Financial Services in Focus – Issue 64

By Vince BattagliaHarry NewAdrian Verdnik and Philip Hopley 

In this edition, we consider the Government’s announcement regarding the proposed regulatory and licensing regime for crypto asset secondary service providers, ASIC’s consultation on licensing requirements for CCIVs, and ASIC’s relief to temporarily extend the current laws regarding virtual-only members’ meetings, and much more.

Click on each heading below to read more about each of these areas: financial products, funds, superannuation, insurance, financial product advice, financial markets, anti-money laundering, banking, other financial services regulation and tax.

Government announces consultations and inquiries for digital transactions and crypto assets

On 21 March, the Treasurer, Josh Frydenberg, and the Minister for Superannuation, Financial Services and the Digital Economy, Jane Hume, jointly announced that:

  1. the Government has released a paper seeking industry’s feedback by the end of May on proposed new crypto asset licensing and custody requirements, and covering the first stage of a broader token mapping exercise to be completed by the end of 2022. For an analysis of this announcement, see our article. Consultation closes on 27 May;
  2. the Government has released the terms of reference for a review by the Board of Taxation into the appropriate policy framework for the taxation of digital transactions and assets such as crypto (which is being conducted on the basis it will not increase the overall tax burden) The Board has been asked to complete its review by 31 December; and
  3. the Government will release terms of reference covering its request for advice from the Council of Financial Regulators (CFR) on potential policy responses to address the issue of de-banking for financial technology firms, digital currency exchanges, and remittance providers. The CFR has been asked to provide advice to the Government by the end of June 2022.

ASIC publishes guidance for social media influencers and financial services

On 21 March, ASIC announced that it has published an information sheet about discussing financial products and services online, outlining how the law applies to social media influencers, and the licensees who use them.

According to ASIC, the new ASIC Information Sheet 269 Discussing financial products and services online:

  1. highlights activities where influencers may contravene the law if they are unaware of the legal requirements, using a series of practical examples on financial product advice, dealing by arranging and misleading or deceptive conduct;
  2. explains issues for influencers to consider including whether an AFSL is needed, being familiar with relevant regulatory guidance, and doing their due diligence on people who are paying them (including non-monetary benefits);
  3. reminds AFS licensees who use influencers to do their due diligence, have appropriate risk management systems and monitoring processes, have sufficient compliance resourcing to monitor the influencers they use, and consider their design and distribution obligations.

ASIC consults on CCIV licensing guidance

On 17 March, ASIC announced it has commenced consulting on financial services licensing requirements for corporate collective investment vehicles (CCIVs).

According to ASIC, the new ASIC Consultation Paper 360 Corporate collective investment vehicles: Preparing for the commencement of the new regime (CP 360) contains proposals on a range of licensing-related matters, including how ASIC will:

  1. assess AFSL applications from corporate directors seeking to operate a CCIV;
  2. assess AFSL applications from persons seeking to provide financial product advice on and/or deal in CCIV securities, and
  3. administer the licensee obligations that will apply to CCIV corporate directors.

ASIC also published draft updates to give licensing-related regulatory guides for public consultation. ASIC states that it intends to release the updated regulatory guides before 1 July to allow to allow entities adequate time to prepare for the provision of CCIV-related financial services before the new regime commences.

We have written previously about the passing of the CCIV legislation in Issue 63 and proposed ASX Listing Rules amendments to facilitate CCIV listings.

ASIC delivers speech on priorities for 2022

On 3 March, the ASIC Chair delivered a speech to the AICD Australian Governance Summit in relation to ASC’s corporate governance priorities and the year ahead.

Among other matters, the ASIC Chair’s speech addressed:

  1. ASIC’s priorities in the coming year, which include:
    1. combating and disrupting financial scams;
    2. addressing the deceptive promotion of riskier asset classes such as crypto and misleading or deceptive conduct relating to investment products;
    3. disrupting investment ‘gamification’ on digital platforms;
    4. protecting financially vulnerable customers in a credit contact; and
    5. ensuring customers receive the benefits of the design and distribution obligations (noting that ASIC’s early reviews of target market determinations highlighted some disappointing approaches and that ASIC will pursue a targeted surveillance approach); and
    6. corporate governance priorities, including governance failures relating to non-financial risk, cyber governance and resilience failures and egregious governance failures resulting in corporate collapse;
  2. ASIC’s encouragement towards entities to improve their cyber security resilience; and
  3. ASIC’s activities in relation to climate-change disclosure, including its review to establish whether the practice and promotion of managed investment and superannuation funds that offer ‘ESG’ or ‘green’ products are actually aligned.

