Financial Services in Focus – Issue 70

Instrument extending foreign financial services provider relief registered

On 2 August, ASIC announced that it is extending for a further 12 months the transitional relief for foreign financial services providers (FFSPs) from the requirement to hold an AFSL when providing financial services to Australian wholesale clients. The current transitional arrangements for ASIC’s sufficient equivalent relief and limited connection relief were due to expire on 31 March 2023.

To give effect to this, on 29 July the ASIC Corporations (Amendment) Instrument 2022/623 (Amendment Instrument) was registered. According to the Explanatory Statement, the Amendment Instrument preserves the effect of ASIC sufficient equivalence relief and limited connection relief for FFSPs until 31 March 2024, providing certainty for industry given the lapsing of the Treasury Laws Amendment (Streamlining and Improving Economic Outcomes for Australians) Bill 2022 (Bill). We have written about the Bill in our earlier Issue 63. The Amendment Instrument also delays the commencement of the ASIC Corporations (Foreign Financial Services Providers—Funds Management Financial Services) Instrument 2020/199 until 1 April 2024.

ASIC states that during the extended transitional period, it will consider new applications for individual temporary licensing relief, or new standard or foreign AFSL applications, from entities that cannot rely on the transitional relief.

ASIC issues first interim stop orders under DDO regime

On 28 July, ASIC announced that it has exercised its stop order powers under the design and distribution obligations (DDO) regime against three financial firms in response to deficiencies in the target market determinations (TMDs) for their products. According to ASIC:

• it issued an interim stop order to prevent a responsible entity from distributing units where the TMD included two categories of retail investors for whom investment would not be consistent with their likely objectives, financial situation and needs; and
• it issued interim stop orders to prevent two companies from distributing shares to retail investors where there was no TMD available.

ASIC also states that it:

• has targeted surveillances underway on issuers’ and distributors’ DDO compliance;
• will continue to look at TMDs that are defective, not publicly available or even made;
• will review how issuers interact with their distributors; and
• will monitor how issuers monitor and review consumer outcomes.

APRA consults on proposed enhancements to member outcomes prudential standard

On 1 August, APRA published for public consultation a discussion paper setting out proposed updates to APRA Prudential Standard SPS 515 Strategic Planning and Member Outcomes (SPS 515), as well as accompanying prudential guidance.

APRA states that it intends to release draft enhancements to the SPS 515 framework early next year for a further round of consultation.

Consultation on the discussion paper closes on 11 November.

APRA announces new superannuation data publications

On 25 July, APRA announced that it will launch a series of new superannuation data publications from September 2022. According to APRA, the publications represent a key milestone in APRA’s Superannuation Data Transformation project, and contain data captured under newly-introduced superannuation reporting standards.

APRA also published its response paper and additional materials in relation to its previous consultation on the confidentiality of data reported under the new superannuation reporting standards. For more information on the consultation, see our earlier Issue 63 here.

Treasury consults on proposed bill on faith-based superannuation products

On 20 July, the Assistant Treasurer, Stephen Jones, announced that the Federal Government is releasing for consultation draft legislation to adjust how faith-based super products are treated under the Your Future, Your Super performance test. The exposure draft legislation is available on the Treasury’s website.

According to the Treasury, the exposure draft legislation seeks to:

• require trustees to apply to APRA for faith‑based product status;
• subject faith‑based products to a supplementary test that considers their faith‑based investment strategy, if they fail the original test; and
• exempt faith‑based products from the consequences of failure if they pass the supplementary test.

Consultation closes on 16 August.

APRA publishes final investment governance prudential standard SPS 350

On 19 July, APRA announced that it has released the final APRA Prudential Standard SPS 350 Investment Governance (SPS 350), and APRA’s response to consultation on the exposure draft standard. The final materials follow APRA’s consultation conducted from September 2021 to February 2022, which we have written about in Issue 59.

The final standard, APRA’s response letter to industry, and non-confidential submissions are available on APRA's website.

ASIC publishes updated Financial Services and Credit Panel regulatory guidance and new ‘your rights’ infosheet

On 3 August, ASIC released new guidance about the Financial Services and Credit Panel (FSCP), including an update to Regulatory Guide 263 Financial Services and Credit Panel (RG 263) and the new Information Sheet 273 FSCP decisions: Your rights (INFO 273).

ASIC states INFO 273 outlines the rights of financial advisers affected by an FSCP decision, including how to make an application to vary or revoke FSCP decisions and how to seek an independent review of FSCP decisions.

ASX announces delay to CHESS replacement project

On 3 August, the ASX announced that there is a delay to the project schedule for the CHESS replacement project, and explained that it will engage Accenture to provide an independent review of the new CHESS application and identify necessary actions for the ASX to communicate a revised timetable. The ASX states that the go-live date for new CHESS will not be before late 2024.

