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.
- Banking Code (ASIC): ASIC has approved a variation of the Banking Code of Practice from 1 July 2020, in the form of a special note. The variation, as suggested by the Australian Banking Association, involves the insertion of a ‘Special Note’ into the Code to allow for special application of specified Code provisions until 1 March 2021. The ABA proposed the variation due to the unique external environment caused by COVID-19. The two changes provide that: a) banks may not always be able to meet the timelines for customer communication outlined in some provisions of the Banking Code of Practice; and b) a bank’s obligations when lending to small business customers, to engage in a fair, reasonable and ethical manner, and to exercise the care and skill of a diligent and prudent banker, will be informed by the circumstances and effects of COVID-19 generally. To me it is a sensible move (and one that may assist in later AFCA disputes). The various industry codes have become more strict, as the regulatory environment has morphed post-Hayne, with the the result they contain a lot more time-based requirements than the overarching legislation. In the midst of COVID-19, some of these timelines are naturally going to come under pressure. Now to see whether other industry sectors will follow the same course e.g. ICA and the General Insurance Code of Practice.
- Consumer data right (Legislation): The Consumer Data Right or ‘open banking’ commenced on 1 July 2020. Customers of the Big Four banks will be able to request that their data from deposit and transaction accounts and credit / debit cards should be shared with accredited third parties. From 1 November 2020, information from from home, investment and personal loans, and joint accounts will be capable of being shared. Other approved ADIs will join over the next year. Entities collecting / receiving CDR data must be accredited by the ACCC, and comply with the associated regulations. Third party non-ADI entities can apply for accreditation; many are consider applying for accreditation now to unlock the benefits that come with the additional consumer information.
- Climate reporting (UK): far afield, but interesting and relevant nonetheless — the UK Climate Financial Risk Forum (CFRF) has published a guide written by industry for industry to help firms approach and address climate-related financial risks. The novel guide provides practical recommendations to firms of all sizes on disclosure of climate-related financial risks; effective risk management; scenario analysis, and opportunities for innovation in the interest of consumers. The key areas it encourages financial services firms to focus on are: a) risk management: by appropriately embedding climate-related financial risk into its governance and risk management processes, firms can make informed business decisions and improve their resilience; b) scenario analysis: by appropriately modelling and considering a range of possible scenarios, a firm can better understand and manage future risks today, whilst capturing opportunities to support the transition to a net-zero carbon economy; c) disclosures: by making effective climate-related financial disclosures, a firm can improve transparency thereby helping the market appropriately assess the true future value of assets; d) innovation: by developing novel products, services, policies and approaches, a firm can adapt its business to respond to the potential impacts of climate change, benefit consumers and deliver the change required to meet climate goals. Climate change reporting has been a large theme in Australia in recent years (see here for more detail), so this interesting guide will not doubt be useful to many Australian entities seeking guidance on disclosure, etc.
- Whistleblowing (ASIC): ASIC has released a new information sheet to help companies, company officers and company auditors understand and comply with their obligations under the corporate whistleblower protection regime. It is a useful step from the conduct regulator, as the Corporations Act 2001 (Cth) provides protections for whistleblowers e.g. the right to confidentiality, they are protected from reprisals, and they are protected from legal action for reporting their concerns. Whistleblowers can access these rights and protections by reporting their concerns to a company officer or company auditor, and the information sheet is geared towards helping those parties to understand their obligations and handle whistleblower disclosures in line with the requirements of the regime. My top read for the week, INFO 247 also provides guidance on obtaining consent from whistleblowers to disclose their identity if required for investigations (always very tricky!), and how to address any employment issues involving a whistleblower while also handling their disclosure. Overall, I think that ASIC has done a decent job of conveying its expectations around the revamped corporate whistleblower regime, including with this additional guidance. Time will tell how the regime will play out in terms of the quality of information that ASIC is hoping to receive on corporate misconduct…
- Red tape report (ASIC): ASIC’s has released its latest red-tape report Overview of decisions on relief applications (October 2019 to March 2020) (REP 664), which outlines decisions on relief applications. During the report period, ASIC granted relief from provisions of the Corporations Act 2001 (Cth) or the NCCP in relation to 619 applications. Usefully, the report also provides examples where ASIC has exercised, or refused to exercise, its exemption and modification powers under the Corporations Act. For example, ASIC considered whether to grant licensing relief to two entities of a corporate group which sought the relief to allow the financial advisers of an AFS licensee to continue to provide advice following their transfer to an unlicensed entity, which was not a related body corporate of the licensee. ASIC refused, including as it did not consider there was a net regulatory benefit, and that the regulatory detriment of granting the relief was minimal and clearly outweighed by the commercial benefit.
Thought for the future: applications for relief from particular financial services requirements appear to be on the increase,which is understandable in the environment caused by COVID-19. When faced with onerous regulatory requirements, one consideration should always be seeking relief from ASIC if at all possible. There is a goldmine of information in ASIC’s reports like the one covered at  above which can guide actions in this regard!
(These views are my own and do not constitute legal advice. Photo credit Tom Wheatley)