ASIC remakes sunsetting legislative instruments on takeovers, compulsory acquisitions and relevant interests

On 28 September, ASIC stated it remade seven legislative instruments relating to takeovers, compulsory acquisitions and relevant interests. These instruments were due to automatically repeal and cease operation (‘sunset’) on 1 October 2023 if not remade.

The relief is contained in the following seven legislative instruments:

• ASIC Corporations (Changing the Responsible Entity) Instrument 2023/681;
• ASIC Corporations (Takeover Bids) Instrument 2023/683;
• ASIC Corporations (Compulsory Acquisitions and Buyouts) Instrument 2023/684;
• ASIC Corporations (Bidder Giving Substantial Holding Notice) Instrument 2023/685;
• ASIC Corporations (On-Sale Disclosure Relief for Scrip Bids and Schemes of Arrangement) Instrument 2023/686;
• ASIC Corporations (Warrants: Relevant Interests and Associations) Instrument 2023/687; and
• ASIC Corporations (Replacement Bidder’s and Target’s Statements) Instrument 2023/688.

ASIC states that the relief embodied in the Instruments is on substantially the same terms as the sunsetting instruments, with the exceptions described in its media release.

APRA revokes superannuation standards on derivative financial instruments

On 10 October, APRA released a letter to all registrable superannuation entity licensees on the revocation of certain superannuation standards.

The letter states that APRA revoked Reporting Standard SRS 534.0 Derivative Financial Instruments (SRS 534.0) on 26 September 2023.

APRA states the letter follows APRA’s Response Paper to consultation on Superannuation Data Transformation (SDT) Phase 2, which was released on 29 August 2022. The paper outlined the next steps for pre-SDT reporting standards that overlap with Phase 1 reporting standards to reduce duplicate reporting from industry.

APRA consults on increased transparency of superannuation fund expenditure

On 10 October, APRA announced it is consulting on proposals that would significantly increase visibility of how superannuation members’ money is spent and invested.

APRA has written to superannuation trustees inviting their feedback on its plans to publish total fund expenditure and expanded asset allocation data by mid-2024.

APRA is initially proposing to publish:

• total expenses for the industry by category and by internal, related outsourced and non-related outsourced arrangements for administration and operating expenses and for investment expenses;
• total expenses at individual fund level by category, including expenditure for marketing and sponsorships, industrial bodies, related parties, director and executive remuneration, and political donations by payee or service provider;
• total expenses with the name of the service provider where the provider is a promoter (such as a third party that receives a benefit for marketing a fund); and
• additional aggregated asset allocation data for fund investments in property and infrastructure, alternative strategy funds, listed equity and private equity. APRA will seek trustee feedback on publishing the data at an individual fund level as well.

Treasury consults on payday superannuation

On 9 October, Treasury released a consultation paper on a proposal to require employers to pay their employees’ superannuation guarantee entitlements on the same day that they pay salary and wages.

The consultation paper, Securing Australians’ Superannuation: Budget 2023-24, seeks input from stakeholders on the policy and legislative design of the Securing Australians’ Superannuation package.

In commenting on the paper, the Assistant Treasurer and Minister for Financial Services, Stephen Jones, stated that the proposed reform will address the issue of unpaid superannuation by giving employees better visibility of their retirement savings.

Consultation closes on 3 November.

APRA publishes updates to the Superannuation Data Transformation frequently asked questions

On 4 October, APRA published two new and three updated frequently asked questions on the Superannuation Data Transformation project. APRA has also made updates to the worked example on reporting investments under SRS 550.0 Asset Allocation, including providing further examples of reporting on derivatives.

Government consults on draft superannuation tax concessions legislation

On 3 October, the Government released exposure draft legislation and explanatory materials in relation to certain superannuation tax concessions announced in the 2023-24 budget.

Among other things, the draft legislation seeks to reduce tax concessions for individuals with a total superannuation balance above $3 million by imposing an additional 15 per cent tax on certain earnings under a new Division 296 of the Income Tax Assessment Act 1997.

In announcing the release of the draft legislation, the Treasurer, Jim Chalmers, and Assistant Treasurer and Minister for Financial Services, Stephen Jones, jointly stated that the proposed reform aims to make the system fairer and more sustainable, and will affect only a handful of people.