ASIC temporarily extends relief for virtual-only meetings

On 3 March, ASIC announced that it has granted relief to allow additional time for certain companies and registered schemes to hold virtual-only meetings, subject to conditions. On that day, the ASIC Corporations (Virtual-only Meetings) Instrument 2022/129 (Instrument 2022/129) was registered for this purpose.

ASIC states that, under Instrument 2022/129:

  1. all listed companies, together with listed and unlisted registered schemes, will continue to have the option to hold virtual-only meetings until 31 May 2022 (an additional two months). For unlisted companies, the extension is until 30 June 2022, which aligns with the extended deadline for unlisted public companies with 31 December 2021 year ends to hold their annual general meetings; and
  2. before a company or responsible entity of a registered scheme relies on the relief, the directors of the company or responsible entity must pass a resolution that it would be unreasonable for the company or registered scheme to hold a meeting of its members wholly or partially at one or more physical venues, due to the impact of the COVID-19 pandemic.

ASIC explained that permanent changes to the Corporations Act to permit hybrid meetings (including virtual-only meetings if allowed under the entity’s constitution) apply from 1 April 2022. For more information on these reforms, see our earlier Issue 63.

APRA publishes new Superannuation Data Transformation FAQs

On 17 March, APRA announced that it has published additional frequently asked questions (FAQs) on the Superannuation Data Transformation Phase 1 reporting standards. Read the FAQs.

APRA and ASIC issue joint letter on implementation of retirement income covenant

On 7 March, APRA and ASIC issued a joint letter to all registrable superannuation entity (RSE) licensees on the implementation of a new retirement income covenant. According to the regulators, the retirement income covenant takes effect from 1 July and RSE licensees will be required to formulate a retirement income strategy and publish a summary of the strategy on the superannuation entity’s website by that time.

The letter sets out an indicative implementation pathway for RSE licensees to consider when embedding the covenant into their business operations, and communicates APRA’s and ASIC’s expectations of RSE licensees in implementing the covenant.

APRA announces no action against trustees divesting Russian assets

On 3 March, the Treasurer, Josh Frydenberg, and the Minister for Superannuation, Financial Services and the Digital Economy, Jane Hume, jointly announced that the Government confirms its strong expectation that Australian superannuation funds will review their investment portfolios and take steps to divest any holdings in Russian assets.

On that day, APRA also announced that it has noted the Government’s expectations in this respect, and that it will not be taking any action against trustees who seek to divest Russian assets in this context where trustees have considered such divestments in accordance with their duties.

Regulations amended to give effect to Flexible Super package from 2021-22 Budget

On 3 March, the Treasury Laws Amendment (Enhancing Superannuation Outcomes) Regulations 2022 were registered.

According to the Explanatory Statement, the purpose of the Amending Regulations is to make amendments to regulations to support the amendments in Schedules 3 and 4 to the Treasury Laws Amendment (Enhancing Superannuation Outcomes for Australians and Helping Australian Businesses Invest) Act 2022 (Cth), which give effect to the Flexible Super package announced in the 2021-22 Budget.

APRA releases updated offshore reinsurer prudential standard

On 8 March, APRA published finalised revisions to APRA Prudential Standard LPS 117 Capital Adequacy: Asset Concentration Risk Charge (LPS 117). According to APRA, the finalised revisions address prudential concerns arising from the increased prevalence of offshore reinsurance, and that the key change is an adjustment to exposure limits in LPS 117 to ensure that the amount of risk placed outside of APRA’s regulatory remit is within prudent levels.

