Financial Services in Focus – Issue 110

ASIC proposes to remake six legislative instruments about managed investment schemes

On 27 May, ASIC announced it is seeking feedback on its proposal to remake legislative instruments that provide relief around managed investment schemes. The instruments, which are due to expire on 1 October 2026, will be extended for five years. Aside from minor changes to improve clarity and consistency, the contents of the instruments will remain unchanged.

The legislative instruments to be remade are:

• ASIC Corporations (Serviced Apartment and Like Schemes) Instrument 2016/869;
• ASIC Corporations (Property Rental Schemes) Instrument 2016/870;
• ASIC Corporations (Charitable Investment Fundraising) Instrument 2016/813;
• ASIC Corporations (School Enrolment Deposits) Instrument 2016/812;
• ASIC Corporations (Horse Schemes) Instrument 2016/790; and
• ASIC Corporations (Attribution Managed Investment Trusts) Instrument 2016/489.

ASIC is proposing to remove transitional provisions that are no longer necessary, including the relief in section 6 of ASIC Corporations (Attribution Managed Investment Trusts) Instrument 2016/489.

The consultation period closes at 5pm AEST on 24 June 2026. 

Treasury reforms for streamlining and strengthening the foreign investment framework

On 19 May, Treasury provided an overview of the legislative, policy, and practice reforms for further streamlining and strengthening the foreign investment framework that were announced in the 2026-2027 Budget. 

The package of reforms includes:

• setting a new performance target of deciding all low-risk applications within 30 days (to be implemented from 1 January 2027);
• removing ineffective conditions on existing foreign investment approvals;
• amending foreign investment law; and
• streamlining the Register of Foreign Ownership of Australian Assets. 

The reforms aim to ensure Australia’s regulatory settings are well-calibrated to attract and enable low-risk investment whilst providing flexibility and stronger tools to identify, manage and respond to high-risk investment, serious non-compliance and avoidance. 

On the same day, the Financial Services Council announced its support for the government’s reform announcement with its CEO, Blake Briggs, stating the FSC ‘supports reforms to exempt low risk and minor transactions from the foreign investment framework requirements where there is no change in control’ and ‘welcome[s] the expansion of the current interfunding exemption to include unregistered schemes’.

Our recent article Australia's foreign investment reforms: the second tranche is here takes an in-depth look at these reforms. 

RBA and Digital Finance Cooperative Research Centre release findings from Project Acacia

On 18 May, the RBA and Digital Finance Cooperative Research Centre released a report detailing the findings of Project Acacia, a joint initiative examining how innovations in digital money and settlement infrastructure could support the development of wholesale tokenised asset markets in Australia.

With support from ASIC, APRA and the Australian Treasury, Project Acacia identified:

• the potential for asset tokenisation, alongside innovations in digital money and settlement infrastructure, to enhance the efficiency, functionality and resilience of Australia’s wholesale financial markets; and
• several challenges to scaling tokenised markets that warrant deeper analysis by regulators and industry. 

The report also outlines a new multi-stream program aimed at advancing responsible innovation in Australia’s wholesale financial markets and overcoming long-standing co-ordination challenges, removing unnecessary barriers to the safe adoption of new technologies, and enabling industry participants to explore and scale innovative approaches to uplifting wholesale market functioning in a manner consistent with financial stability.

Key elements of the program, which will involve a range of stakeholders, include:

• strengthening cooperation between industry and regulators;
• exploring a new regulatory ‘sandbox’ for digital financial market infrastructure to provide industry with a more structured pathway from experimentation to commercialisation;
• considering the opportunities and challenges associated with government issuance of tokenised bonds;
• continuing industry-led work on interoperable commercial bank deposit tokens; and
• RBA consulting with industry on opportunities to safely adapt its settlement infrastructure and ESA access arrangements, alongside continued exploration of wCBDC.

The full report is available on the RBA website.

AUSTRAC steps up supervision of virtual assets sector as reforms take effect

On 8 May, AUSTRAC announced it had launched two targeted supervisory campaigns into Australia’s virtual assets sector, as landmark Australian anti-money laundering and counter-terrorism financing (AML/CTF) reforms reshape how virtual asset businesses are regulated.

The two campaigns aim to improve AML/CTF risk management within the virtual assets sector with a primary focus on virtual asset service providers (VASPs) (previously known as ‘digital currency exchanges’). This comes as reforms mean AML/CTF obligations will apply to a growing range of crypto-related products, including custody, brokerage, and other virtual asset services beyond traditional cash to crypto exchange models.

