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.
- Deferred sales model (Treasury): on 10 December 2020 Parliament passed the Financial Sector Reform (Hayne Royal Commission Response) Bill 2020, which included the establishment an industry-wide deferred sales model (DSM) for add-on insurance in response to the recommendations of the Hayne Royal Commission. The DSM will be effective from 5 October 2021. Under section 12DX of the Australian Securities and Investments Commission Act 2001, a class of add-on insurance products may be provided an exemption through regulations. An exemption may be subject to conditions. Treasury has now released a consultation paper which invites stakeholders to provide evidence for any classes of add-on insurance products — aside from CTP and travel insurance, which will be exempted anyway — that represent a very high level of consumer value where it would not be appropriate that they be captured by the deferred sales model. The consultation finishes on 15 February 2021.
- Licensing debt management firms (Treasury): On 25 September, the Treasurer announced a suite of reforms to Australia’s consumer credit laws to facilitate more timely access to credit for small businesses and consumers, whilst retaining and strengthening a number of consumer protections. An element of the reforms is protecting consumers from the often predatory practices of debt management firms by requiring them to hold an Australian Credit License when they are paid to represent consumers on matters related to credit activities. In short, The National Consumer Credit Protection Amendment (Debt Management Services) Regulations 2021 (the Regulations) prescribe a new type of ‘credit activity’ for the purposes of section 6 of the NCCP Act, which will require providers of debt management services to hold an ACL and meet the ongoing obligations imposed on credit licensees. These obligations include amongst other things, a requirement to meet the ‘fit and proper person’ test, and to undertake their activities ‘efficiently, honestly and fairly’. Licensees are subject to general conduct obligations and are required to be members of the Australian Financial Complaints Authority (AFCA). A great development to curtail rogue operators, to my mind, especially when the economy is struggling from COVID-19. The draft legislation is here.
- Climate disclosure (UK FCA): one I picked up a little late — the UK FCA has published a Policy Statement and final rule and guidance promoting better climate-related financial disclosures for UK premium listed commercial companies. Companies will be required to include a statement in their annual financial report which sets out whether their disclosures are consistent with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD), and to explain if they have not done so. The rule will apply for accounting periods beginning on or after 1 January 2021, meaning the first annual financial reports subject to this rule would then be published in spring 2022. Expect this to land in Australia, before long…
- Relief application (ICA): as a result of regulatory relief given to Australia Post by the Government (which gave regulatory relief to temporarily adjust Australia Post’s Performance Standards to reflect the operating constraints and limitations that have resulted from COVID-19), ASIC has issued a no-action position in relation to breaches of the following provisions of the Corporations Act 2001 (Corporations Act) and Corporations Regulations 2001 (Corporations Regulations): section 941D of the Corporations Act — the requirement to provide a Financial Services Guide within five business days of advice being provided in time-critical circumstances; section 1012G of the Corporations Act — the requirement to provide a Product Disclosure Statement within five business days of a product being issued in time-critical circumstances; and, regulation 7.9.15C(5)(b)(i) of the Corporations Regulations — the requirement to provide a document containing dollar disclosure within five business days of a general insurance product being issued. This no-action position applies in certain circumstances and subject to the conditions outlined in ASIC’s letter to the ICA here.
- Vatican (AUSTRAC): AUSTRAC has drastically reduced the sum of money it says was sent from the Vatican to Australia, the Vatican says, after it earlier reported a huge figure that raised suspicions of money laundering. The joint Vatican-Australian review showed only $9.5 million was transited between 2014 and 2020, a small portion of the $2.3 billion originally reported by AUSTRAC in December 2020. The Vatican contested the huge figures in December and asked the Australian financial intelligence unit, known as AUSTRAC, to review its calculations. Cardinal George Pell, who was the Vatican’s treasurer from 2014 to 2017 told Reuters: “I was relieved to hear that billions were not laundered through the Vatican while I was head of the Secretariat for the Economy”.
Thought for the future: during the licensing process from ACLs and AFSLs, I have recently noticed ASIC asking queries about how prospective licensees are handling COVID-19. Perhaps, inspired by the UK, in future they will ask queries about how prospective licensees will handle climate-change related challenges?