Financial Services in Focus – Issue 2

Funds and financial products

Government releases terms of reference for the 2018 Terrorism Insurance Act Review

On 30 April the Government announced that it has commenced the 2018 review of the Terrorism Insurance Act 2003 (Cth) (TIA), and released its terms of reference.

The Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer, stated that as the scheme for replacement terrorism insurance coverage was established as an interim measure, the TIA requires a review be undertaken every three years to assess the need for the scheme to continue in operation.

Interested parties are invited to provide written submissions on the issues raised in the terms of reference by 30 June.

Australian Financial Complaints Authority (AFCA) takes shape

On 1 May the Government announced the authorisation of Australian Financial Complaints Limited to operate AFCA, the new financial dispute resolution scheme.

The Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer, stated that AFCA will have expertise to deal with all disputes across the entire financial services industry, including superannuation and small business lending disputes.

As part of this announcement, four further members were appointed to AFCA’s board. Hall & Wilcox consultant, Andrew Fairley, has been announced as a board member of the inaugural board.

ASIC takes action on misleading or deceptive conduct in ICOs

On 1 May ASIC announced that it will take action on misleading or deceptive conduct in initial coin offerings (ICOs).

ASIC stated that it is making inquiries with ICO issuers and their advisers where ASIC identifies conduct or statements that may be misleading or deceptive.

For further analysis on this matter, please see the our article.

ASIC releases information sheet on ICOs and crypto-currency

In May ASIC released INFO 225, which outlines guidance on potential application of the Corporations Act 2001 (Cth) in relation to fund raising via an ICO and to other crypto-currency or digital token businesses.

Among other things, INFO 225 states that ASIC considers a financial product that references or is linked to crypto-assets is subject to the standard regulatory regime under the Corporations Act 2001 (Cth) that applies to that kind of specific product.

Further ASIC guidance on blockchain and distributed ledger technology is available from INFO 219.

Financial product advice

ASIC reviews accountant compliance with changes to SMSF advice licensing

On 3 May ASIC completed its review designed to identify unlicensed accountants recommending clients set up an SMSF. ASIC states the review found no systemic concerns around the provision of unlicensed SMSF advice but did identify significant levels of inaccurate and out of date information on websites and in promotional material of accountants reviewed.

Financial markets

ASIC makes class waivers and determinations in relation to the ASIC Market Integrity Rules for futures and securities markets

On 30 April ASIC made a number of legislative instruments in relation to the ASIC Market Integrity Rules for futures markets and securities markets. These include four class waivers. In addition, in early May ASIC made certain determinations under the ASIC Market integrity rules.

ASIC consolidates guidance on market integrity rules for market participants

On 4 May ASIC published two regulatory guides (RGs) that consolidate and replace guidance in seven regulatory guides for securities and futures markets participants.

These two regulatory guides are Regulatory Guide 265 Guidance on ASIC market integrity rules for participants of securities markets which consolidates RG 214, RG 215, RG 223, RG 224, RG 226 and RG 238, and Regulatory Guide 266 Guidance on ASIC market integrity rules for participants of futures markets which consolidates RG 214, RG 223, RG 226 and RG 250.

ASIC states that it is committed to reducing red tape for market participants by administering the law efficiently with a minimum of procedural requirements and that most market operators and market participants will have to comply with consolidated market integrity rules from Monday 7 May 2018.

ASIC revises licensing regime for domestic and overseas market operators

On 4 May ASIC updated its regulatory guidance on the licensing regime for financial markets.

Regulatory Guide 172 Financial markets: Domestic and overseas operators (RG 172) was re-released and introduces a two-tiered market licence regime, applying a risk-based assessment. ASIC states that new approach has been facilitated by the amendments made in March 2017 to the Corporations Act 2001 (Cth) relating to the market licensing regime.

ASIC also states that the market licensing regime will provide flexibility to accommodate a broad range of new and specialised market platforms while ensuring that critical financial markets meet the highest international standard of regulation.

The updated RG 172 incorporates and supersedes two existing Regulatory Guides, namely Regulatory Guide 177 Australian market licences: Overseas operators and the guidance for market operators in Regulatory Guide 223 Guidance on ASIC market integrity rules for competition in exchange markets.

Anti-money laundering

Home Affairs portfolio establishment legislation

On 10 May the Home Affairs and Integrity Agencies Legislation Amendment Act 2018 (Cth) was registered, which amends a range of legislation including the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) to give effect to the allocation of certain ministerial powers following the establishment of a new Home Affairs portfolio and to make changes relating to the Attorney-General’s oversight of intelligence, security and law enforcement agencies.

Other financial services regulation

Government releases response to Senate White Collar Crime Report

On 4 May the Government made available its response to the Senate Economics References Committee Report ‘Lifting the fear and suppressing the greed’: Penalties for white-collar crime and corporate and financial misconduct in Australia.

The Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer, stated that the Government has accepted the majority of the Senate report’s recommendations, including an increase to the availability of infringement notices, of civil penalties and allow maximum civil penalties to be set by a multiple of benefit gained or loss avoided and for the disgorgement of profits in civil proceedings.

APRA finalises new Restricted ADI licensing framework

On 4 May APRA released an information paper and response paper outlining a new pathway for financial entities to become registered as ADIs in Australia.

APRA Chairman Wayne Byrnes said that the Restricted ADI framework is designed to balance the competing objectives of encouraging competition while maintaining safety and stability in the financial system.

If a Restricted ADI is unable to meet APRA’s full prudential framework standards within the two-year license period, it must exit the industry.

Government releases its response to the Open Banking Review

On 9 May the Government released its response to the Open Banking Review. The Open Banking program will aim to make data available on credit, debit card, deposit transaction accounts, mortgages and other banking functions.

The Treasurer, the Hon Scott Morrison, stated that Open Banking will give banking customers greater access to the data their banks hold on them and the ability to direct that it be safely transferred to trusted and accredited service providers of their choice.

The Open Banking reforms will be phased in starting 1 July 2019.


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