Australian regulators weekly wrap — Monday, 15 July 2019



The Australian regulators weekly wrap is a weekly alerter which quickly sets out five noteworthy developments from the past week. It is designed to help you in keeping up to speed with what is happening in Australian financial services regulation.

Follow me here or connect with me on LinkedIn if you would like to receive these alerters or if you would like any further information.

  1. Production intervention: ASIC is not wasting any time — hot off the heels of its recent consultation paper as to how it should best use its new product invention power (read more about that in the 1 July 2019 alerter here) ASIC has released a consultation paper (CP 316)on its first proposed use of the power. It is looking at the short term credit industry; specifically, where fees are charged under separate contracts which ultimately add up to well over 100% of the loan value. Submissions close by 30 July 2019.
  2. Culture capital: APRA has increased NAB, ANZ and Westpac’s minimum capital requirements by $500M each (following a $1B capital add-on to CBA last year) citing the “ need to strengthen non-financial risk management, ensure accountabilities are clear, cascaded and enforced, address long-standing weaknesses and enhance risk culture”. This move follows APRA’s release of its information paper on 22 May 2019 on the financial services industry’s self-assessments of governance, culture and accountability. A useful read, that information paper effectively set out that irrespective of size, complexity or industry many institution are having a difficult time identifying, managing and mitigating non-financial risk.
  3. Consumer credit insurance: ASIC has released a report (REP 622) which found that the design / sale of consumer credit insurance has consistently failed consumers (this may not surprise the many UK practitioners who have had experience with mis-sold PPI products). In particular, the report states that CCI is extremely poor value for money; associated with sales practices which cause harm e.g. CCI was sold to ineligible customers; consumers were charged for deductions where their loan had expired; hardship claims under CCI policies are made without appropriate consumer-focused processes for many lenders. ASIC is undertaking investigations, monitoring remediation schemes and is considering completely banning the sale of CCI by telephone. But further, according to ASIC Commissioner Sean Hughes “If we do not see early, significant and sustained improvement in the design and sale of consumer credit insurance, our next steps may involve the deployment of our new product intervention power where we see a risk of significant consumer detriment”
  4. AFCA: 58 AFSLs and 217 ACLs who had previously held external membership with an external dispute resolution scheme had not obtained AFCA membership since it commenced operations on 1 November 2018. Following ASIC’s involvement, 35% of those entitles either cancelled their licences voluntarily or had ASIC cancel or suspend it for them. All ASFLs and ACLs are required to obtain AFCA membership; critically, it has a lot more powers than its predecessors e.g. FOS. It has a higher monetary jurisdiction than FOS, a broad and new directions power in respect of “systemic issues” (and is expected to work closely with ASIC here) and expects to be more involved in remediation programs. Watch this space…
  5. Licence scrutiny: judging by the number of media releases each week, ASIC is doing more work cancelling licences or banning individuals. (Example here.) This appears to fit in with its more hawkish enforcement outlook, as encapsulated in ASIC Chair James Shipton’s statement at this year’s annual forum in May 2019 “… we are looking to use the full extent of our new penalties and powers through the prism of ‘why not litigate’”.

Do you think I overlooked something or would like more information? If so, please send me a message!

(These views are my own and do not constitute legal advice. Photo credit Tom Wheatley)

Australian regulators weekly wrap — Monday, 8 July 2019



The Australian regulators weekly wrap is a weekly alerter which quickly sets out five noteworthy developments from the past week. It is designed to help you in keeping up to speed with what is happening in Australian financial services regulation.

Follow me here or connect with me on LinkedIn if you would like to receive these alerters or if you would like any further information.

