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.
- Business interruption (APRA): the prudential regulator will require a number of general insurers to review the soundness of their risk management frameworks in light of recent issues with business interruption insurance by 30 November 2021. APRA has stated that lockdowns and other restrictions associated with COVID-19 have triggered a spate of potential BI claims, with many insurers exposed through policy wordings that had not kept up-to-date with changing legislation. The resultant legal uncertainty, and significant financial exposure for insurers, has raised concerns about the strength of insurers’ risk management frameworks in the prudential regulator’s eyes. APRA has published the letter (my top read for the week) and guidance material that supports the self-assessment exercise, and has urged non-participating insurers to consider whether a similar self-assessment would enhance their own risk management practices. For those insurers undertaking their FAR implementation, there will be considerable overlap here.
- External administration (ASIC): ASIC has updated Information Sheet 29 External administration — controller appointments and schemes of arrangements — most commonly lodged forms (INFO 29) to help external administrators, controllers and scheme administrators comply with their lodgement and publication requirements following the introduction of three new types of external administration since 1 January 2021. These are great resources — I really like the ALRC’s flow-charts on the disclosure and licensing regime, and now ASIC’s output here. The following three new flowcharts have been included in INFO 29 for ease of reference: Flowchart 2A — Liquidator in a creditors’ voluntary winding up (simplified liquidation process); Flowchart 14 — Restructuring practitioner of a company; and, Flowchart 15 — Restructuring practitioner of a restructuring plan for a company.
- Internal dispute resolution (ASIC): on 30 July 2020 new IDR standards and requirements were published in Regulatory Guide 271 Internal dispute resolution, which commence on 5 October 2021. The new guidance is much more prescriptive than Regulatory Guide 165 Licensing: Internal and external dispute resolution, which continues to apply to all complaints received before 5 October 2021. ASIC has now released internal dispute resolution reporting documents, which will be tested in a pilot involving financial firms from across relevant industry subsectors in late 2021. The reporting documents include a data dictionary and data glossary. The data dictionary sets out the information that financial firms will be required to collect and report to ASIC, while the data glossary provides explanations about the key terms in the data dictionary. ASIC has said that financial services firms should now consider how to map their own complaints systems to the data dictionary. Given the commencement of DDO, breach reporting & anti-hawking also in October 2021, that is good advice…
- Reference checking (ASIC): ASIC has made the ASIC reference checking and information sharing protocol that will give effect to the Financial Services Royal Commission’s recommendations to improve reference checking in the financial advice and mortgage broking industries. The ASIC Protocol sets out obligations for licensees to undertake a reference check and share information on an individual seeking to be employed or authorised as a financial adviser or mortgage broker. Helpfully, ASIC has also released Information Sheet 257 ASIC reference checking and information sharing protocol (INFO 257) which is a much quicker read!
- Anti-hawking (ASIC): quite a busy week for the corporate regulator — ASIC is also consulting on proposed updates to its guidance on the prohibition on the hawking of financial products. ASIC’s updated regulatory guide reflects the reforms to the anti-hawking regime under the Financial Sector Reform (Hayne Royal Commission Response) Act 2020, which is due to commence on 5 October 2021. These reforms consolidate the three existing hawking prohibitions, take a technology neutral approach, and incorporates for the first time a definition of ‘unsolicited contact’ — consumer consent given by a consumer must be ‘positive, voluntary and clear’. Stakeholders have until 17 August to provide feedback on CP 346, which is quite complicated in its application.
Thought for the future: in the UK debt packager firms advise consumers on how to deal with their debts, often referring them to an Insolvency Practitioner or debt management firm, for which they receive referral fees. They have been regulated for some time, and following an FCA review of the practices of debt packager firms, 5 firms have stopped providing regulated debt advice until further notice and the FCA has used formal powers to stop another firm from providing regulated advice. Debt management firms are now, as of 30 June 2021, regulated by ASIC. Expect to see ASIC apply its focus to weeding out those doing the wrong thing in the near future (which will only be a good thing for the industry and consumers alike).