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.
- FAR (Senate Report): the Senate Economics Legislation Committee has completed its report into the Financial Accountability Regime Bill 2021. The Committee has recommended that the bills be passed, complete with civil penalties introduced in the FAR regime (despite appreciable lobbying to the contrary). Both houses sit again in late March 2022, so expect the legislation to go through then. For a practical overview of FAR, and some of the implementation issues affected entities will need to contend with, please do sign up to this webinar on 2 March 2022 here.
- Compliance risk (APRA): the prudential regulator has released an information sheet called ‘How to manage compliance risk and stay out of the headlines’ noting that ‘[c]ompliance risk has traditionally been the poor cousin of longer-established risks to financial services organisations, such as credit and market risk. But that’s no longer true.’ Key messages were that well-documented approach to compliance risk management supports an APRA-regulated entity’s operations, and that APRA’s recent work indicates that entities need to: 1) have a clearly defined approach to managing compliance risk; 2) have established processes to support compliance risk management practices; and, 3) specify clear accountability for managing compliance risk. This information sheet is quite timely, as these issues can and should be baked into FAR implementation for organisations.
- Opening statement (ASIC): there were a few interesting points in the ASIC Chair’s opening statement to the Senate Economics Legislation Committee Additional Estimates Committee. Leaving aside the expected talk on increased enforcement, Mr. Longo mentioned the establishment of a Regulatory Efficiency Unit (REU) to promote better regulation by removing unnecessary frictions and making it easier for business to get things done. The REU — which is a great idea to me — will identify a set of initiatives this year that aim to improve the efficiency of ASIC’s interactions with its regulated population. He also stated that ESG and crypto and cyber-resilience have been three areas of focus that will ‘no doubt remain of the highest order this year.’ Finally, in what is a nod to the changing face of enforcement, he said that ASIC will be seeking remedies that deliver quicker outcomes, in cases that are chosen more carefully, following investigations that are more timely. Expect that to mean more reliance on ASIC’s new tools e.g. PIP power (and FAR in due course).
- Legislative instruments (ASIC): ASIC is seeking industry feedback on proposals to remake relief contained in seven legislative instruments relating to specific financial services disclosure requirements through a consultation paper released today. They relate to PDS in-use notices for employer-sponsored superannuation, product dashboard disclosure, shorter PDSs and PDS obligations for superannuation trustees, IDPS operators and responsible entities of IDPS-like schemes. They also relate to the issuance of Financial Services Guides in time critical situations. Some necessary house cleaning to my mind, on instruments regularly you can read more about these instruments here.
- Financial reports (ASIC): between 1 July 2021 and 31 December 2021, ASIC prosecuted seven companies for failing to comply with their obligations to lodge financial reports and hold annual general meetings (AGMs) in the required timeframes. My top read for the week, most of the failures related to periods where financial reports were failed to be reported over the course of years. ASIC has stated that it will continue to prosecute companies that systemically fail to comply with their financial reporting obligations.
Thought for the future: the UK FCA announced a plan in 2021 to be a more ‘innovative, adaptive and assertive, data led regulator’. Since whatever the FCA does, ASIC follows closely, it is worth a look at how the FCA performed in this infographic. One of the interesting points I picked out was the money spent on advising customers on high risk investments, which ASIC itself has done in recent months. I am not entirely comfortable with this — regulators are not commercial or financial advisers, and this feels like quite a subjective foray…