Consultation closed on 18 October.

APRA consults on proposed amendments to the prudential standard on member outcomes

On 21 September, APRA announced plans to update Prudential Standard SPS 515 Strategic Planning and Member Outcomes (SPS 515) to enhance member outcomes in superannuation in areas such as trustee expenditure of member funds, management of financial resources and the transfer of members in and out of funds.

APRA states that its proposed reforms to SPS 515 aim to:

• ensure expenditure requirements better align with the best financial interest duty and, for the retirement phase, to support the retirement income covenant. Under the reforms, trustees must be able to justify the purpose of expenditure relating to business operations;
• lift the bar on trustees’ management of financial resources. The draft SPS 515 seeks to ensure trustees maintain a prudent approach in areas such as fee setting and managing member-funded reserves; and
• improve management of risks to members being transferred across funds.

Additionally, following a review of SPS 515 and associated guidance, APRA has decided to retire its guidance circular on the sole purpose test. APRA has no plans to issue new guidance.

A discussion paper and draft Prudential Standard and related material can be found here.

Submissions are due by 21 December.

APRA and ASIC release consultation on general insurance and life insurance data collections

On 12 October, APRA and ASIC published two joint discussion papers on plans to enhance the data collections for the life and general insurance industries.

APRA and ASIC state they plan to collect more granular data as part of the Insurance Data Transformation (IDT) project, which will enable regulators, policymakers and insurers to undertake a more comprehensive assessment of the risks facing the industries.

The discussion papers are available here.

Submissions are due by 22 December.

APRA publishes AASB17 updates to the Insurance frequently asked questions

On 11 October, APRA published four new updated frequently asked questions (FAQs) on the Australian Accounting Standards Board (AASB17) collections, which are available here.

Transition of Life Insurance Code of Practice

On 27 September, the Financial Services Council announced that responsibility for the Life Insurance Code of Practice (Life Code) will transition to the Council of Australian Life Insurers (CALI), effective 29 September 2023.

CALI will assume responsibility for Life Code and become the primary point of contact for code-related matters for industry stakeholders, regulators and policy makers.

CALI’s media release about its on-going role in relation to the Life Code can be found here.

ASIC extends date for financial adviser registration requirement

On 20 September, ASIC announced that it is extending the date by which ‘relevant providers’ – financial advisers who provide personal advice to retail clients on relevant financial products (including time share advisers) – must be registered. Relevant providers will now need to be registered by 1 February 2024. The reason for the further extension is that the Treasury Laws Amendment (2023 Measures No. 1) Bill (the Bill) remains before Parliament.

A further extension to the registration requirement will allow additional time for:

• Parliament to consider the improvements proposed by the Bill;
• ASIC to assist the financial advice industry to understand and comply with the registration requirement by issuing regulatory guidance and conducting webinars; and
• AFS licensees to understand the registration requirement and to make necessary applications to register their relevant providers with ASIC.

Amendment to AML/CTF Rules for online gambling accounts

On 28 September, AUSTRAC announced that the AML/CTF Rules have been amended to strengthen the applicable customer identification procedures (ACIP) that apply to online gambling service providers.

AUSTRAC states the following:

• The special circumstances that previously allowed online gambling service providers to delay ACIP under section 10.4 of the AML/CTF Rules have been repealed.
• From 29 September 2024, all online gambling service providers must complete ACIP before creating an online gambling account or commencing to provide any designated service.
• Interim arrangements will be in place from 29 September 2023 to 28 September 2024 to give gambling services time to adapt their systems to accommodate this change, and these interim measures allow for some delay in special circumstances.

The amendments are made by the Anti-Money Laundering and Counter‑Terrorism Financing Rules (Online Gambling Services) Amendment Instrument 2023, which was registered on 26 September 2023.

RBA’s assessment of ASC Clearing and Settlement Facilities

On 9 October, the RBA released its 2023 Assessment of the ASX Clearing and Settlement Facilities.