APRA states that it is now seeking feedback on:

  1. proposed further changes to LPS 117 driven by the integration of AASB 17 Insurance Contracts into APRA’s insurance capital framework and LAGIC updates;
  2. consequential proposed changes to APRA Prudential Standard LPS 114 Capital Adequacy Asset Risk Charge, driven by revised LPS 117; and
  3. proposed changes to APRA Reporting Standard LRS 117 Capital Adequacy Asset Concentration Risk Charge, driven by the revised LPS 117, the integration of AASB 17 and the introduction of APRA Connect.

Consultation closes on 29 April.

APRA’s response paper in relation to LPS 117 (which also includes the proposed amendments described above) and draft materials are available on APRA’s website.

ASIC announces legislative relief for insurers to provide consumers cash in emergency situations

On 2 March, ASIC announced that it has issued legislative relief that allows insurers to give emergency payments to consumers in certain circumstances without first giving them a Cash Settlement Fact Sheet (CSFS). For more information on the legislative instrument (which was registered on 10 February), see our earlier Issue 63.

According to ASIC, the relief streamlines the process for insurers to advance consumers up to $5,000 in cash in emergency situations without first having to issue a CSFS. The relief applies in limited circumstances where:

  1. the consumer has expressly instructed the insurer or its representative that they need immediate financial assistance
  2. the verbal cash settlement offer has been made within 14 days of the insurable event that is the subject of the claim, and
  3. the cash payment (together with any additional immediate cash payments under the same claim) does not exceed $5,000.

ASIC states that the relief is subject to conditions and will expire in 2025, and that ASIC will review the operation and appropriateness of the instrument before it expires.

APRA publishes new FAQs for private health insurers on COVID-19 disruptions

On 21 March, APRA announced that it has published updated FAQs for private health insurers on the application of the capital framework for COVID-19 related disruptions. APRA states that it is moving towards a principles-based approach which places greater reliance on insurers to manage their specific risks and calculate their deferred claims liability. 

Government releases terms of reference for the Quality of Advice Review

On 11 March, the Minister for Superannuation, Financial Services and the Digital Economy, Jane Hume, announced the release of the terms of reference for the Government’s Quality of Advice Review (Review) and the appointment of reviewer. A copy of the terms of reference is available on the Treasury’s website.

According to the Minister, the Review will investigate, amongst other things:

  1. whether there are opportunities to streamline and simplify regulatory compliance to reduce costs and duplication;
  2. how to improve the clarity and availability of documents provided to consumers; and
  3. whether parts of the regulatory framework have created unintended consequences.

According to the terms of reference, a report will be provided to the Government by 16 December 2022.

ASX consults on proposed changes to ASX Clear (Futures) OTC Rules and Handbook

On 21 March, the ASX published a consultation paper outlining its proposed changes to the ASX Clear (Futures) OTC Rules and Handbook.

According to the ASX, the proposed changes (which are set out here) are to:

  1. implement benchmark fallback rate provisions in relation to the OTC interest rate derivatives products cleared by ASX; and
  2. introduce OTC product enhancements to support the Actual/Actual ICMA Day Count Convention for the clearing of Assets Swaps and the IMM AUD roll convention, the industry convention to enable swaps to roll on ASX’s bank bill futures dates.

Consultation closes on 29 April.

ASX announces TCFD courses and reminds entities about proposed issuer fee model

On 17 March, the ASX issued Compliance Update no. 02/22. In this update, the ASX:

  1. announced it will hold educational sessions on climate reporting under Task Force on Climate-related Financial Disclosures (or ‘TCFD’) recommendations;
  2. reminded listed entities of its consultation on a proposed new fee model regarding ASX charges for Issuer Services (which we have written about further below);
  3. reminded listed entities about daylight saving times.

ASIC extends relief for market participants inputting aggregate loss limits into trading platform

On 16 March, the ASIC Market Integrity Rules (Futures Markets) Class Waiver Amendment Instrument 2022/139 was registered.

According to the Explanatory Statement, the purpose of the instrument is to extend the operation of ASIC Market Integrity Rules (Futures Markets) Class Waiver 2018/313 (Class Waiver 2018/313) to 22 March 2024, which provided conditional relief to market participants from the obligation to set and document appropriate, pre-determined, aggregate loss limits on each of its client accounts and house accounts and to input these aggregate loss limits into trading platform account maintenance.

