Australian regulators weekly wrap — Monday, 14 March 2022

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.

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1. Youpla Group (ASIC): very unusual. Following the liquidation of one funeral fund, ASIC has written to the directors of Youpla Group to ask them to take immediate and public action to address concerns about the financial viability of ACBF 1, ACBF Plan and ACBF Community. Youpla manages four entities that provide funeral insurance products nationwide and ASIC said it had concerns about the other three funds. In particular, ASIC was concerned about members of ACBF 1, ACBF Plan and ACBF Community continuing to pay premiums when they may get little benefit from these products in the future. Administrators were appointed yesterday, however, the public intervention by ASIC into the financial position of a business is strange (and quite sharp).
2. Corporate governance priorities (ASIC): ASIC Chair Joe Longo gave a speech at the AICD Australian Governance Summit on ASIC’s corporate governance priorities. He singled out: 1) governance failures relating to non-financial risk that result in significant harm to consumers and investors e.g. directors failing to identify and manage the risk attaching to a company’s business activities; failing to ensure that appropriate resources are allocated to deal with risks; or failing to respond to indicators that risks are not being properly managed; 2) cyber governance and resilience failures. Mr Longo referred to the proceedings brought by ASIC against RI Advice Group, where wherin ASIC allegs that it failed to have adequate policies, systems and resources to appropriately manage risk in respect of cyber security and cyber resilience; and, 3) egregious governance failures or misconduct resulting in corporate collapse. This includes instances where company money, or money belonging to company creditors, is misapplied or misappropriated. He also singled out other issues relating to non-financial risk that ASIC is considering, being include cyber resilience and climate-related disclosure, including misleading marketing or ‘greenwashing’ by listed entities.
3. Liquidity (APRA): APRA has released a discussion paper to ADIs and other interested stakeholders advising of APRA’s post-implementation review of the Basel III liquidity reforms. The Basel III liquidity reforms were introduced eight years ago in Australia, with the commencement of the revised Prudential Standard APS 210 Liquidity in 2014. The two core measures of the reforms, the Liquidity Coverage Ratio and the Net Stable Funding Ratio, became effective from 2015 and from 2018 respectively. The LCR requires banks to hold high quality liquid assets at least equal to an estimate of short-term net cash outflows under a stress scenario, to build resilience to liquidity shocks. The NSFR requires banks to maintain an amount of available stable funding at least equal to their required stable funding, to promote sustainable funding structures. The consultation paper seeks to determine how efficiently and effectively the Liquidity Coverage Ratio and Net Stable Funding Ratio are achieving their objectives. The discussion paper requests responses by 14 April 2022.
4. ePayments (ASIC): ASIC has published a report, Report 718: Response to submissions on CP 341 Review of the ePayments Code: Further consultation (REP 718), on updates to the ePayments Code. REP 718 follows the release in May 2021 of Consultation Paper 341 Review of the ePayments Code: Further consultation (CP 341), which sought feedback on proposed updates to the Code. The ePayments Code provides important consumer protections in relation to electronic payments, including ATM, EFTPOS, credit and debit card transactions, online payments, and internet and mobile banking. For example, there is a general principle in the Code that banking customers will not be liable for unauthorised transactions on their accounts if they have taken reasonable steps to protect their accounts. ASIC’s report also relates primarily to updates in the following areas of the Code: compliance monitoring and data collection; mistaken internet payments; unauthorised transactions; complaints handling; and, facility expiry dates. ASIC’s present aim is to publish an updated Code in April 2022. A transition period of 12 months will apply.
5. CDR (Treasury): Treasury and the Data Standards Body are seeking input on the development of rules and standards to implement the CDR in the telecommunications sector. While CDR is supposed to be sector agnostic, and the general rules for CDR will be adhered as set out in the paper e.g. rules relating to eligible data recipients or dispute resolution or privacy standards, the paper seeks to identify areas where sector-specific rules and standards are needed to effectively apply the regime to telecommunications entities, and to design these in a way that is aligned with existing sectoral arrangements, seeking to minimise costs for participants. The consultation paper, which is open for feedback until 29 March 2022, is available here.

Thoughts for the future: 21 May 2022 is the latest the Federal election can be held. The following bills are awaiting passage before the election: Financial Accountability Regime Bill 2021; Corporations Amendment (Meetings and Documents) Bill 2022; National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020; Financial Services Compensation Scheme of Last Resort Levy Bill 2021. Expect to see many get through at the end of March, when both houses sit again — a number of these bills have partisan support e.g. FAR and CSLR.