The Reserve Bank of Australia states that its assessment assesses the performance of the ASX clearing and settlement facilities against RBA’s Financial Stability Standards. The RBA states ASX clearing and settlement facilities were rated as having ‘observed’ or ‘broadly observed’ most of the Financial Stability Standards. The RBA states it recognises there has been improved engagement and an increased commitment to transparency from the ASX.

The RBA, however, states it has assessed that the ASX clearing and settlement facilities ‘partly observed’ requirements under the Financial Stability Standards related to Governance, the Framework for the Comprehensive Management of Risks, and Operational Risk, and made a number of recommendations in response.

Treasury describes a review of continuous disclosure amendment laws

On 19 September, Treasury described a review of the 2021 amendments to the continuous disclosure regime will be undertaken by a reviewer.

Section 1683B of the Corporations Act requires the Minister to cause a review to be conducted of the operations of the changes made to the continuous disclosure regime by the Treasury Laws Amendment (2021 Measures No.1) Act 2021.

The terms of reference for the review are found here. In undertaking the review, the reviewer is required to consult with the public and invite submissions.

The reviewer is required to provide a report to the Government by 14 February 2024.

APRA seeks feedback on improving effectiveness of hybrid capital bonds

On 21 September, APRA announced it will be exploring options to improve the effectiveness of Additional Tier 1 (AT1) capital instruments for use in a potential bank stress scenario.

APRA states the AT1 capital instruments, often referred to as ‘hybrid’ bonds, are one of three types of capital that banks can hold to support their resilience and protect depositors.

APRA published a discussion paper on the challenges of using AT1 in an Australian context and called for feedback on a range of potential options to overcome them. APRA states it will hold discussions with industry on these options this year and, after considering this feedback, it plans to formally consult on any proposed changes to prudential standards or guidance next year.

Written submissions are due by 15 November.

APRA consults on updates to modernised Economic and Financial Statistics reporting standards and guidance

On 27 September, APRA released a consultation on its proposed changes to the Economic and Financial Statistics (EFS) reporting standards and guidance, drafted in conjunction with the ABS and RBA.

APRA, the ABS and RBA have also released a letter proposing to amend some inconsistencies found in Reporting Practice Guide RPG 701.0 ABS/RBA Reporting Concepts for the EFS Collection and Reporting Standard ARS 701.0 - ABS/RBA Definitions for the EFS Collection to align with the updated capital framework released in 2021. APRA, the ABS and the RBA are also consulting on changes to the EFS Priority Listing for Data Items.

A copy of the consultation letter, updated standard and guidance, and draft summary of the changes to the EFS Data Priority Listing can be found here.

Submissions are due by 6 November.

Treasury releases draft legislation reforming the Payment Systems (Regulation) Act 1998

On 11 October, Treasury released draft legislation and explanatory materials in relation to updating the Payment Systems (Regulation) Act 1998 with the aim of seeking to ensure regulators and government can address new risks related to payments as the provision of payments evolves and increases in complexity.

Treasury states the proposed updates include:

• expanding the definitions of ‘payment system’ and ‘participant’ to ensure the RBA has the ability to regulate new and emerging payment systems, such as digital wallet providers and ‘Buy Now Pay Later’ service providers; and
• introducing a new ministerial designation power that will allow particular payment services or platforms that present risks of national significance to be subject to additional oversight by appropriate regulators.

In announcing the proposed reforms, the Treasurer, Jim Chalmers, said the draft legislation is delivering a key element of the Government’s Strategic Plan for Australia’s Payments System.

Consultation closes on 1 November.

RBA, Bank of International Settlements and other banks launch cross-border payments project

On 5 October, the RBA announced its participation in ‘Project Mandala’, which explores the feasibility of encoding jurisdiction-specific policy and regulatory requirements into a common protocol for cross-border use cases such as foreign direct investment, borrowing and payments.

Project Mandala is a joint collaboration between the Bank for International Settlements Innovation Hub Singapore Centre, Reserve Bank of Australia, Bank of Korea, Bank Negara Malaysia, and Monetary Authority of Singapore, along with financial institutions, and seeks to ease the policy and regulatory compliance burden relating to cross-border payments by seeking to automate compliance procedures, providing real-time transaction monitoring and increasing transparency and visibility around country-specific policies.

