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.
- AUSTRAC portal (AUSTRAC): the AML / CTF regulator is seeking to update its portal. It has just released market feedback on user-expressed priorities, which include as key issues: the design of the suspicious matter reporting report and process (priority issue of 44% of responders); user Experience and User Interface navigation (priority issue of 32% of responders); guidance and support (priority issue of 28% of responders); and, the need for greater automation and introduction of an application programming interface (priority issue of 24% of responders). A really great initiative by AUSTRAC, I think the last is particularly important, and one that other regulators should revisit. I am specifically thinking of ASIC, given the number of breach reports it will be receiving come October…
- APRA statement (APRA): Wayne Byres gave an opening Opening Statement to Joint Standing Committee on Trade and Investment Growth last week. In it he outlined APRA’s role i.e. prudential supervision of specific financial institutions and promoting financial system stability in Australia and current focus on climate risk. Interestingly, however, he delved into detail on its approach, stating: “As we supervise financial institutions, APRA generally seeks to avoid overly prescriptive regulation, instead adopting a principles-based approach wherever possible. Given the diversity of institutions that we oversee, we believe a principles-based approach is more cost-effective, enables the application of regulation to be better tailored to individual circumstances, and reduces barriers to innovation.” That is undoubtedly correct, though work pointing out that as APRA/ASIC and other move more in the direction of principles-based regulation there will be increasing interpretational conflicts with the regulated population. See here for a run through the policy, academic and practical position.
- ASIC v BOQ (ASIC): the Federal Court has declared several terms within some Bank of Queensland (BoQ) small business contracts unfair. The Court found that the following terms were unfair: unilateral variation clauses which allowed BoQ to vary the terms and conditions of their contracts without giving borrowers advance notice or an opportunity to exit the contract without penalty; event of default clauses which allowed BoQ to unilaterally determine whether a default has occurred as well as call defaults based on events that do not present any material risk to BoQ and without giving borrowers an opportunity to address the issue; indemnification clauses which allowed BoQ to make a claim against a customer for losses caused by BoQ’s mistake, error or negligence; and conclusive evidence clauses which meant that if BoQ issued a certificate stating an amount owing by a customer, that amount would be assumed to be correct unless the customer could prove otherwise. The Court declared the unfair terms void from the start of the contracts and ordered that the unfair terms be replaced with new, fair terms agreed by the parties. The case follows a similar one against Adelaide & Bendigo Bank last year — there is a helpful table in this article to assist you (with the BoQ case) in navigating your loan document UCT reviews!
- Super funds (Treasury): Treasury has released a consultation on the financial and auditing requirements draft Bill for superannuation funds. The draft Bill will requires RSE licensees to: prepare and lodge financial reports for each financial year and half-year with ASIC; publish the financial report, directors’ report and auditor’s report for a financial year on the RSE’s website and provide details of how to access these reports with the notice of the annual members meeting; and, provide a copy of the financial reports for a financial year and half-year to members and beneficiaries on request. The draft Bill also amends the requirements for the auditor of an RSE, who will have obligations under both the Corporations Act 2001 and the Superannuation Industry (Supervision) Act 1993. These changes seek to ensure that the auditor, and in certain circumstances, audit firms and audit companies, are subject to stringent eligibility, reporting and independence requirements.
- Insolvency prosecutions (ASIC): between 1 January 2021 to 30 June 2021, ASIC prosecuted 124 people in relation to 224 contraventions of the Corporations Act 2001. Those prosecuted were involved in companies that went into liquidation and had registered liquidators appointed and mainly failed to response to information requests. ASIC took action following reports of misconduct being lodged by registered liquidators of the companies. This one surprised me (and perhaps a number of liquidators); ASIC has historically not focused too much on this area, but that all seems to have changed. A good thing in my view!
Thought for the future: following the UK FCA’s business interruption insurance test case, close to £1bn has been paid out to policyholders in interim and final settlements. The UK FCA has released the latest data, which can be accessed here. Noting the similar position in Australia under QBE’s test case, which the High Court recently rejected special leave appeal on (the lower Court of Appeal held that insurers were not able to rely on a policy exclusion which referred to the Quarantine Act 1908. This Act was repealed with the introduction of the new Biosecurity Act 2015), it is worth paying attention to the UK experience for insurers…