The Australian regulators weekly wrap is a weekly alerter which quickly sets out five noteworthy developments from the past week. It is designed to help you in keeping up to speed with what is happening in Australian financial services regulation.
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- Foreign licensing relief: ASIC released a consultation paper (CP 315) proposing to provide licensing relief i.e. from the need to hold an AFSL for foreign financial services firms providing funds management advice to Australian professional investors. ASIC decided against giving relief for situations of reverse solicitation i.e. where the investor seeks advice from the foreign adviser, citing lack of information / monitoring concerns. The new regime will affect the current exemptions in place and is narrower. Foreign firms who service — and intend to continue servicing — Australian clients are well advised to revisit their licensing requirements in light of what is proposed. Submissions on the consultation paper are required by 9 August 2019.
- Car insurance investigations: ASIC released a report somewhat amusingly entitled “Roadblocks and roundabouts” setting out its research that insurer investigations into car insurance claims suspected of being fraudulent are leading to poor consumer outcomes, including through excessive interview and documentation requirements. Metrics-wise, ASIC found that while only a small proportion of claims are investigated, for those that are over 70% of them are found to be valid. It has called for general insurers to implement better standards, improve written communication to consumers and also how claims are selected for investigation. ASIC has also flagged that the (recently reviewed) General Insurance Code of Practice could be further improved.
- Mortgage lending: in good news for personal borrowers, following consultation on Prudential Practice Guide APG 223 APRA announced that it no longer expects ADIs to assess home loan applications using a minimum interest rate of 7%. ADIs can instead utilise a revised interest rate buffer of 2.5% over the loan’s interest rate. (Though, of course, individual ADIs can and generally will impose higher serviceability thresholds.) Said APRA Chair Wayne Byres: “The changes being finalised today are not intended to signal any lessening in the importance APRA places on the maintenance of sound lending standards. This updated guidance provides ADIs with greater flexibility to set their own serviceability floors, while maintaining a measure of prudence through the application of an appropriate buffer that reflects the inherent uncertainty in credit assessments.”
- AFS applications: a busy week for ASIC on the licensing front — it released a new information sheet (INFO 240) to assist applicants on recent changes to its financial services licensing procedures. Most applicants will now need to provide additional information and documents as part of their application, focusing on the individuals running the business e.g. national criminal checks. Fitting in with the global regulatory zeitgeist of greater regulatory focus on individuals (e.g. US Yates Memo, UK SMCR, HK MIC, etc), ASIC stated that the new information will enable it “to ascertain whether it has reason to believe an applicant is likely to contravene its legislative obligations, including to deliver financial services ‘efficiently, honestly and fairly’ and to ensure that the responsible officers of a body corporate applicant are of good fame or character”.
- Responsible lending: ASIC’s unusual public hearings on responsible lending are set to take place in August 2019 in Melbourne and Sydney (you can read more about them in last week’s alerter). Writing in The Australian today, Commissioner Hughes has said that the hearings are “not about increasing requirements, but rather clarifying and updating our guidance” (expected before 2020) and that “this is an information-gathering exercise, not an inquisitorial pursuit or ‘grilling’ as some speculation as suggested. Attendees will be invited, not ‘hauled in’ involuntarily.” Hayne Royal Commission public hearing they may not be, however, these hearings will certainly attract a great deal of commentary.
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(These views are my own and do not constitute legal advice. Photo credit Tom Wheatley)