Australian regulators weekly wrap — Monday, 14 October 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.

Follow me here or connect with me on LinkedIn if you would like to receive these alerters or if you would like any further information.

  1. UK / US data sharing (international): the US and UK have entered into the U.S.-UK Bilateral Data Access Agreement, which effectively gives law enforcement authorities from each of those countries the power to access data located outside their respective jurisdictions. For example, the US DOJ will have the power to access data directly from UK communication services providers (provided there is a court’s approval.) It is designed to expedite serious criminal investigations e.g. anti-money laundering, fraud and corruption offences by allowing the enforcement agency to bypass government approvals under the usual mutual legal assistance treaty requests and go directly to the data holder. It is a major capability upgrade! The law does not deal with encryption though and there are various conditions, most notably that the data cannot be used to target residents of other countries. The reason that this development has poll position in this week’s update? Because Australia and the US have just announced in a joint statement they are working on a bilateral treaty to give effect to the same arrangement: “Underpinned by Australian legislation yet to be introduced, a bilateral CLOUD Act agreement would enable Australian law enforcement to serve domestic orders for communications data needed to combat serious crime directly on U.S.-based companies, and vice versa.” (Emphasis added.)
  2. An “ambitious” agenda (APRA): Chairman Wayne Byrnes has delivered a speech to the Australian Banking Association outlining APRA’s ambitious agenda as set out in its Corporate Plan for 2019–23 which you may recall had four key outcomes: 1) maintain financial resilience and stability; 2) improve member outcomes in superannuation; 3) transform governance, culture, remuneration and accountability in financial institutions; and 4) improve cyber resilience across the financial system. Mr. Byrnes focused on item 3, outlining that APRA planned to achieve its goal by strengthening the prudential framework through more prescriptive rules around remuneration, updates to CPS 510 Governance and CPS 520 Fit and Proper (and reviewing CPS 220 Risk Management) and “…working closely with the Treasury and ASIC to deliver on the Government’s ambitious timetable” for BEAR including to “…encapsulate conduct-related matters as well” within that regime. (A statement which makes me suspect we will receive little consultation time again.) APRA also plans to expand its supervisory team focusing on this area to at least 20 individuals, invest in cutting edge regulatory tools e.g. natural language processing analytics and undertake new forms of reviews / investigations to focus on these particular areas e.g. self-assessments and partnering with external experts. Finally, it plans to share more of its insights publicly stating that “…at the very least we foresee routinely making public reports on all thematic reviews and the risk governance self-assessments … insights from our risk culture deep dives, and, wherever possible, reports from Prudential Inquiries and similar investigations”. A big speech, and my top read for the week!
  3. Self-managed super funds (ASIC): ASIC has publicly called for SMSF investors to consider the downsides of the strategy. In particular, for those individuals who will have a low fund balances i.e. under $500K or who want a simple superannuation solution, particularly if they have a low level of financial literacy or limited time available to manage their affairs. To assist individuals in making their decision about whether to invest in an SMSF -as at 30 June 2019 there were 599,678 SMSFs in Australia holding nearly $748 billion in assets – ASIC has developed quite an informative and user friendly fact-sheet.
  4. Pre-insolvency advisers (ASIC): two pre-insolvency advisers have pleaded guilty to dealing in the proceeds of crime following an ASIC investigation. In short, the advisers issued fictitious invoices through entities they controlled to a failing company, Cap Coast Telecoms, which duly paid the invoices to the the tune of $743,050. That sum was then transferred by the pre-insolvency advisers to the director of Cap Coast Telecoms or his associates. Cap Coast Telecoms was then wound up in insolvency leaving many creditors behind. The pre-insolvency advisers each pleading guilty to breaching 400.4(2) of the Criminal Code Act (Cth) 1995, for intentionally dealing in proceedings of crime. The director is facing the same charge and 10 counts of breaching his directors’ duties. An action that has been welcomed by insolvency practitioners, it is worth remembering that phoenix activity of this nature is firmly in ASIC’s (not to mention the ATO’s) sights for the next four years as set out on page 26 of its Corporate Plan 2019–23.
  5. Financial adviser banned (ASIC): ASIC has banned a financial adviser for seven years following a review of his advice files because it found that he did not adequately investigate his clients’ superannuation and insurance arrangements (in some cases he recommended very high levels of insurance cover compared to his clients’ income), and instead used templated strategies. ASIC also found that the adviser, who has the right to appeal to the AAT for a review of decision, failed to provide statements of advice that were clear, concise and effective to all his clients. ASIC Commissioner Danielle Press said: “Financial advisers providing personal advice are required by law to act in the best interests of their clients. ASIC expects advisers to take into account their clients’ personal circumstances, needs and financial goals to ensure that the advice they provide is appropriate.” (Emphasis added.)
  6. Bonus item: a US defamation claim brought by an employee whose company identified him as a “significant and unacceptable compliance risk” in connection with a US Foreign Corrupt Practices Act investigation has failed. The US Seventh Circuit Court found “The inability to prove the statement false demonstrates that it is a statement of opinion, beyond the reach of defamation law.” A very interesting (and unusual) read!

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)

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: