under the new policy, annual pricing reviews and independent assurance processes will verify costs and returns, and any excess revenue will be addressed through rebates, fee reductions, or targeted reinvestment into core systems and services.

The policy will be discussed in the Business Committee on 18 June 2025 prior to being finalised by the boards of ASX Clear and ASX Settlement.

ASIC proposes to remake basic deposit and general insurance product distribution legislative instrument

On 28 May, ASIC announced that it is seeking feedback on its proposal to remake the ASIC Corporations (Basic Deposit and General Insurance Product Distribution) Instrument 2015/682, which provides relief from the requirement for an AFS licensee to appoint a distributor of a basic deposit product or general insurance product as its authorised representative, which is set to sunset on 1 October 2025. 

This relief aims to reduce the regulatory burden on deposit product and general insurance providers and decrease the compliance costs to providers, promoting the wide availability of these products. 

ASIC has assessed that the instrument is operating effectively and efficiently and proposes to remake the instrument for a period of five years. 

Consultation closed on 25 June 2025.