Financial Services in Focus – Issue 11
Funds and financial products
Senate passes crowd-sourced funding legislation for proprietary companies
On 12 September, the Senate passed the Corporations Amendment (Crowd-sourced Funding for Proprietary Companies) Bill 2017 (Cth), with amendments.
This Bill will extend the crowd-sourced funding regime to proprietary companies. Under this legislation, proprietary companies with less than $25 million in assets and turnover will be able to raise up to $5 million in any 12-month period through crowd-funding platforms.
ASIC approves Australian Financial Complaints Authority rules
On 12 September, ASIC stated that it approved the Australian Financial Complaints Authority (AFCA) Complaint Resolution Scheme Rules and the Terms of Reference of the AFCA Independent Assessor.
ASIC states that it is a statutory requirement that financial firms including most credit representatives, that deal with retail clients must join the AFCA scheme by 21 September 2018, and that almost all Financial Ombudsman Scheme members have effectively transferred their membership to AFCA and that about 80% of members of the Credit and Investments Ombudsman Scheme and about 64% of superannuation trustees and retirement savings accounts providers have also joined up.
Asia Region Funds Passport commencement proclamation
On 13 September, the Corporations Amendment (Asia Region Funds Passport) Commencement Proclamation 2018 fixed 18 September 2018 as the day on which Schedules 1, 2, 2A and 3 of the Corporations Amendment (Asia Region Funds Passport) Act 2018 (Cth) commence.
Schedules 1, 2 and 3 of the Corporations Amendment (Asia Region Funds Passport) Regulations 2018 (Cth) also commenced as a result of the proclamation.
Corporations (Passport) Rules registered
On 7 September, the Corporations (Passport) Rules 2018 (Rules) was registered.
According to the Explanatory Statement, the purpose of the Rules is to incorporate the Passport Rules agreed by the participating economies in Annex 3 to the Memorandum of Cooperation on the Establishment and Implementation of the Asia Region Funds Passport into Australian law.
ASIC releases report into insurance cover provided via super funds
On 7 September, ASIC released a review on the provision of insurance cover through superannuation in Report 591 Insurance in superannuation (Report).
ASIC states that the findings of concern in the Report included the following:
- poor complaints-handling timeframes and practices, as almost a third of trustees in the review took more than 90 days on average to resolve complaints about insurance in 2017-2018; and
- some trustees were still automatically defaulting members as ‘smokers’ when transferring them to different sections of the same fund, resulting in higher insurance premiums payable by those members. All trustees have agreed to discontinue this practice.
ASIC continues to monitor cryptocurrency ICOs
The Corporate Plan has once again highlighted ASIC’s intention to closely monitor ICOs and cryptocurrency in Australia.
This focus on ICOs and cryptocurrencies fits within one of ASIC’s six broad key focus areas – the potential harms from technology driven by the growing digital environment and structural changes in financial services and markets.
In addition, ASIC notes as one of its action areas for 2018-19 a new project of developing its approach to regulating market infrastructure providers to crypto exchanges, as well as monitoring emerging ICO products and intervening where there is poor behaviour and potential harm to consumers and investors.
See our update here on this development.
ASIC releases report into sale of direct life insurance
On 30 August, ASIC released two reports into direct life insurance.
Report 587 The sale of direct life insurance summarises the findings and recommendations from ASIC's review of the sale of direct life insurance products in Australia, including term life, accidental death, trauma, total and permanent disability (TPD) and income protection insurance. ASIC states that this review found that sales practices and product design are leading to poor consumer outcomes.
Report 588 Consumers’ experiences with the sale of direct life insurance sets out the results of research into consumers’ experiences in buying life insurance directly - that is, without getting personal advice from a financial adviser or buying through a group arrangement like superannuation. ASIC states that this report found consumers struggle with the direct life insurance sales experience and the complexity of the products, and consumer understanding of key features is often poor.
ASIC provides regulatory approvals for a proposed new product and ETFs for the Chi-X market
ASIC stated that it has updated the market integrity rules to facilitate the introduction of a new type of financial product that securities and derivatives exchange Chi-X Australia Limited is introducing to its market, known as transferable custody receipts (TraCRs).
The updated rules include TraCRs in the definition of 'cash market products' in Rule 1.4.3 of the new consolidated rulebook, the ASIC Market Integrity Rules (Securities Markets) 2017.
ASIC prescribes three-year period for credit card responsible lending assessments
On 5 September, ASIC created ASIC Credit (Unsuitability – Credit Cards) Instrument 2018/753, which prescribes a three-year period to be used by banks and credit providers when assessing a new credit card contract or credit limit increase for consumers.
The legislative instrument was accompanied by the release of Report 590 Response to submissions on CP 303 Credit cards: Responsible lending assessments, which highlights the key issues that arose out of the submissions received on the consultation paper and details ASIC’s responses to those issues.
The new legal requirement commences on 1 January 2019. ASIC states that credit providers are expected to have systems in place to ensure that that they can meet the new obligations.
APRA releases Banking exemption No. 2 of 2018
On 3 September, APRA released Banking exemption No. 2 of 2018 (Exemption). The Exemption replaces Banking exemption No. 1 of 2015, and involves a determination that section 8 of the Banking Act 1959 (which generally states that only the Reserve Bank and ADI’s may carry on banking business) does not apply to a registered entity that complies with the conditions specified in the attached Schedule.
The Exemption takes effect upon registration on the Federal Register of Legislation.
Other financial services regulation
Banking Royal Commission releases responses to Round 5 hearings on superannuation
On 28 August, the Banking Royal Commission (Commission) released the responses to its Round 5 hearings on superannuation.
The Commission also released an Addendum setting out clarifications and corrections to the Closing Submissions of Counsel Assisting.
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Financial Services | 19 Sep 2018
Crowd-sourced funding (CSF) is almost a reality for proprietary companies. Businesses in Australia will soon be able to access CSF without needing to convert into or incorporate an unlisted public company.
Blockchain, Cryptocurrency, Initial Coin Offerings & Security Token Offerings | 20 Sep 2018
Yesterday ASIC issued a media release in respect of their recent activity against ICOs. ASIC’s actions are in line with its Corporate Plan, where it noted that monitoring and regulating ICOs and cryptocurrency were going to be an area of focus.