This was to allow ASIC sufficient time to consult with industry about future proposed changes to market integrity rules which would address the relief in Class Waiver 2018/313.

ASIC amends market integrity rules and other ASIC-made rule books

On 10 March, ASIC announced that it has made amendments to market integrity rules and other ASIC-made rule books. According to ASIC, it has:

  1. introduced new market integrity rules aimed at promoting the technological and operational resilience of securities and futures market operators and participants under ASIC Market Integrity Rules (Securities Markets and Futures Markets) Amendment Instrument 2022/74;
  2. amended the prohibition on payment for order flow to address certain regulatory gaps under ASIC Market Integrity Rules (Securities Markets) Amendment 2022/73, which was registered on 9 March; and
  3. made deregulatory, minor and administrative amendments to 10 ASIC-made rule books under ASIC Market Integrity Rules (Securities Markets and other ASIC-Made Rules) Amendment Instrument 2022/117,

with each legislative instrument having been registered on 9 March.

The amendments arise out of consultations separately undertaken by ASIC in relation to each matter. The reports setting out ASIC’s responses to each consultation are available on ASIC’s website.

ASIC market integrity determination registered

On 8 March, the ASIC Market Integrity Rules (Securities Markets) Determination 2022/134 (Determination) and ASIC Market Integrity Rules (Securities Markets) Repeal Instrument 2022/135 (Repeal Instrument) were registered.

According to the Explanatory Statement, the purpose of the Determination and Repeal Instrument are to determine the Tier 1 Equity Market Products and the Tier 2 Equity Market Products for the purposes of Rule 6.2.1(1)(c) of the ASIC Market Integrity Rules (Securities Markets) 2017, and repeal the superseded determination. The Explanatory Statement further explains that the instruments maintain existing policy settings under ASIC Market Integrity Rules (Securities Markets) Determination 2021/991.

ASX consults on ASX Issuer Services fee changes

On 3 March, the ASX published a discussion paper on proposed changes to its fee model for ASX Issuer Services. The proposed model is a new subscription-based pricing model. The ASX clarified that the changes do not relate to listing fees.

ASIC states that it is targeting a commencement date for the new issuer services fees of 1 July.

Consultation closes on 14 April.

FATF updates FATF Recommendation 24

In March 2022, the Financial Action Task Force (FATF) updated the FATF Recommendations. According to FATF, the amendments were to:

  1. revise Recommendation 24 (transparency and beneficial ownership of legal persons), INR.24 and Glossary; and
  2. add ‘nominator’ and ‘nominee shareholder or director’ to the Glossary to strengthen the standards on beneficial ownership of legal persons.

The FTAF Recommendations are available on FATF’s website.

AUSTRAC consults on AML/CTF rule changes including ‘Phase 1.5’ amendments

On 11 March, AUSTRAC published proposed amendments to the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1) (Cth) for public consultation. According to AUSTRAC, the amendments propose to:

  1. amend Chapters 10 to implement the amendment to the National Consumer Protection Framework for Online Wagering;
  2. repeal Chapters 24 (movements of physical currency into or out of Australia), 25 (receipts of physical currency from outside Australia) and 26 (movements of bearer negotiable instruments into or out of Australia);
  3. introduce a new Chapter 24 (reports about cross border movements of monetary instruments);
  4. amend Chapter 34 (affixing notices about cross-border movement reporting obligations); and
  5. introduce Chapter 81, which proposes to exempt financial institutions that are enrolled with AUSTRAC from registration on the Digital Currency Exchange Register.

The exposure draft rules and Explanatory Note are available here. According to the Explanatory Note, the amendments in relation to Chapters 24, 25, 26 and 34 reflect the ‘Phase 1.5’ reforms to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (which commence on 17 June).

Consultation closes on 8 April.

AUSTRAC levy for 2021-22 determined

On 3 March, the Australian Transaction Reports and Analysis Centre Industry Contribution Determination 2022 (No. 1) (Determination) was registered. According to the Explanatory Statement, the purpose of the Determination is to determine the amount of the instalment of levy imposed on certain entities regulated and supervised by AUSTRAC for 2021-22.

