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.
- Enforcement priorities (ASIC): ASIC has provided further information to its update on 23 March, in which it said it would defer key internal actions e.g. the new RG 165 — complaints handling. ASIC has said that going forward it will focus on areas where there is the risk of significant consumer harm, serious breaches of the law, risks to market integrity and time-critical matters. It has also said that maintain its enforcement activities and continue to investigate and take action where the public interest warrants it to do so against any person or entity that breaks the law. It has not provided information, like the ACCC, that indicates it will be more lenient in terms of enforcement activity e.g. with document requests. ASIC has created a hub recording its actions in dealing with COVID-19, which you can access here. It has a little bit of additional information for particular market segments. For example, insurers, in relation to whom it states: ‘ASIC encourages fair and efficient insurance claims handling. ASIC expects firms involved in handling insurance claims to act with the utmost good faith. ASIC expects industry to communicate clearly and accurately to customers about their cover recognising the changing situation they may be facing.’ On the whole, the information is in my view not all that substantive and there is more than can be done to provide regulatory relief, including issuing reasonably confined ‘no action’ letters due to disruption caused by COVID-19. Or lending ASIC’s considerable weight to the deferral of key Treasury reforms e.g. breaching reporting and FAR. My information is that there is (rightly) a lot of lobbying happening; watch this space.
- Insurers working together (ACCC): the competition regulator continues to lead the charge with proactive relief measures — insurance companies and brokers will be able to work together to implement COVID-19 relief measures for certain small businesses following the ACCC’s granting of interim authorisation to specified insurance companies. Existing eligible business customers suffering hardship as a result of the COVID-19 pandemic will be able to defer their insurance premium payments for up to six months. Eligible business customers will also be refunded unused premiums for any insurance policy they need to cancel as a result of the pandemic, and will not be charged administration or cancellation fees if they do. The same applies for travel insurance premiums. This will free up resources that they can otherwise dedicate to dealing with the COVID-19 disruption.The ACCC authorisation allows participating insurance companies to discuss and work together on ways to effect the above outcomes. You can read the now-published application for relief under s. 88(1) of the Competition and Consumer Act 2010 (Cth) here. ACCC Chair Rod Sims has commendably said that “Many small and medium-size Australian businesses are experiencing unprecedented financial hardship due to the COVID-19 pandemic, but need to maintain essential insurance protections, in some cases in order to be able to continue to operate. There is a clear and urgent need for these measures…We have received a number of urgent formal requests for authorisations from many sectors of the Australian economy. The ACCC stands ready to grant interim authorisations quickly when they are in the public interest.” (Emphasis added)
- Prudential licenses (APRA): the prudential regulator has written to applicants for new banking or insurance or superannuation licences to advise that it is temporarily suspending issuing new licenses for at least six months in response to the economic uncertainty created by COVID-19. APRA has stated that: ‘Experience has shown that it is challenging for new entrants to succeed even under normal economic conditions, which is why APRA does not consider it prudent to license APRA regulated entities at this time.’ You can access APRA’s letter here. I understand the rationale, thought it does feel somewhat paternalistic…
- Financial advisers (ASIC): the conduct regulator has released a special COVID-19 information sheet for financial advisers and advice licensees. It is quite a useful guidance tool in terms of the actions that ASIC is taking on the advice side and in covering frequently asked questions. It records that ASIC is delaying work on life insurance advice and grandfathered conflicted remuneration. ASIC will not be asking for client files from advisers or data from product issuers at this time. (Product issuers are expected to turn off their arrangements by the start of next year though.) ASIC will also allow additional time to respond to ASIC notices in this area, and it is also giving advisers more time to respond to the currently outstanding CP 329 information paper on advice fee consents and independence disclosures. In terms of the FAQS, they cover issues such as how advisers can provide new advice and annual reviews in the current environment e.g. SOAs can be done electronically and that FSGs and SOAs can be delayed in time-critical cases. ASIC has also reinforced the need to maintain oversight over the advice that representatives of licensees are providing, stating ‘As difficult as the operating environment currently is, advice licensees must remain focused on meeting their general obligations. You should review existing measures and adapt processes and procedures as required’. Interestingly, in terms of life insurance, ASIC has recommended caution about recommending replacement cover at this time i.e. as it may contain pandemic exclusions.
- Responsible entities (ASIC): ASIC has sent a letter to responsible entities of registered managed investment schemes reminding them about their fundamental duties and legal obligations to members as they face the market volatility, disruption and other challenges associated with COVID-19. That is, they must comply with the law, they have general licensee duties i.e. 912A and they must exercise their powers and carry out their duties in the best interests of scheme members. ASIC has also said that it expects them to actively manage scheme liquidity e.g. watching levels of redemptions and applications for interests. Should a scheme become non-liquid, ASIC has powers to grant hardship relief and rolling withdrawal relief on a case-by-case basis — ASIC has encouraged responsible entities to contact it in those circumstances. You can read the letter here, which is a pretty clear signal that ASIC is worried about many MIS’ liquidity reserves.
Thought for the future: there is a lot of information emanating from policymakers about measures being rolled out to combat the economic effects of COVID-19. Some of that information, if communicated in the wrong way, could amount to ‘financial advice’ for which is an AFSL is required. Case in point are real estate agents communicating with renters about accessing their superannuation early to make rental payments, which sparked a letter from ASIC warning about the giving of unqualified advice (which was the subject of some attention at the recent Parliamentary Joint Committee on Corporations and Financial Services). Conveying factual information is fine, giving a recommendation is illegal — a fine distinction but important to remember in the current information-heavy environment.
Do you think I overlooked something or would like more information? If so, please send me a message! On a personal note, I hope that you are keeping safe and well this Easter.
(These views are my own and do not constitute legal advice. Photo credit Tom Wheatley)