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 of Practice (ABA): the Australian Banking Association has announced it has commissioned an independent review of the Banking Code of Practice. The Code is independently reviewed every three years. The 2021 independent review is being undertaken by Mike Callaghan AM PSM, and is being undertaken in consultation with consumer representatives, small business organisations and other stakeholders. The Terms of Reference outline the scope of the review e.g. it will consider the Banking Code Compliance Committee, and whether there is a need to adjust its duties and powers, including whether sanctions available are appropriate i.e. like exists in the insurance sector. A Consultation Note outlining some of the issues that will be covered in the review has been published, and the review will report by end November 2021.
- Complaints statistics (AFCA): Australians lodged more than 70,000 complaints with the AFCA in the past 12 months, leading to more than $240 million in compensation and refunds. Nearly 70 per cent of cases were resolved by agreement after AFCA brought the parties together (mainly, I suspect, because the FS firm wanted to avoid going to hearing), and that nearly 60 per cent of cases were resolved within 60 days. AFCA’s investigations into a range of systemic issues resulted in remediation payments to consumers totalling nearly $32 million in the past financial year. (The total serious contraventions and other breaches referred to regulators such as ASIC since 1 July 2020 were 36.) The consumer-centric language still (annoyingly to me for a body which is supposed to be impartial) exists in the update, but these statistics are well-worth consideration. My top read for the week, you can access them here.
- Litigation funding (ASIC): ASIC has released Consultation Paper 345 Litigation funding schemes: Guidance and relief (CP 345) to seek feedback on proposed guidance and relief for litigation funding schemes. It follows changes made in 22 August 2020, which required operators of litigation funding schemes to hold an AFS licence, and litigation funding schemes to be generally be subject to the managed investment scheme regime under the Corporations Act 2001 (Cth).The main ideas which I picked up from the consultation paper were that ASIC is proposing to grant relief from the equal treatment duty in relation to distributions of a settlement or judgment sum obtained in connection with a litigation funding scheme, and extend relief from the dollar disclosure provisions in relation to certain commercially sensitive information. Both are sensible changes.
- Alex (APRA): APRA has granted Alex Bank Pty Ltd a licence to operate as a restricted authorised deposit-taking institution and Alex Corporation Limited as a non-operating holding company, under the Banking Act 1959 (Cth). It is a rare and happy development for the banking sector, concentrated as it is — you can see just how concentrated by clicking here.
- ‘Greenwashing’ (ASIC): ASIC Commissioner Cathie Armour has warned of increasing ‘greenwashing’, which is where investment opportunities are presented as more socially friendly than they actually are. She stated that: ‘There is growing global unease about the risks of greenwashing of financial products — partly driven by a lack of clarity about labelling or a single generally accepted taxonomy in this area. This issue has been recognised by international regulators as well as the International Organization of Securities Commissions, which has established a Sustainable Finance Task Force that covers greenwashing and other investor protection concerns. ASIC is participating in this task force.’ Ms Armour warned of the potential for misleading and deceptive conduct, clearly signaling ASIC’s focus on this area, and noted that the potential to mislead can arise as a result of the product issuer being unclear on what standards they use to assess the product as environmentally or socially responsible; or, overstating green credentials that are not sufficiently reflected in their operations.
Thought for the future: 4 months until October 2021, when both the DDO and new breach reporting frameworks will commence. If you are an AFSL holder and haven’t commenced your preparations in earnest, now is the time!