APRA publishes FAQs in relation to credit risk management

On 10 March, APRA published a new set of frequently asked questions (FAQs) for ADIs in on credit risk management. According to APRA, the FAQs provide information to assist ADIs to interpret Prudential Standard APS 220 Credit Risk Management, and are available here.

ASIC publishes response to consultation on ePayments Code amendments

On 7 March, ASIC published a report setting out its response to ASIC Consultation Paper 341 Review of the ePayments Code: Further consultation. For more information on the consultation, see our earlier Issue 54.

According to ASIC, ASIC Report 718 Response to submissions on CP 341 Review of the ePayments Code: Further consultation seeks to address a selection of key issues now, in the context of this review, ahead of the Government’s proposed further work to produce a mandatory ePayments Code.

ASIC states that its present aim is to publish an updated ePayments Code in April 2022.

APRA seeks feedback on implementation of Basel III liquidity reforms

On 3 March, APRA announced that it has released a discussion paper to ADIs and other interested stakeholders advising of APRA’s post-implementation review of the Basel III liquidity reforms.

According to the discussion paper (which is available on APRA’s website), the purpose of the review is to assess the impact of the liquidity coverage ratio and the net stable funding ratio (which became effective from 2015 and 2018 respectively), and understand the costs and benefits of the measures.

Consultation closes on 14 April.

ASIC publishes ‘Get Moneysmart’ resource

On 18 March, ASIC announced that it has published a new resource called ‘Get Moneysmart’ to make it easier for young people to manage their money and deepen their understanding of key money concepts and behaviours.

Government consults on expanding CDR to non-bank lending

On 15 March, the Minister for Superannuation, Financial Services and the Digital Economy, Jane Hume, announced that the Government is commencing consultation on the expansion of the consumer data right (CDR) to ‘Open Finance’. The consultation paper and an explainer are available on Treasury’s’ website here.

According to the consultation paper, phase 1 of Open Finance will include the assessment and designation of the non-bank lending sector, merchant acquiring services, and key datasets in the general insurance and superannuation sectors.

The present consultation relates to the non-bank lending sector and closes on 12 April.

The Minister announced that the Government will conduct further consultation on the expansion of the CDR to the merchant acquiring, superannuation and general insurance sectors later this year.

ASIC reminds entities of whistleblower policy obligations

On 15 March, ASIC published an article warning entities that their whistleblower policy may not comply with latest updates to the whistleblower protection regime. ASIC states that public companies, large proprietary companies and corporate trustees of registrable superannuation entities are required to have a whistleblower policy that reflects the strengthened whistleblower protection regime that started on 1 July 2019.

APRA announces voluntary climate risk self-assessment survey

On 2 March, APRA announced that it has released a cross-industry letter to advise on the purpose and timing of a voluntary climate risk self-assessment survey with medium-to-large APRA-regulated entities.

According to the letter, APRA will shortly commence a voluntary survey of medium-to-large APRA-regulated entities, asking them to self-assess how their current practices align to APRA’s guidance on managing the financial risks of climate change. The letter sets out the purpose and timing of the survey.

ASIC urges regulated entities to adopt an enhanced cyber security posture

On 1 March, ASIC announced that all ASIC-regulated entities should adopt an enhanced cyber security posture as a matter of priority, and referred to the Australian Cyber Security Centre’s alert to Australian organisations to this effect.

ASIC reminded boards, senior management, licensees and regulated entities that they should consider where they have an obligation to report breaches to ASIC or other government agencies, and also where disclosure to the market or in financial reports may be necessary.

ATO determines certain assets of SMSFs are excluded from being in-house assets

On 2 March, the Superannuation Industry (Supervision) Self-Managed Superannuation Funds (COVID-19 Rental Income Deferrals – In‑House Asset Exclusion) Determination 2022 (Determination) was registered.

According to the Explanatory Statement, the effect of the Determination is that assets covered by the instrument are taken not to be in‑house assets of the SMSF in the 2021–22 income year in which there was an agreement on arm’s length terms that the payment of rent owed could be deferred or any future income years. The Determination arises from the impact of COVID-19 pandemic.


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