RBA consults on enhancements to Australia’s debit card market

On 28 September, the RBA released The Australian Debit Card Market: Default Settings and Tokenisation: Conclusions Paper setting out the conclusions of its recent public consultation on options for further enhancing the competitiveness, efficiency and safety of Australia’s debit card market.

In announcing the Conclusions Paper, the RBA stated the key conclusions are the following:

• the Board decided that it will not continue to explore prohibiting the setting of a default routing network on dual-network debit cards;
• the Board, however, remains strongly supportive of merchants having the ability to choose their preferred debit card network through least-cost routing. The Board expects providers to make faster progress on enabling least-cost routing for merchants that could benefit from it; and
• the Board decided that, following further consultation with industry, the RBA will endeavour to publish high-level expectations on the tokenisation of payment cards by the end of 2023.

Government intends to regulate digital asset platforms

On 16 October, Treasury released a proposals paper in which it describes a proposed regulatory framework that seeks to address consumer harms in digital asset platforms.

Treasury’s Regulating Digital Asset Platforms: Proposal paper is accompanied by a factsheet. Proposals include licensing digital asset intermediaries and rules around structuring a digital asset facility including custodial and reporting rules.

In jointly announcing the proposed new regulatory parameters, the Treasurer, Jim Chalmers, and the Assistant Treasurer and Minister for Financial Services, Stephen Jones, stated that the government’s proposals have been designed to ensure they are consistent with other jurisdictions, adopt existing financial service laws as appropriate and create new bespoke obligations in the areas of highest risk.

We examine the impact of these proposals in our earlier article.

Consultation closes on 1 December.

ASIC releases its Annual Report

On 13 October, ASIC released its 2022-23 Annual Report. A copy of the report is available here on the ASIC website.

APRA releases its Annual Report

On 12 October, APRA released its Annual Report for the 2022-23 financial year. A copy of the report is available on the APRA website here.

ASIC remakes financial reporting legislative instrument

On 10 October, ASIC published that it has made ASIC Corporations (Financial Reporting by Stapled Entities) Instrument 2023/673. The instrument continues the relief previously provided under ASIC Class Order [CO 13/1050] Financial reporting by stapled entities, which was subject to sunsetting on 1 October 2023.

ASIC has assessed that ASIC Class Order [CO 13/1050] Financial reporting by stapled entities is operating effectively and efficiently, and continues to form a necessary and useful part of the legislative framework.

APRA and ASIC publish an information package about the Financial Accountability Regime

On 3 October, APRA and ASIC published an information package to support the financial services industry in implementing the Financial Accountability Regime (FAR).

The FAR imposes a strengthened responsibility and accountability framework for APRA-regulated entities in the banking, insurance and superannuation industries and their directors as well as their most senior executives. In doing so, the FAR aims to improve the risk and governance cultures of those financial institutions.

The information package comprises:

• the Joint Administration Agreement between APRA and ASIC setting out the framework within which the regulators will work together to administer the FAR; and
• a joint information paper providing guidance for ADIs on transitioning from the BEAR to the FAR, supported by the ADI accountability statement guidance and template.

The FAR will come into force for the banking industry on 15 March 2024 and for the superannuation and insurance industries on 15 March 2025.

ASIC calls on licensees to strengthen remediation procedures

On 25 September, ASIC released a statement calling on AFS licensees and credit licensees to ensure they remediate affected customers quickly and fairly, in line with ASIC’s guidance in Regulatory Guide 277 Consumer Remediation (RG 277).

ASIC states that it has recently reviewed the remediation policies and procedures of some large financial institutions to assess their implementation of RG 277, and concludes that it has identified gaps where some licensees’ policies and procedures were inconsistent with RG 277 and which could lead to poor outcomes for customers.

ASIC expects all licensees to align their remediation practices with the guidance set out in RG 277, and to consider the key findings from the review and make any necessary changes to their policies, procedures and practices.

ASIC releases annual licensing report

On 21 September, ASIC released its annual licensing report. Report 772 Licensing and professional registration activities: 2023 update outlines ASIC’s licensing and professional registration activities, discusses new and proposed changes to processes, and notes other ASIC work that affects licensees.