Australian regulators weekly wrap — Monday, 2 September 2019



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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  1. Class actions / consumer protections: starting somewhat tangentially this week, albeit with more regulatory enforcement activity there are inevitably more class actions, Justice Parker of the NSW Supreme Court recently refused to approve a solicitors’ costs and a common fund order (where the Court orders all class action group members to pay a portion of any judgment or settlement sum to the litigation funder) in a class action against KPMG. That in itself is not significant, as common fund orders are rightly being subject to increasing judicial scrutiny-including through the use of independent contradictors to advise the court as to fairness or otherwise of the commission sought — what is significant is this passage at [99]: “It is sufficient to say that the funding agreements contain terms which are (or are arguably) in [the funder’s] favour, and that this gives rise to questions about the application of consumer protection legislation (within which I would include the Contracts Review Act 1980 (NSW))” (Emphasis added) The cited legislation protects against unfair provisions in contracts and is a very interesting and novel approach to approaching common fund orders. An area to watch closely in future…
  2. ASIC’s corporate plan: ASIC released its corporate plan for 2019 to 2023. It is a worthwhile read (my pick of the week), albeit most of the information has already made it to the market e.g. establishment of the Office of Enforcement to centralise decision-making and drive “Why not litigate?”. Some highlights include that ASIC’s №1 priority is “High-deterrence enforcement action” and that it sees poor design and inappropriate sale of investment / protection products and poor governance, culture and lack of accountability as key drivers of unacceptable outcomes. Expect ASIC to continue to wield its new product intervention power, and BEAR when it comes into play, considerably. Also interesting was ASIC’s focus on investment in data and technology tools to conduct its activities more effectively and the scaling-up it continues to undertake in the enforcement space — about 72% of ASIC’s resources will be dedicated to enforcement and supervision in 2019/20.
  3. APRA’s corporate plan: APRA too released its corporate plan for 2019–2023. Again, most of the information has already made it to the market (and it is arguably a more abstract report than ASIC’s one). Of note is that, like ASIC, APRA plans to focus on outcomes for superannuation members, plans to focus on cyber resilience of organisations (a good thing after the recent Glencore v ATO decision!) and “will seek to transform governance, culture, remuneration and accountability (GCRA) across APRA-regulated institutions’ management of non-financial risks. APRA will be ‘constructively tough’ with regulated institutions where practices fall below prudential expectations.”
  4. More on APRA: Wayne Byres, APRA’s Chairman, delivered a speech to the Risk Management Association in which he stated that, among other things: APRA will be acting more forcefully than in the past; climate change risks are a focus, including climate-related disclosures (and these considerations are a necessary part of part of fulfilling directors’ duties); BEAR is a core component of APRA’s regulatory response to lift governance, culture and accountability; APRA is dedicating more supervisory resources to governance (CPS510) and risk management (CPS 220) issues.
  5. Mortgage brokers: on the heels of the Treasurer’s introduction of the exposure draft bill for mortgage brokers’ best interests duty and remuneration reforms (see last week’s update), ASIC has released research (Report 628) which sets out that consumers expect mortgage brokers to find them the “best” loan (Finding 1) and that mortgage brokers can be inconsistent in the way they present options to potential borrowers (Finding 4). One in ten consumers also said they were struggling to meet repayments (Finding 10). In summing up, in what is a now-familiar theme of piling pressure on the broking (and financial advisory) industries, ASIC Commissioner Hughes stated: “ASIC strongly supports the recent Government announcement to enact a best interests duty for mortgage brokers. Importantly, the implementation of such a duty will align the role of brokers to the reasonable expectations of consumers”

Do you think I overlooked something or would like more information? If so, please send me a message!

(These views are my own and do not constitute legal advice. Photo credit Tom Wheatley)

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