Financial Services in Focus – Issue 15
Funds and financial products
Australian Financial Complaints Authority (AFCA) opens for business
On 1 November, AFCA opened for business and started accepting new complaints as a one-stop external dispute resolution (EDR) scheme.
AFCA is replacing the Financial Ombudsman Service (FOS), Credit and Investments Ombudsman (CIO) and the Superannuation Complaints Tribunal (SCT).
ASIC states that AFCA members holding an AFS licence or credit licence must notify ASIC of their AFCA membership details by 30 November 2018.
More information is available on the AFCA website.
Financial product advice
ASIC begins consultation on updated competence requirements for advice licensees
On 8 November, ASIC announced via the release of a consultation paper that it is inviting input on proposed updates to their organisational competence requirements for advice licensees.
ASIC proposes updates to Regulatory Guide 105 Licensing: Organisational competence to support the professional standards reforms, which aim to lift the education, training and ethical standards in the financial advice industry.
The proposals in Consultation Paper 305 Organisational competence requirements for advice licensees: Update to RG 105 are based on the existing draft guidance published by the Financial Adviser Standards and Ethics Authority.
Submissions are due by 6 December.
AUSTRAC publishes draft AML/CTF Rules
On 26 October, AUSTRAC published a draft of Chapter 11 of the Anti-Money laundering and Counter-Terrorism Financing Rules 2007 (Draft Rules) and Explanatory Note for public consultation.
The Draft Rules propose that the following entities be exempt from lodging a 2018 Compliance Report:
- registered remittance affiliates of a registered network provider, who provide only items 31 or 32 of section 6 of the AML/CTF Act designated services; and
- reporting entities who ceased, and did not recommence, to provide a designated service in the 2018 calendar year.
The consultation period is open until 22 November.
ASIC’s ban on flex commissions in car finance deals comes into effect
On 1 November, ASIC stated that its ban on flex commissions in the car finance market commences on 1 November 2018.
Flex commissions were paid by lenders to car dealers and finance brokers to encourage them to arrange car loans at the highest possible interest rate. The higher the interest rate, the larger the commission earnt by the dealer or broker.
ASIC expects the ban to improve lending practices as:
- Consumers should be offered an interest rate that is based on their financial position and credit score, rather than their ability to negotiate.
- Consumers are more likely to be offered interest rates by car dealers that are competitive compared to what other lenders are providing.
- Vulnerable consumers will not be charged high interest rates simply because they are not able to negotiate lower rates.
APRA seeks to increase the loss-absorbing capacity of ADIs
On 8 November, APRA announced proposed changes to the application of the capital adequacy framework for authorised deposit-taking institutions to support orderly resolution in the unlikely event of failure.
The discussion paper released seeks feedback from interested stakeholders on the proposals.
APRA finalises prudential standard aimed at combating threat of cyber attacks
On 7 November, APRA released the final version of its prudential standard focused on information security management.
The new Prudential Standard CPS 234 Information Security will shore up APRA-regulated entities’ resilience against information security incidents (including cyber-attacks), and their ability to respond swiftly and effectively in the event of a breach.
More information is available on the APRA website.
Other financial services regulation
Financial Services Royal Commission gears up for Round 7 public hearings
The public hearings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry for Round 7 will run from 19 November to 30 November in Sydney and Melbourne.
The seventh round of public hearings will focus on causes of misconduct and conduct falling below community standards and expectations by financial services entities (including culture, governance, remuneration and risk management practices), and on possible responses, including regulatory reform.
The hearings will also consider the role of ASIC and APRA in supervising the actions of financial services entities, deterring misconduct by those entities, and taking action when misconduct may have occurred.
RBA launches consultation on the functionality of its New Payments Platform
On 29 October, the RBA announced that it has commenced a consultation on the functionality and access for its New Payments Platform (NPP).
According to the RBA, it is seeking views on whether the various ways of accessing the NPP, and their associated technical and other eligibility requirements, are adequate for different business models, or whether other forms of access or eligibility requirements may be justified.
The closing date for submissions is 30 November
ASIC releases report into the effect of enforceable undertakings as a deterrent
On 25 October, ASIC made available The General Deterrence Effects of Enforceable Undertakings on Financial Services and Credit Providers (undated), a report of a pilot study conducted by the Law Faculty of the University of New South Wales.
The report found that peer providers do perceive deterrent effects of EUs entered into by competitors.
Further details on the methodology and findings of the study are set out in the report. ASIC’s media release is found here.
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