Financial Services in Focus – Issue 96

ASIC reports on its interventions on greenwashing misconduct

On 23 August, ASIC released Report 791 ASIC’s interventions on greenwashing misconduct: 2023–2024 (REP 791).The report outlines ASIC’s regulatory interventions made between 1 April 2023 and 30 June 2024 regarding concerns about greenwashing claims. It also summarises the high-level findings, key recommendations and good practice examples identified from ASIC’s greenwashing surveillance activities during the financial year 2023–2024.

REP 791 states that during the period of 1 April 2023 to 30 June 2024, its interventions related to:

• underlying investments that are inconsistent with disclosed ESG investment screens and investment policies;
• sustainability-related claims made without reasonable grounds;
• insufficient disclosure on the scope of ESG investment screens and investment methodologies; and
• sustainability-related claims made without sufficient detail.

According to ASIC’s media release, it acknowledges the significant changes ahead with the proposed introduction of mandatory climate-related financial disclosure requirements for large businesses and financial institutions. Throughout the transition to the proposed mandatory climate reporting regime, ASIC will act to ensure current disclosure and governance standards are maintained and that entities comply with their existing legal obligations, including the longstanding prohibition against misleading and deceptive conduct.

ASIC further extends transitional relief for foreign financial services providers

On 31 July, ASIC announced it is extending  the transitional relief for foreign financial services providers (FFSPs) from the requirement to hold an AFS licence when providing financial services to Australian wholesale clients for a further 12 months The extension of the transitional relief is made by ASIC Corporations (Amendment) Instrument 2024/497.

To provide certainty for FFSPs currently relying on ASIC relief, ASIC will extend this transitional relief until 31 March 2026. After that date, FFSPs will be required to notify ASIC of their intention to rely on the new licensing exemption regime, unless they choose to opt in by notifying ASIC earlier.

FFSPs that have been, or are granted a foreign AFS licence, will be able to continue to operate their financial services business in Australia under the licence issued by ASIC.

ASIC proposes to extend relief for employee redundancy funds

On 30 July, ASIC announced it is seeking feedback on a proposal to extend, for a period of five years, the relief currently provided to employee redundancy funds from the AFS licensing and managed investment provisions of the Corporations Act, which is due to expire on 1 October 2024. 

ASIC proposed to remake ASIC Corporations (Employee redundancy funds relief) Instrument 2015/1150 as it has assessed that the legislative instrument is operating effectively and efficiently, and continues to form a necessary and useful part of the legislative framework.

Opportunity to provide feedback on the proposal closed on 23 August.

ASIC reminds superannuation trustees about lodging audited financial reports

On 25 July, ASIC reminded superannuation trustees of registrable superannuation funds that they need to lodge audited financial reports for each fund within three months of the end of the fund’s financial year. For most superannuation funds, this means a deadline of 30 September 2024 to avoid fees for late lodgement.

ASIC states it expects trustees to ensure financial reports are of high quality, containing useful and meaningful information to build public trust and confidence in the integrity of Australia’s financial system.  Audited financial reports need to be lodged via ASIC’s Regulatory Portal.

APRA releases notes on Life Insurance CEO Roundtable

On 21 August, APRA published the public notes from the life insurance CEO roundtable held on 17 July 2024.  The roundtable was attended by 21 life insurance CEOs and other executives, as well as representatives from Treasury, ASIC and CALI.

CALI issues report on benefits of life insurance

On 12 August, Council of Australian Life Insurers (CALI) released its inaugural State of Australia’s Safety Net report, which investigates the link between life insurance and the personal and financial wellbeing of Australian workers.

The report found that, among other things, more than two-thirds of Australian workers are concerned cost of living pressures will impact their ability to afford life insurance in the future. CALI also states the report highlights the critical need for the passage of tranche two of the Federal Government’s Delivering Better Financial Outcomes legislation, which would allow life insurers to provide simple advice on their own products when customers ask them to.

