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 (Parliament): the FAR bill is in Parliament, and will pass in the Spring sitting (which ends in December 2022). See here for details. The Government is now seeking stakeholder views on the Minister Rules. The Minister Rules prescribe: particular responsibilities and positions which cause a person to be subject to the FAR in the banking, insurance and superannuation sectors; the enhanced notification threshold, which is the total asset size above which an entity is required to comply with additional notification obligations; and, the way that a written record can be authenticated in a proceeding as prima facie evidence of the statement it records. Some big changes in here on my first review — we are summarizing now, and will issue a more detailed briefing shortly — including the fact that the problematic product role isn’t in here. That in itself is a reason for celebration, and a lowkey rolling back of the Hayne Royal Commission recommendations (which, while picked up by APRA, were deeply fraught).
- CASSPr (Crypto): Senator Andrew Bragg announced at the Australian Crypto Convention today that he will be releasing a draft bill for a 6 week consultation to legislate components of CASSPrs, digital assets and stablecoins (including CBDCs). You can read more about CASSPrs — essentially mutated AFSLs — here. Senator Bragg noted that part of the push was to shame the Government into doing something. Fair play. The token mapping exercise is great, but as I have been saying it does not mitigate the fact that we need clear rules to support our crypto businesses as the UK and US is furnishing.
- James Mawhinney (ASIC): the Full Federal Court has allowed an appeal by James Mawhinney to overturn a 20-year ban restraining him from advertising investments and raising funds from the public through financial products. In essence, Mr Mawhinney was denied procedural fairness because ASIC had not sought certain findings of contraventions, but the primary judge made and relied on those findings in making the restraining order. The original injunctions against capital raising remain. The backstory to this saga is that, in March 2021, the Court found Mayfair Wealth Partners Pty Ltd and related entities engaged in misleading or deceptive conduct and made false or misleading representations when promoting the M+ and M Core Fixed Income Notes. Mayfair 101 Group products were advertised in newspapers, on websites and via Google search advertising, when potential investors searched for terms such as ‘bank term deposits’ and ‘best term deposit’. One of the most high profile battles ASIC has had in recent times, this one does not feel over just yet…
- Prudential architecture (APRA): APRA has outlined plans for its multi-year program to modernise the architecture of prudential standards and guidance for banks, insurers and superannuation funds. The program is intended to ensure the framework continues to underpin financial safety and stability in a rapidly changing economic and technological environment. APRA will achieve this through a series of initiatives focused on: better regulation — ensuring prudential standards and guidance are easier to navigate, understand and implement; digital first — exploring how to use technology to support better regulation; and, new risks, new rules — developing new approaches to tackle emerging risks and new business models on the regulatory perimeter. With over 140 prudential instruments, some of which are tricky to understand in practice (I am looking at you, CPS 511), I think this is a great initiative from the prudential regulator.
- OTC derivatives (ASIC): ASIC has remade class order [CO 12/752] Financial requirements for retail OTC derivative issuers which was due to sunset on 1 October 2022. Under the instrument, retail OTC derivative issuers must: meet a net tangible asset requirement where the licensee must hold the greater of $1M or 10% of average revenue; prepare, each quarter, projections of cash flows over a 12-month period based on their reasonable estimate of revenues and expenses over that term; meet an NTA liquidity requirement where the licensee must hold 50% of the required NTA in cash or cash equivalents and 50% in liquid assets, comply with financial trigger point reporting obligations if licensees fail to hold the required NTA. You can read the instrument here, which is a sensible move by the corporate regulator for a system which is working.
Thought for the future: Senator Bragg’s legislation is likely to be dead on arrival, given the Labor Government. Still, as he acknowledged, it will be a form of pressure. I agree with the move, and hope he succeeds in taking the regulatory discussion forward in this area.