On 3 August, ASIC and the RBA jointly announced that the regulators welcomed the independent review of the new CHESS application software. The regulators state that they will continue to closely monitor the ASX’s compliance with its clearing and settlement facility licence obligations, including additional licence conditions imposed in November 2021.

AUSTRAC consults on proposed amendments to IFTI report contents

On 27 July, AUSTRAC published for public consultation exposure draft materials proposing amendments to Chapter 16 of the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1) (Cth) (AML/CTF Rules).

AUSTRAC states it is proposing these amendments because SWIFT is migrating to the ISO20022 XML messaging format for cross border payments from November 2022, and the proposed amendments seek to facilitate international funds transfer instructions in the ISO20022 message format.

Consultation closes on 10 August.

AUSTRAC announces MOU with Nigerian Financial Intelligence Unit

On 26 July, AUSTRAC announced that it and the Nigerian Financial Intelligence Unit have signed a memorandum of understanding (MOU) for the exchange of financial intelligence.

APRA publishes updated capital framework guidance for ADIs

On 26 July, APRA announced that it has released the finalised prudential practice guides (PPGs) that accompany the final capital adequacy and credit risk capital requirements for authorised deposit-taking institutions.

APRA also stated that it is publishing an updated version of APRA Prudential Standard APS 113 Capital Adequacy: Internal Ratings-based Approach to Credit Risk and a response paper to submissions received during consultation on the bank capital reforms conducted in November 2021.

The materials are available on APRA's website.

Government announces review of the Reserve Bank of Australia

On 20 July, the Treasurer, Dr Jim Chalmers, released the terms of reference for the review of the Reserve Bank of Australia (Review) to be conducted by a panel of three independent experts, and announced the website for the Review. We have written about the Review.

According to the Treasurer, the Review will produce a final report with recommendations to the Federal Government by March 2023.

APRA publishes findings of latest climate risk self-assessment survey

On 4 August, APRA published the findings of its latest climate risk self-assessment survey conducted across the banking, insurance and superannuation industries.

The findings are set out in APRA’s Information Paper Climate risk self-assessment survey. The findings are based on a voluntary survey issued in March this year, to which 64 medium to large institutions responded, in relation to which APRA sought information about how APRA-regulated entities are aligning their practices with the expectations set out in Prudential Practice Guide CPG 229 Climate Change Financial Risks.

The information paper states that, overall, the survey responses present a picture of reasonable cross-industry alignment to APRA’s guidance on climate change financial risks.

CFR announces updated version of cyber resilience framework exercises

On 29 July, the Council of Financial Regulators (CFR) announced that it has released an updated version of the Cyber Operational Resilience Intelligence-led Exercises (CORIE) 2.0. According to the CFR, the CORIE framework has been developed to aid in preparation and execution of industry-wide cyber resilience exercises.

APRA consults on proposed operational risk management prudential standard

On 28 July, APRA announced that it is consulting on a new prudential standard designed to strengthen the management of operational risk in the banking, insurance and superannuation industries. APRA states that it proposes to introduce a new cross-industry APRA Prudential Standard CPS 230 Operational Risk Management (CPS 230), which will set out minimum standards for managing operational risk, including updated requirements for business continuity and service provider management. View the discussion paper and draft CPS 230.

APRA states that it expects to release the final CPS 230 early next year, before the new standard comes into force from 1 January 2024.

Consultation closes on 21 October.

AFCA publishes complaints data for FY22

On 26 July, AFCA published data in relation to complaints received by AFCA over the 2021-22 financial year. According to AFCA, there was a rise of 3% on the previous financial year.

ACCC announces CDR sandbox

On 22 July, the ACCC announced that it has launched the Consumer Data Right (CDR) sandbox. According to the ACCC, the CDR sandbox is a hosted environment that behaves and functions like the actual CDR ecosystem. View the CDR sandbox.

ASIC announces extension of reporting deadlines

On 22 July, ASIC announced that it will extend the deadline for unlisted entities to lodge financial reports by one month for balance dates from 24 June to 7 July (inclusive). This includes lodgement of full year and half-year financial reports, directors’ reports and auditor’s reports, compliance plan audit reports, and profit and loss and balance sheets (and other associated information) under Chapter 7.

Government announces increase in FIRB fees

On 22 July, the Treasurer, Dr Jim Chalmers, the Assistant Treasurer and Minister for Financial Services, Stephen Jones, the Minister for Housing, Minister for Homelessness and Minister for Small Business, Julie Collins, and the Assistant Minister for Competition, Charities and Treasury, Dr Andrew Leigh, jointly announced an increase in foreign investment fees and penalties on and from 29 July. The new fee schedule can be found on the Foreign Investment Review Board (FIRB).