ASIC extends reference checking protocol to mortgage aggregators

On 19 August, ASIC updated its reference checking and information sharing protocol for financial advisers and mortgage brokers to reflect legislative changes introduced by ASIC Corporations and Credit (Reference Checking and Information Sharing Protocol) Instrument 2024/647. The new protocol will enable mortgage broking intermediaries (ie aggregators) to obtain references on mortgage broker licensees and licensees’ representatives. 

To help licensees comply with reference checking requirements under the new protocol, ASIC has also updated Information Sheet 257 ASIC reference checking and information sharing protocol.

The new protocol commenced on 20 August 2024 with a transitional period until 28 February 2025.

ASIC provides a financial advice update on regulatory developments

On 9 August, ASIC released its ‘Financial advice update’, which it states is a round-up of regulatory developments and issues affecting financial advice and is designed to be of interest to AFS licensees who are advice licensees and financial advisers.

The topics discussed include:

• maintaining accurate records on the financial advisers register;
• assessing adviser qualifications;
• ASIC’s review of cold calling for superannuation switching business models;
• cyber security – third-party exposure;
• financial adviser registration;
• Report 779 Superannuation and choice products: What focus is there on performance?; and
• provisional relevant providers.

Government responds to independent review of continuous disclosure regime amendments

On 12 August, the Assistant Treasurer and Minister for Financial Services, Stephen Jones, announced the government has published its response to Dr Kevin Lewis’ independent review of the 2021 Amendments to Australia’s continuous disclosure laws and has accepted the primary recommendations of Dr. Lewis’ review.

The Minister stated the review was able to make recommendations on two primary matters, which the government accepted:

• the 2021 Amendments be repealed in respect of enforcement action by ASIC; and
• the 2021 Amendments be retained for the time being in respect of private litigants.

ASX publishes whitepaper on feedback on accelerating cash equities settlement to T+1

On 2 August, ASX published a Whitepaper Feedback Summary document resulting from the publication of the whitepaper on Considerations for accelerating cash equities settlement in Australia to T+1 on 23 April 2024. ASX sought industry feedback on a potential move to T+1 settlement in Australia and received responses from a broad range of stakeholders.

ASIC consults on rules to promote competitive outcomes in cash equity clearing and settlement services

On 30 July, ASIC released Consultation Paper 379 ASIC CS Services Rules’ (CP 379) on proposed rules aimed to facilitate competitive outcomes in cash equity clearing and settlement (CS) services provided by the ASX Group. It is the first time ASIC exercised its new powers under the competition in CS reforms.

CP 379 seeks feedback on proposals to:

• implement the 2017 Council of Financial Regulators Regulatory Expectations for Conduct in Operating Cash Equity Clearing and Settlement Services in Australia as enforceable obligations; and
• impose additional requirements in several key areas, including technical interoperability, management of intragroup conflicts of interest and external assurances on pricing and barriers to competition.

Consultation closes 10 September.

ASIC report on anti-scam practices of banks outside the four major banks

On 20 August, ASIC released a report into the anti-scam practices of 15 banks outside the four major banks.  Report 790 Anti-scam practices of banks outside the four major banks (REP 790) examined the scam prevention, detection and responses of these 15 banks.

ASIC says on REP 790 that key findings include: 

• significant variability in the maturity of scam strategies and governance; 
• inconsistent and narrow approaches to determining liability; and  
• a lack of support for scam victims. 

ASIC says REP 790 is part of ASIC’s ongoing focus on anti-scam practices in the broader financial service landscape, and that it is also reviewing the anti-scam practices of superannuation trustees.

APRA announces its keeping macroprudential policy settings steady

On 29 July, APRA confirmed it will keep its macroprudential policy settings on hold following its latest quarterly assessment of domestic and international economic conditions. 

APRA states it’s macroprudential policy toolkit is aimed at promoting stability at a systemic level to ensure financial institutions can continue to supply credit and payment services required for the economy to grow at a sustainable rate. APRA also states that the decision to retain the current settings considered an uncertain interest rate and economic outlook, as well as high levels of household debt and inflation. 

APRA further states that because of these considerations: 

• the countercyclical capital buffer will remain at 1.0 per cent of risk weighted assets;
• the mortgage serviceability buffer will be kept at 3 percentage points; and  
• lending limits have not been applied.

Council of Financial Regulators consults on central clearing of bonds and repos in Australia

On 24 July, the Council of Financial Regulators (CFR) released a consultation paper on reassessing the case for central clearing of bonds and repos in Australia. The CFR states there have been considerable changes in the size and structure of the Australian bond and repo markets in recent years. The CFR also states that recent analysis by RBA staff indicates the potential benefits of central clearing in these markets has increased, and the case for central clearing may be stronger than previously assessed by the RBA in 2015.

The CFR is seeking feedback from stakeholders on the magnitude of any costs and benefits that may accrue from the introduction of a central counterparty in the Australian bond and repo markets. Feedback is also sought from stakeholders to understand the circumstances under which a bond and repo CCP could be operated safely and efficiently by an overseas operator, and what additional protections may be required in such a scenario.

Submissions are invited before 4 September.

ASIC report on credit card lending

On 30 July, ASIC released Report 788 Credit card lending in Australia: Staying in control (REP 788), which provides information on how Australians use credit cards and on the consumer harm that can result from problematic design, distribution or use of credit cards. REP 788 is based on a review of credit card lending in Australia completed by ASIC.

ASIC states lenders can do more to help consumers build better credit card habits. REP 788 looked at around 20 million credit card accounts across 13 lenders over six years and identified several better practices some lenders had implemented, including:  

• providing alternative account options for those who have problematic debt; 
• excluding consumers with problematic debt from marketing campaigns;
• providing consumers with targeted reminders and education to help reduce persistent debt;
• promoting credit card selector tools and conducting ongoing assessment of those using high-interest cards;
• adopting measurable review triggers, including consumer outcomes, to enhance target markets; and 
• analysing data so those at risk of financial hardship may be identified sooner. 

APRA outlines new priorities in 2024-25 Corporate Plan

On 28 August, APRA published its latest Corporate Plan outlining how it will maintain the strength and stability of Australia’s banks, insurers and superannuation trustees over the next four years. 

In addition to APRA’s strategic priorities, this latest Corporate Plan incorporates, for the first time, APRA’s annual policy and supervision priorities, as well as a new inclusion of data priorities. APRA Chair John Lonsdale said the plan aimed to ensure the continued financial and operational resilience of APRA-regulated entities while also responding to new and heightened risks. 

APRA announces internal reorganisation to better support strategic priorities

On 28 August, APRA announced changes to its internal structure designed to ensure it remains equipped to deal with emerging and future challenges. The changes will support APRA’s updated strategic priorities, as announced in its 2024-24 Corporate Plan as discussed above.

The most significant change will see APRA move to having its five industry supervision groups being managed in two supervision divisions instead of the current three frontline supervision divisions; Banking, Superannuation and Insurance (encompassing general, life and private health insurance). 

From 2 September 2024, the two frontline supervision divisions will be: 

• a General Insurance and Banking division; and  
• a Life Insurance, Private Health Insurance and Superannuation division. 

APRA finalises new cross-industry prudential standard on defined terms

On 22 August, APRA announced it finalised the new cross-industry Prudential Standard CPS 001 Defined terms (CPS 001). The new standard consolidates all existing standards on definitions for authorised deposit-taking institutions and general, life and private health insurers.

ASIC expands strategic priorities for coming 12 months

On 22 August, ASIC released its latest Corporate Plan 2024-25 (Corporate Plan) announcing that Australia’s public and private markets and emerging financial products will form a new pillar of ASIC’s expanded strategic priorities. 

ASIC releases workshop summary document on servicing First Nations communities

On 21 August, ASIC released a summary document regarding its June 2024 industry workshop on servicing First Nations communities with a focus on culture, community and engagement. The workshop explored insights from financial services industry representatives on existing approaches, and guidance for how industry can develop more meaningful services in remote locations to provide better outcomes.

ASIC reports on its activity in taking down online investment trading scams

On 19 August, ASIC announced the takedown of more than 7,300 phishing and investment scam websites that sought to swindle consumers out of their information. 

