Australian regulators weekly wrap — Monday, 30 January 2023

  1. AFCA (Federal Court): Home finance companies General Commercial Group Pty Ltd and Eden Capital (Australia) Pty Ltd have each been penalised $50,000 by the Federal Court for failing to cooperate with AFCA. Also, General Commercial director Dale Brendan Heremaia and his son, Eden Capital director Benjamin Eden Heremaia, were ordered to pay $30,000 and $20,000 respectively for their roles in the contraventions. The Federal Court case was brought by ASIC, and Justice Downes found the failure of the respondents to co-operate with AFCA constituted a breach of the NCCP. The judgment said the respondents had; failed to provide documents and information requested by AFCA; commenced proceedings against complainants and an AFCA staff member; had been uncooperative in communications with AFCA; and, initially failed to pay an AFCA determination.
  2. Legislative design (ALRC): the ALRC under Derrington J is the best it has been since…. well ever. This paper on ‘User-friendly legislation: Why we need it, and how to achieve it’, does what it says on the label and is my top read for the week. Focusing on the practical aspects of achievement, it advocates for: simpler expression; logical legislative structure; the use of knowledge tools (ChatGPT is a increasingly getting used as a imperfect legal validator or redundancy — it cannot and must not be relied on by itself though!); and, effective user feedback. I wholeheartedly agree, and am looking forward to continuing to follows the ALRC’s herculean task of simplifying the Corporations Act in 2023.
  3. ACMA powers (Parliament): the Australian Communications and Media Authority will be given new information-gathering and record-keeping powers to create transparency around efforts by digital platforms to respond to misinformation and disinformation on their services. The ACMA will also be empowered to register an enforceable industry code and to make a standard, should industry self-regulation measures prove insufficient in addressing the threat posed by misinformation and disinformation. The new framework is designed to focus on systemic issues which pose a risk of harm on digital platforms, rather than individual pieces of content posted online — the code and standard-making powers will not apply to professional news and authorised electoral content, nor will the ACMA have a role in determining what is considered truthful. A big responsibility, and in conjunction with the upcoming The Voice referendum, powers we can (cautiously) welcome.
  4. UK crypto licensing (FCA): about 85% of crypto firms who applied for a licence with the FCA failed to meet the regulator’s standards for registration. In correspondence published on 26 January by the Treasury Committee of MPs, the FCA said most firms could not demonstrate that they met its anti-money laundering and counter-terrorist financing tests. While the UK does not have a formal regulatory framework for crypto — yet (look out for that later in the year, perhaps), the FCA requires firms to register under its AML regime to carry out crypto services in the UK. I have a lot of sympathy for the 85% — AML/ CTF in the digital assets space can get quite complex. Hopefully with this feedback, we see more registrations in 2023!

Thought for the future: advanced AI like ChatGPT makes a lot of mistakes, and cannot be relied on in financial services regulatory practice (especially since it only goes to June 2021!). With that said, it is an imperfect validator of advice, given its ability to synthesize mountains of legislation. As an unreliable free co-pilot / redundancy, which takes little effort to utilize, my sense is that it is clients’ broad interests for their service providers to transparently explore the use of AI (within the bounds of agreement, confidentiality, appropriate risk frameworks and fiduciary duties!) to generate work that is more accurate, faster and cost effective. This has already happened with technology assisted review in the e-discovery space, so it is not new — it is now just on a different playing field. Lawyers and other service providers will need to level up, or see their clients ask why.

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