Financial Services in Focus – Issue 20

Funds and financial products

Royal Commission fallout

On 18 February, the Commonwealth Treasurer, Josh Frydenberg, issued a media release setting out the Commonwealth Government’s actions since the release of the final report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

Among those is the passing of legislation in the Senate (Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Bill 2018) to significantly increase criminal and civil penalties for corporate and financial sector misconduct, being legislation that implements certain recommendations of the ASIC Enforcement Review Taskforce. The Bill will return to the House of Representatives. ASIC’s media release on the passing of the Bill is in the Senate is here and here is the Treasurer’s media release.

On 19 February provided an update on its planned actions responding to the final report. ASIC states that there are 12 recommendations that are directed at ASIC, or where the Government’s response requires action now by ASIC, without the need for legislative change, and that ASIC is committed to fully implementing each of these. Amongst its list of planned actions, ASIC has announced that it will establish a separate ‘Office of Enforcement’ within ASIC, to deal with the Royal Commission’s emphasis of the need to, as much as possible, separate enforcement staff from the ASIC’s non-enforcement contact with regulated entities.

Further, on 11 February APRA released a media release in which it sets out APRA’s response to each of the Royal Commission’s recommendations that require a response from APRA. APRA also provides a table setting out each of 10 recommendations affecting APRA, and APRA’s response to each recommendation.

Meanwhile, we offer our further reflections on the Royal Commission’s final report.

Whistleblower protections legislation passes Parliament

On 19 February, the Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2018 passed both houses of Parliament.

This Bill creates a consolidated whistleblower protection regime for the corporate and financial sectors, and introduces new protections for tax whistleblowers not available under the existing laws.

The Bill amends:

  • the Corporations Act to strengthen and consolidate whistleblower protections for the corporate and financial sector;
  • the Taxation Administration Act 1953 (Cth) to create a whistleblower protection regime for disclosures of information by individuals regarding breaches of the tax laws or misconduct in relation to an entity’s tax affairs; and
  • repeals the financial sector whistleblower regimes and clarifies transitional arrangements.

The Assistant Treasurer, Stuart Robert, stated that large companies will be required to have a whistleblower policy to support good corporate governance and culture, which he said the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry stated is fundamentally important.

Financial product advice

FASEA releases Code of Ethics Standard

On 11 February, FASEA released the legislative instrument and explanatory statement for the Code of Ethics standard (‘Code’).

FASEA states that, following its consultation with industry, it has clarified aspects of the Code, including the values underlying the Code, and amending standards around conflicts, the best interests of the client, the effects of advice on the client and adviser record-keeping. Further, FASEA states that a guidance document that includes case studies for each standard will be released shortly.

The Financial Planners and Advisers Code of Ethics 2019 is a legislative instrument that is made by FASEA section 921U(2)(b) of the Corporations Act. And was registered on 11 February. The Explanatory Statement to the Code can be viewed here.

Consumer credit

ASIC consults on updating its responsible lending guidance

On 14 February, ASIC issued a consultation paper to update its guidance on responsible lending.

In Consultation Paper 309 Update to RG 209: Credit licensing: Responsible lending conduct, ASIC is considering its general approach to its guidance in this area, what aspects of its current guidance may need updating or clarification, and whether it should provide additional guidance on specific issues.

ASIC states that it considers it timely to review and update the guidance in light of its regulatory and enforcement work since 2011, changes in technology, and the recent Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

ASIC also states that it is considering whether to provide an opportunity for key stakeholders to speak to the Commission at public hearings in addition to making written submissions.

Consultation closes on 20 May.

Other financial services regulation

Social security legislation passed regarding means test rules for income streams

On 14 February, the Social Services and Other Legislation Amendment (Supporting Retirement Incomes) Bill 2018 passed both houses of Parliament.

According to the Explanatory Memorandum, the legislation (among other things) establishes new means test rules to accommodate the development of new innovative income streams, resulting from recent changes to the Superannuation Industry (Supervision) Regulations and also amends the current rules for lifetime income streams, to create fairer, more equitable means test outcomes.

The legislation is slated to commence on 1 July.


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