Australian regulators weekly wrap – Monday, 11 November 2019
Keeping on top of the latest financial services regulatory & compliance trends?
Investing time in your professional development within a rapidly changing financial services industry is challenging. To meet that challenge, the Australian regulators weekly wrap is designed to keep you at forefront of your practice by quickly setting out the top 5 developments from the past week, analysis and practical considerations for the future.
- Freezing orders (ASIC): the corporate regulator has obtained freezing orders against a financial advisor Ross Andrew Hopkins, QWL and QWL Asset Management from dissipating their assets and an undertaking that they will not provide financial services to clients without seeking prior approval from ASIC. The action relates to an ongoing investigation that ASIC is conducting into these parties around their alleged failure to assist the Australian Financial Complaints Authority to resolve client complaints. The move strikes me as interesting from the point of highlighting ASIC’s hawkishness – obtaining freezing orders during an investigation is rare – and growing role AFCA is playing in the financial services framework.
- Superannuation (ASIC): ASIC has commenced action in the Federal Court in South Australia against Tidswell Financial Services Ltd (Tidswell), an AFSL holder and superannuation trustee, and various related promoter entities (and its director), in relation to the promotion of the MobiSuper Fund. In short, ASIC is alleging Tidswell (and the AFSL holder for one of the promoter entities) failed to do all things necessary to ensure the financial services covered by its AFSL were provided efficiently, honestly and fairly. (More s. 912A action!) ASIC also alleges that both Tidswell failed to adequately monitor the promotion of the Fund through a purported ‘general advice model’ that had insufficient regard for consumers’ best interests. It claims the promoter made misleading claims about fee savings and equivalent insurance cover if consumers joined the Fund and provided personal advice that was not in consumers’ best interests. Two things are interesting to me: first, the clear continuation of a focus on superannuation firms in line with ASICs strategic goals. Second, the cooperation with APRA – the prudential regulator has supported ASIC with its investigation and has provided it with a delegation of certain functions and powers under the Superannuation Industry Supervision Act 1993 (Cth). On the heels of the APRA’s unsuccessful IOOF action, this one will be really interesting to watch – you can read the concise statement here.
- Responsible lending (ASIC): At the FBAA Challenge the Future conference in the Gold Coast on 8 November, Richard McMahon, a senior manager in the credit, retail banking and payments division at ASIC has said that the hotly anticipated updated RG 209 should be released by the end of the year. He is also quoted (Advisor, 12 / 11) as saying: “what we’re thinking about now is continuing to provide principles-based guidance with content and structure changes, to give more clarity about what ASIC considers important, and to give you some examples…This could include a more expressed description of the principles [that] licensees should consider when developing their compliance processes, a stronger focus on the purpose of the obligations and what licensees should seek to achieve, and a shifting of the focus away from the term scalability to more direct guidance about what circumstances licensees should consider when deciding what information gathering steps are reasonable.”
- Superannuation data (APRA): APRA has launched a multi-year project to upgrade the breadth, depth and quality of its superannuation data collection. The project will make it easier to scrutinise and reliably compare fund and product performance. Deputy Chair Helen Rowell said APRA will use the insights gained from a more complete and granular data collection to sharpen its supervision priorities and drive better industry industry practices. The Phase 1 Discussion Paper and the first topic paper on RSE Structure and Profile can be read here.
- Modern slavery (Legislation): the Australian Council of Superannuation Investors (ACSI) and the Responsible Investment Association Australasia (RIAA) have developed a best-practice guide to reporting under Australia’s Modern Slavery Act. The new Act has requirements for organisations in reporting the risks of modern slavery in their operations and supply chains. The ACSI/RIAA guide provides information for investors on how to incorporate investments into their modern slavery reporting and meaningfully address modern slavery risks. My top read for the week, it is an excellent work product and can be accessed here. Under the new legislation, for Australian corporations, the first reporting year will be 1 July 2019–30 June 2020 with the reports due by 31 December 2020. In my experience. implementing modern slavery frameworks can take more time than expected, so businesses who have not started to meaningfully grapple with the incoming regime should start now.
Thought for the future: in London this week and speaking to former colleagues about current trends and past matters, it strikes me that ASIC’s enforcement cooperation with APRA is overdue. The UK PRA and FCA – whom our regulators are quite close with – regularly cooperate on large enforcement investigations, so my sense is that we will see more of this in Australia in the coming years and it will throw up new challenges for dual regulated entities.