Since July 2023, ASIC states it has coordinated the removal of over 5,530 fake investment platform scams, 1,065 phishing scam hyperlinks and 615 cryptocurrency investment scams.

ASIC reminded all consumers to remain vigilant to social media hyperlinks that promote online trading and cryptocurrency investments.

APRA shares further insights on common cyber control weaknesses

On 15 August, APRA published a letter to all regulated entities to provide further insights and guidance on common cyber control weaknesses. 

The letter details the common issues observed in terms of security configuration management, privileged access management and security testing, namely: 

• insufficient segregation between production and backup environments;
• insufficient testing of capability to recover systems and data within tolerance levels from backups; and
• insufficient testing of capability to recover systems and data within tolerance levels from backups.

APRA expects regulated entities to review their control environment against these common weaknesses and address any identified gaps promptly. 

Senate inquiry into financial regulatory framework and home ownership

On 14 August, the Senate stated it has referred an inquiry into Australia’s financial regulatory framework and home ownership to the Senate Economics References Committee for inquiry and report by 5 December 2024.

The Terms of Reference require the committee to consider whether the present financial regulatory framework adequately prioritises the goal of home ownership for Australians, with particular reference to:

• APRA prudential standards and Corporations Act provisions for lending;
• the nature and type of debt and equity arrangements being used to underpin housing development;
• the appropriate involvement (if any) of corporate and institutional funds in the provision of housing;
• the effectiveness of mechanisms to monitor investment in the residential property market;
• the tax treatment of residential property and impacts on demand and house prices;
• the adequacy of metrics available to policymakers for monitoring the ratio of new housing supply relative to population growth;
• examples of effective priority treatment for aspiring Australian homeowners that do not compromise financial stability; and
• any related matters.

The closing date for the committee receiving submissions is 26 September 2024.

Treasury consultation on Consumer Data Right exposure draft rules and consultation questions

On 9 August, Treasury released consultation the exposure draft amendments to the Competition and Consumer (Consumer Data Right) Rules 2020, a consultation paper, explanatory materials and a draft Privacy Impact Assessment.

The exposure draft rules take into account stakeholder feedback on the Consent Review and Operational Enhancements design papers, released on 25 August 2023.

Treasury is also proposing a stakeholder forum.

Consultation close on 9 September.

On 9 August, Treasury also released a Consumer Data Right compliance costs review report.

ASIC proposes to extend the operation of three legislative instruments

On 7 August, ASIC announced it proposed to extend the operation of three legislative instruments for a further five years:

• Class Order [CO 14/923] Record-keeping obligations for Australian financial services licensees when giving personal advice;
• ASIC Corporations and Credit (Breach Reporting—Reportable Situations) Instrument 2021/716; and 
• ASIC Credit (Breach Reporting—Prescribed Commonwealth Legislation) Instrument 2021/801.

ASIC has assessed that these instruments, which are due to expire in October 2024, are operating efficiently and effectively, and continue to form a necessary and useful part of the legislative framework.

No consultation paper was issued for this consultation.

ASIC invites feedback from stakeholders by 4 September.

ASIC signs MoU with State Securities Commission Viet Nam

On 5 August, ASIC announced it has signed its first Memorandum of Understanding (MoU) with the State Securities Commission (SSC) Viet Nam in Sydney to support information sharing arrangements under a formalised capacity building program supported by the Department of Foreign Affairs and Trade (Program).  The Program is focused on strengthening technical cooperation in the regulation and supervision of securities markets, information sharing, and other areas of mutual interest supporting fair, orderly, and transparent markets.

AFCA publishes annual Approach document schedule for financial year 2024-2025

On 26 July, AFCA published its annual Approach document schedule for financial year 2024-2025 following external consultation in June. This is accompanied by a consultation feedback report, which outlines the consultation process and how AFCA responded to stakeholder feedback.  AFCA Approach documents support consumers, small businesses and financial firms’ understanding of AFCA’s approach to certain issues and how it reaches decisions. 

The Approach documents provide practical information on how AFCA will assess and determine complaints and enhance AFCA’s transparency, consistency, and efficiency. AFCA will publicly consult on Approaches and provide feedback about the outcomes of the consultation process.