  1. Foreign licensing relief: ASIC released a consultation paper (CP 315) proposing to provide licensing relief i.e. from the need to hold an AFSL for foreign financial services firms providing funds management advice to Australian professional investors. ASIC decided against giving relief for situations of reverse solicitation i.e. where the investor seeks advice from the foreign adviser, citing lack of information / monitoring concerns. The new regime will affect the current exemptions in place and is narrower. Foreign firms who service — and intend to continue servicing — Australian clients are well advised to revisit their licensing requirements in light of what is proposed. Submissions on the consultation paper are required by 9 August 2019.
  2. Car insurance investigations: ASIC released a report somewhat amusingly entitled “Roadblocks and roundabouts” setting out its research that insurer investigations into car insurance claims suspected of being fraudulent are leading to poor consumer outcomes, including through excessive interview and documentation requirements. Metrics-wise, ASIC found that while only a small proportion of claims are investigated, for those that are over 70% of them are found to be valid. It has called for general insurers to implement better standards, improve written communication to consumers and also how claims are selected for investigation. ASIC has also flagged that the (recently reviewed) General Insurance Code of Practice could be further improved.
  3. Mortgage lending: in good news for personal borrowers, following consultation on Prudential Practice Guide APG 223 APRA announced that it no longer expects ADIs to assess home loan applications using a minimum interest rate of 7%. ADIs can instead utilise a revised interest rate buffer of 2.5% over the loan’s interest rate. (Though, of course, individual ADIs can and generally will impose higher serviceability thresholds.) Said APRA Chair Wayne Byres: “The changes being finalised today are not intended to signal any lessening in the importance APRA places on the maintenance of sound lending standards. This updated guidance provides ADIs with greater flexibility to set their own serviceability floors, while maintaining a measure of prudence through the application of an appropriate buffer that reflects the inherent uncertainty in credit assessments.”
  4. AFS applications: a busy week for ASIC on the licensing front — it released a new information sheet (INFO 240) to assist applicants on recent changes to its financial services licensing procedures. Most applicants will now need to provide additional information and documents as part of their application, focusing on the individuals running the business e.g. national criminal checks. Fitting in with the global regulatory zeitgeist of greater regulatory focus on individuals (e.g. US Yates Memo, UK SMCR, HK MIC, etc), ASIC stated that the new information will enable it “to ascertain whether it has reason to believe an applicant is likely to contravene its legislative obligations, including to deliver financial services ‘efficiently, honestly and fairly’ and to ensure that the responsible officers of a body corporate applicant are of good fame or character”.
  5. Responsible lending: ASIC’s unusual public hearings on responsible lending are set to take place in August 2019 in Melbourne and Sydney (you can read more about them in last week’s alerter). Writing in The Australian today, Commissioner Hughes has said that the hearings are “not about increasing requirements, but rather clarifying and updating our guidance” (expected before 2020) and that “this is an information-gathering exercise, not an inquisitorial pursuit or ‘grilling’ as some speculation as suggested. Attendees will be invited, not ‘hauled in’ involuntarily.” Hayne Royal Commission public hearing they may not be, however, these hearings will certainly attract a great deal of commentary.

Do you think I overlooked something or would like more information? If so, please send me a message!

(These views are my own and do not constitute legal advice. Photo credit Tom Wheatley)

Australian regulators weekly wrap — Monday, 1 July 2019



The Australian regulators weekly wrap is a weekly alerter which quickly sets out five noteworthy developments from the past week. It is designed to help you in keeping up to speed with what is happening in Australian financial services regulation.

Follow me here or connect with me on LinkedIn if you would like to receive these alerters or if you would like any further information.

  1. Responsible lending: following ASIC’s release of its consultation paper in February 2019 in respect of updating its guidance on responsible lending (RG 209), ASIC announced that it intends to hold public hearings concerned with responsible lending practices (a prominent theme in the recent Hayne Royal Commission). An unusual occurrence, the hearings will take place in August 2019 and feature groups / individuals who provided a written submission to ASIC in response to the consultation paper. 64 of the submissions have now been made public.
  2. Whistleblowers: corporate whistleblowers — being those eligible as such because they meet certain criteria (always the first consideration) — now have stronger protections under the Corporations Act 2001 (Cth) as firms will commit an offence by revealing their identify or by causing them “detriment” and be liable for heavy civil penalties / compensation. Public companies and large private companies now have until 1 January 2020 to embed a compliant whistleblowing policy. Updating this framework can prove complex and take time, so affected companies should start now.
  3. BEAR: APRA has outlined its proposed approach to end-to-end product responsibility under the Banking Executive Accountability Regime (Australia’s version of the UK SMCR) to ADIs, proposing that they be required to identify and register an accountable person to hold end-to-end product responsibility for each product the ADI offers to its customers, including retail, business and institutional customers. The public consultation is open until 23 August 2019 for what will undoubtedly prove tricky accountability statements to draft given APRA “proposes a broad interpretation of what is in scope of end-to-end accountability, including not only all steps in the design, delivery and maintenance of all products offered to customers…but also extending to issues such as customer remediation, linkages to IT systems and data quality, outsourcing, and incentive arrangements”
  4. Product intervention: staying with financial (and credit) products, ASIC released a consultation paper as to how it proposes to wield its new product intervention power, a broad and flexible proactive power for it to intervene when a product has resulted, will result or is likely to result in significant detriment to consumers. (Other international jurisdictions will already be familiar with this power.) Among other areas, the paper sets out ASIC’s proposals as to the guidance it will give the industry on the meaning of consumer detriment and how it will arise. It also deals with the nature of the consultation process that ASIC proposes to undertake with firms in its cross-hairs. Public consultation is open until 7 August 2019.
  5. Code of Banking Practice: ASIC has approved an updated version of the Australian Banking Association’s new voluntary Banking Code of Practice. This is the first wave of updates to the code, and involves prohibition on charging fees for services to deceased customers and commitments around the provision of valuations to small business customers. The second wave of changes, which ASIC will decide on later this year, will be the more significant as they will be designed to address the recommendations of the Hayne Royal Commission. And in that regard, one of Commissioner Hayne’s more significant recommendations was that “there must be adequate means to identify, correct and prevent systemic failures in applying the code … in order to do that, some provisions of the codes should be picked up and applied as law” (Emphasis added.)

Do you think I overlooked something or would like more information? If so, please send me a message!

(These views are my own and do not constitute legal advice. Photo credit Tom Wheatley)