AUSTRAC is engaging directly with:

• 36 crypto businesses, focusing on their business models, channels, service scale, and how effectively they are managing AML/CTF risks; and
• 27 local crypto exchanges, focusing on reform readiness and improvements to governance arrangements.

AUSTRAC updates regulator statement of expectations

On 21 May, AUSTRAC released an update to its regulator statement of expectations for businesses in meeting their AML/CTF obligations. These updates are made in light of the reforms to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) which changed obligations for currently regulated business on 31 March 2026 and introduce obligations for newly regulated business on 1 July 2026. 

In particular, the update sets out AUSTRAC’s expectations on managing risk, using the program starter kits, managing risks where there is no settled AUSTRAC position, and meeting AUSTRAC’s regulatory expectations in FY26/27. 

AUSTRAC’s full statement should be read together with its regulatory expectations for implementation of the AML/CTF reforms of 3 July 2025

APRA revises frequently asked questions for Prudential Standard APS 221 Large Exposures

On 5 May, APRA announced it has revised its frequently asked questions (FAQs) for Prudential Standard APS 221 Large Exposures to clarify its expectations on how exposures to structured vehicles should be calculated and reported using the stored value look through methodology.

Certain FAQs have been updated to reflect the prudential standards, and those that are no longer relevant have been removed. Authorised deposit-taking institutions need to ensure their reports are in accordance with the revised FAQs by 31 December 2026 at the latest.

Treasury announces changes to superannuation performance test 

On 8 May, Treasury announced it is seeking feedback on options to strengthen the annual superannuation performance test. The review aims to protect outcomes for members, maintain an objective testy, and ensure long-term stability of the test. 

Treasury is consulting on changes to:

• adjust benchmarks for emerging and alternative assets;
• assess risk-adjusted returns;
• review the benchmarks on a regular basis; and
• extend the test to more superannuation products.

On the same day, the Financial Services Council announced support for the refinement of the superannuation performance test but cautioned against:

• fundamental changes that would weaken consumer outcomes; and
• expanding the test to products, such as externally directed products and retirement products, where the result would be inherently inaccurate or misleading for consumers. 

Submissions close 19 June 2026. 

APRA finalises class exemption for approval to own or control an RSE licensee

On 22 May, APRA announced it has finalised a class exemption from the change of ownership and control provisions of the Superannuation Industry (Supervision) Act 1993 (SIS Act).

Removing the requirement for management employees and company secretaries with a direct controlling interest of less than 2 per cent in a registrable superannuation entity licensee to apply to APRA before acquiring a controlling stake aims to reduce regulatory burden while maintaining appropriate APRA scrutiny. APRA has also made refinements to improve clarity and operation without expanding the scope. 

The response paper, draft instrument and non-confidential submissions are available on APRA's website.

ATO reminds employers Payday Super commences on 1 July 2026

On 25 May, the ATO released a reminder that Payday Super starts on 1 July, urging employers to act and prepare so they can start paying super each payday. ATO Deputy Commissioner Emma Rosenzweig said businesses will need to make changes to some of their processes, and those who implement those changes now can make the transition successfully.

The ATO will take a reasonable and practical approach to compliance during the first year of Payday Super by supporting businesses to make these payments on payday while focusing enforcement on those who deliberately do the wrong thing.

For more information see the ATO’s practical compliance guideline and accompanying compendium.

ASIC research shows Australia is well-placed to unlock opportunities from innovation in financial system

On 21 May, ASIC released the Innovation in Financial Technology and RegTech research report prepared by the Digital Cooperative Research Centre for ASIC. 

The report sets out how fintech and regtech innovations are evolving across the world, highlights that artificial intelligence is becoming more embedded in everyday financial operations, and shows Australia is well-placed to harness an ongoing surge of financial innovation.

Commissioning the research forms part of ASIC’s strategy to support responsible innovation in Australia’s financial system. ASIC says it will inform ongoing industry engagement, including through the ASIC Digital Finance Advisory Panel and targeted roundtables.

ASIC sets financial reporting, audit and sustainability focus areas for FY 2026–2027

On 18 May, ASIC announced its key focus areas for its financial reporting, audit, and sustainability reporting activities in the 2026-27 financial year.

