Australian Regulators Weekly Wrap – 29 August 2022

1. Token Mapping (Treasury): The Government has announced that Treasury will prioritise token mapping work in 2022, which will help identify how crypto assets and related services should be regulated. The aim will be to identify notable gaps in the regulatory framework, progress work on a licensing framework, review innovative organisational structures, look at custody obligations for third-party custodians of crypto assets and provide additional consumer safeguards. A great step, to be sure, but frankly how long do we need to wait until we get a set of rules for crypto? The UK and US are powering ahead. Why cant we do the crypto token mapping exercise at the same time we incrementally develop our regulation. Unfortunately, in this increasingly important space in the financial services ecosystem, we are looking like followers rather than leaders. More thoughts on my Ausbiz interview this week here.
2. Corporations Act (Treasury): The Government has released two suites of exposure draft legislation to reduce the complexity of Australia’s corporations and financial services law and improve its navigability. The amendments implement recommendations from the Australian Law Reform Commissions Interim Report A of its Review of the Legislative Framework for Corporations and Financial Services Regulation. Amendments to move matters in current legislative instruments made by the ASIC into the primary law and regulations are also being consulted on. These amendments make the following changes:
   • removing erroneous references;
   • removing redundant definitions;
   • making broad improvements in relation to the use of definitions, including clarifying the meaning of defined terms;
   • using consistent headings for definition sections, and removing substantive obligations from definitions;
   • repealing redundant regulations; and
   • making other minor and technical amendments to simplify and improve the readability and navigability of the ASIC Act and Corporations Act.

     Important, to be sure, but tinkering nonetheless. What will be more interesting is to see if the Government takes up some of the bigger things the ALRC is working on e.g. principles-based obligations.

3. Open Banking (Treasury): Consultation is open on a draft designation instrument that would extend the Consumer Data Right to non-bank lenders. The CDR gives consumers the right to use data that businesses hold about them and also allows consumers to consent for data to be shared with other service providers. An expected move, the submissions are open for consultation until 16 September 2022.
4. Corporate Plan (ASIC): ASIC has outlined its strategic plans for the next 4 years, being:
   1. Product design and distribution: Reduce the risk of harm to consumers of financial and credit products, caused by poor product design, distribution and marketing, especially by driving compliance with new requirements;
   2. Sustainable finance: Support market integrity through proactive supervision and enforcement of governance, transparency and disclosure standards in relation to sustainable finance;
   3. Retirement decision-making: Protect consumers, especially as they plan and make decisions for retirement, with a focus on superannuation products, managed investments and financial advice; and
   4. Technology risks: Focus on the impacts of technology in financial markets and services, drive good cyber-risk and operational resilience practices, and act to address digitally enabled misconduct, including scams.

      No major surprises here, and these priorities build on recent enforcement action e.g. ASIC’s TMD action and win in the RI Advice case.

5. Competition Penalties (Treasury): The Albanese Government is moving to increase penalties for corporations engaging in anti-competitive behavior from $10 million to $50 million, ensuring the price for misconduct is high enough to deter unfair activity. The current turnover-based penalty will also be increased from 10% of annual turnover to 30% of turnover for the period the breach took place, and penalties for individuals will increase from $500,000 to $2.5 million. This ensures those who perpetuated the wrongdoing, either individually or on behalf of the company, are held accountable. The draft legislation is here.

Thought for the future: The US SEC is tweaking its rules around paying whistleblowers for tips. We considered, but didn’t go with this approach in Australia. I think that will be revisited in the future though…

Edit: An earlier version of this article referred to BOQ in connection with TMD action. That was incorrect, and I offer my apologies!