Financial Services in Focus – Issue 99

Memorandum of Understanding (MoU) on superannuation portability between the Australian and Cook Islands governments

On 20 February, Treasury released a Memorandum of Understanding after the Assistant Treasurer met with the Cook Islands Minister for Foreign Affairs and Immigration in Sydney, on 13 November 2024. The Arrangement between the Government of Cook Islands and the Government of Australia on Shared Retirement Savings Portability is a commitment to set up superannuation portability between the two countries. This will allow affected residents to transfer accumulated retirement savings between each country following permanent migration.

ASIC calls out superannuation trustees for weak scam and fraud practices

On 30 January, ASIC published an open letter to superannuation trustees, urging them to strengthen anti-scam practices. In the letter, ASIC highlighted weaknesses in trustee practices they identified during their review, including that:

• trustees were generally overly reliant on anti-fraud measures and had limited focus on the specific risks and harms associated with scams;
• trustees did not have sufficient oversight over their external administrators and their anti-scam and anti-fraud practices;
• trustees generally did not conduct regular reviews of their scam prevention, detection and response capabilities; and
• trustees generally also lacked a specific scam strategy, as well as dedicated reporting on scams.

In the letter, ASIC has stated that superannuation trustees should conduct an assessment of their anti-scam and anti-fraud measures, including for services provided by external administrators, to identify any areas for improvement. ASIC has also requested that trustees read Report 761: Scam prevention, detection and response by the four major banks and Report 790: Anti-scam practices of banks outside the four major banks, and address the baseline measures that ASIC has set out.

APRA increases transparency with enhancements to annual superannuation publications

On 30 January, APRA published its annual superannuation statistics publications for 2024. For the first time, these annual publications include fund-level expenditure and detailed insurance data, which will form part of the publications going forward. 

The data for the 2023-24 financial year can be found as supplementary tables to the following publications:

• the Annual Fund Level Superannuation Statistics;
• the Annual Superannuation Bulletin; and
• the Annual MySuper statistics.

Government raises mandatory service standards for the superannuation industry

On 28 January, the Assistant Treasurer, Stephen Jones, published that the Government is introducing mandatory and enforceable service standards for all large APRA‑regulated superannuation funds. 

The new standards will improve how funds engage with their members and put member interests at the heart of service delivery. The new standards will initially target critical areas where complaints data shows the greatest need for improvement, such as:

• the timely and compassionate handling of death benefits;
• fair and efficient processing of insurance claims; and
• clear, respectful and accessible communications with members.

FSC Statement on Financial Advice Education Standards Reform 

On 10 February, the FSC published a statement announcing that it welcomed the Government’s announcement to reform the education requirements for professional financial advisers.

The standards will ensure the sustainability of the financial advice profession by streamlining regulatory requirements and thereby easing the way for more people to become financial advisers.

The FSC also welcomed the Government’s proposal to no longer require individual advisers to register annually with ASIC, stating that this will reduce the burden caused by unnecessary overregulation.

ASIC proposes to remake relief for offers of CHESS Depository Interests 

On 24 January, ASIC announced it is seeking feedback on its proposal to remake Class Order 14/827: Offers of CHESS Depository Interests (CO 14/827)for a period of five years, noting it is due to expire on 1 April. 

ASIC is proposing to remake the class order on largely the same terms, subject to some minor amendments including revisions to the definition of ‘depository interests’ and the wording of the AFS licensing exemption.

The purpose of the remade relief is to continue to:

• remove uncertainty about how offers of CHESS Depository Interests (CDIs) over foreign shares and options are regulated under the Corporations Act 2001 (Cth);
• facilitate offers of CDIs over foreign shares and options, and to assist foreign companies to make such offers in an efficient market; and
• promote better understanding for retail investors about CDIs, to assist them to make confident and informed investment decisions.

Treasury released consultation paper on ban on the use of adverse genetic testing results in life insurance

On 12 February, Treasury released a consultation paper into banning the use of adverse predictive genetic testing results in life insurance. 

The Assistant Treasurer announced plans for the ban. It will reduce deterrents to taking genetic tests. This decision followed an earlier consultation.

Consultation is open until 12 March.

APRA clarifies expectations regarding commercial property lending

On 13 February, APRA published a letter to ADIs clarifying its expectations regarding pre-sales and commercial property lending.

APRA reminded ADIs that its requirements and guidance for prudent credit risk management relevant to commercial property lending are contained in APS 220 and APG 220. They include requirements that ADIs maintain prudent policies and sound credit assessment and approval criteria, which APRA continues to monitor as part of routine supervisory activities. APRA further stated that while presales do have an important role to play in a sound credit risk management approach, it has not set minimum requirements or expectations for presales in these standards and guidance. 

Buy Now Pay Later (BNPL) – Draft Regulations 2025

On 5 February, Treasury commenced consultation on the National Consumer Credit Protection Amendment (Low Cost Credit) Regulations 2025, which support the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024 which recently passed Parliament. 

The consultation packages comprises an exposure draft and explanatory statement. These measures aim to regulate BNPL in a way that is flexible, adaptable and proportionate to the risk of consumer harm.