Generally, for 2026-2027 ASIC will:

• review the financial reports of listed and unlisted companies, registrable superannuation entities, and management investment schemes;
• review the disclosures of companies that have provisions for decommissioning and site restoration costs;
• review 25 audit files;
• monitor and report on firms’ implementation of remedial actions suggested by audit firms;
• continue to focus on non-lodgement of financial reports by large proprietary companies;
• review compliance by registered company auditors with their obligations to lodge their annual statements;
• continue to take a range of steps to support entities’ compliance with the sustainability reporting framework; and
• continue to update their register of relief decisions to include ASIC’s decision on individual sustainability reporting relief applications. 

ASX appoints new Managing Director and CEO

On 14 May, ASX announced the appointment of Anthony Attia as Managing Director and CEO effective from 1 September 2026. 

Current ASX Managing Director and CEO, Helen Lofthouse, will depart on 29 May 2026 and the interim CEO will be Darren Yip, current Group Executive Markets and Listings, to support the transition for Mr Attia. 

ASIC calls for urgent cyber uplift as AI accelerates cyber threats in the industry

On 8 May, ASIC called for all licensees and industry professionals to urgently strengthen their cyber resilience measures as frontier artificial intelligence intensifies the global cyber risk environment. ASIC warns that a misuse of frontier AI could expose cyber security vulnerabilities at an unprecedented speed, scale, and sophistication.

In an open letter to the industry, ASIC urges entities to act now and not wait for advanced AI tools to uplift their cyber security fundamentals and ensure their systems can withstand the accelerated threats from AI. 

ASIC urges entities to:

• reassess cyber plans and refocus efforts on the most critical risks;
• confirm cyber risk, governance and overall risk and decision-making frameworks;
• identify and protect critical assets and systems;
• strengthen cyber security fundamentals by reviewing and validating controls;
• reduce exposure of systems and services to untrusted networks to minimise attacks;
• regularly review user access and reassess privileges;
• patch systems promptly;
• review and strengthen patch management processes;
• implement layered defence in-depth architectures;
• prepare for incident response;
• actively manage third-party risks; and
• use AI for defensive purposes where appropriate.

Entities are required to table the letter at their ultimate board and risk governance committees.

The letter follows ASIC’s recent court outcome against FIIG Securities Limited which reinforced the legal case for cyber risk management controls to be demonstrably effective and proportionate to the size, nature and complexity of a business. More information is included in our recent article AFS licensee fined $2.5milllion for failing to protect client data. 

APRA temporarily withdraws Guidelines on Recognition of an External Credit Assessment Institution

On 7 May, APRA announced it had temporarily withdrawn its Guidelines on Recognition of an External Credit Assessment Institution. APRA last updated the Guidelines in 2013 and will provide a further update once the review of its Guidelines is complete. 

APRA’s latest System Risk Outlook report 

On 21 May, APRA announced the latest edition of its System Risk Outlook report. The key update contained in the report is that APRA has intensified its oversight of banks, insurers and superannuation trustees. This change comes as global uncertainty, geopolitical tensions, artificial intelligence, and growing complexity in global markets reshape the risk environment.

Other key insights from the report include:

• Australia’s financial system is well-positioned to support the economy if conditions deteriorate in the current volatile environment;
• AI is being adopted rapidly across all regulated industries, but governance arrangements have not matured at the same pace;
• cyber threats are becoming increasingly more sophisticated; and
• private credit risks are growing internationally. 

APRA Chair John Lonsdale said while Australia’s financial system remains strong and stable, heightened vigilance is needed to maintain that strength in the current global political and economic environment. 

Better Regulation Roadmap

On 12 May, the Council of Financial Regulators (CFR) released its Better Regulation Roadmap - Implementation Plan. CFR (comprising APRA, ASIC, RBA and Treasury), in collaboration with the Australian Competition and Consumer Commission, Australian Financial Security Authority, ATO and AUSTRAC (together, CFR Plus) are working together to deliver better regulation of the financial sector, aiming to improve efficiency through regulatory reform without compromising financial stability, consumer protection and market integrity.

The Roadmap outlines the coordinated activities CFR Plus is undertaking to advance the Government’s better regulation agenda, which includes: 

• implementing the commitments made as part of the Economic Reform Roundtable in 2025;
• streamlining data collections and data sharing; and
• identifying priority legislative reforms to support better regulation.