Consultation closed on 12 February.

ASIC alerts BNPL providers to apply for a license under new laws

On 17 January, ASIC announced the National Credit Code has been extended to BNPL contracts, following royal assent of the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024 (the BNPL Act) on 10 December 2024.

ASIC reminds BNPL product providers that from 10 June:

• they will need to hold a credit licence that authorises them to engage in credit activities as a credit provider, subject to transitional arrangements;
• for entities who already have a credit license, any authorisation they have to engage in credit activities in relation to credit contracts, will also apply to BNPL contracts; and
• if a BNPL provider has a credit licence that does not authorise them to engage in credit activities as a credit provider, they will need to apply for a variation of their license.

ASIC releases discussion paper on roadmap for public and private capital markets

On 26 February, ASIC announced its preliminary views on the opportunities and risks emerging from shifts in public and private capital markets and called for feedback and debate on key questions as part of a discussion paper it launched titled ‘Australia’s evolving capital markets: A discussion paper on the dynamics between public and private markets’ (Discussion Paper).

The Discussion Paper explores the changing dynamics in capital markets, in Australia and abroad, including declining listings on public markets, the rapid growth in investment capital allocated to private markets and the influence of superannuation funds on markets.

Feedback on the discussion paper is due by 5pm on 28 April.

APRA rescinds information paper on cloud outsourcing and ceases ad hoc credit reporting collection

On 19 February, APRA confirmed the following two further steps to simplify the prudential framework:

• rescinded the 2018 Information Paper ‘Outsourcing Involving Cloud Computing Services’ in light of Prudential Standard CPS 230 Operational Risk Management (CPS 230). 
  CPS 230 comes into effect 1 July (replacing existing standards 231 Outsourcing and 232 Business Continuity Management) and includes formal supervisory coverage for entities with cloud service provider arrangements; and
• ceased the collection of ‘ARF 923.0 Covid-19 Capital and Credit’, with the last submission being the period ending 31 January. 

ASIC proposes further relief for licensees under the reportable situations regime 

On 18 February, ASIC announced it is proposing to create additional relief to further assist AFS and Australian credit licensees to comply with the reportable situations regime, noting that the broad reporting requirement has at times led to reports having little regulatory value and being unnecessarily costly to licensees. ASIC has therefore proposed to provide additional relief for certain breaches of the misleading and deceptive conduct provisions, and certain contraventions of civil penalties where:

• the breach has been rectified within 30 days from when it first occurred (this includes paying any necessary remediation); and
• the number of impacted consumers is not more than five; and
• the total financial loss or damage to all impacted consumers resulting from the breach is not more than $500 (including where the loss has been remediated); and
• the breach is not a contravention of the client money reporting rules, and clearing and settlement rules.

ASIC has invited feedback on this proposal by 11 March.

ASIC updates guidance for applicants applying for ASIC relief or no-action letters

On 13 February, ASIC released updated regulatory guides Regulatory Guide 51: Applications for relief (RG 51) and Regulatory Guide 108 No-action letters(RG108).

In particular, ASIC has:

• updated RG 108 to include a reference to relevant content in RG 51 to consider when making a request for a no-action letter;
• updated RG 51 to include a reference that an applicant may have a right to seek review of ASIC’s decision to the Administrative Review Tribunal;
• updated RG 51 to remove the proposed reference in Table 2 that a cost and benefit analysis needed to accompany an application; and
• adopted technical or stylistic recommendations from the consultation process to enhance readability.

ASIC stated that these updates improve and simplify its guidance regarding relief and no-action letters by centralising related guidance and amending outdated references.

On release of the updates, ASIC will withdraw the guidance in RG 21: How ASIC charges fees for relief applications, RG 208: How ASIC charges fees for credit relief applications and RG 57: Notification of rights of review, with the relevant guidance having now been incorporated into RG 51.

ASIC releases key issues outlook for 2025 

On 24 January, ASIC published its key issues outlook for 2025 in which it identified what it considers to be the most significant current issues within its regulatory scope. In determining these issues ASIC states that they have taken into account various factors, including the market’s increased volatility, geopolitical changes, the global accumulation of debt, perceived and real inequality of wealth, advances in artificial intelligence and cybersecurity. 

The issues identified by ASIC in their outlook include, but are not limited to:

• superannuation members being let down by their fund and trustee;
• unsuitable superannuation advice resulting in adverse consumer outcomes; and
• poor quality climate-related financial disclosures leading to misinformed investment decisions.

Consultation on restructuring Australia’s financial reporting system

On 23 January, Treasury commenced consultation on establishing a proposed financial reporting body that combines the Australian Accounting Standards Board, Auditing and Assurance Standards Board and Financial Reporting Council.

The consultation paper highlights that to implement the proposed changes, legislation will be developed to combine the functions and powers of the abovementioned bodies into a single statutory body responsible for standard setting and advising the government in relation to external reporting.

The proposed reforms are intended to realise several benefits including:

• facilitating sustainability reporting standard setting by a dedicated technical committee;
• greater flexibility to meet future external reporting needs; and
• further streamlining of administrative operations.

The consultation period closed on 21 February.