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. Liquidity facility (APRA): APRA has issued a letter to banks announcing the aggregate Committed Liquidity Facility has reduced to $102 billion on 1 January 2022 from $140 billion on 10 September 2021.Since January 2015, those ADIs to which APRA applies the Basel III liquidity standards have been required to hold high-quality liquid assets (HQLA) sufficient to withstand a 30-day period of stress under the liquidity coverage ratio (LCR) requirement. Apart from government securities, the only other significant assets recognised as HQLA are liabilities of the Reserve Bank; namely, banknotes and ES balances. The Basel III standards allow jurisdictions to use an alternative treatment for holdings in the stock of HQLA when there is insufficient supply of HQLA. The Committed Liquidity Facility is the Reserve Bank and APRA’s alternative treatment and, under this arrangement, certain ADIs are able to use a contractual liquidity commitment from the Reserve Bank towards meeting their LCR. The letter is available on the APRA website here.
  2. Claims handling (ASIC): ASIC has issued a useful reminder on the claims handling requirements for consumers. It notes that, from 1 January 2022, persons providing claims handling and settling services are required to hold an Australian financial services (AFS) licence; insurance claimants are entitled to ask whether those who are providing assistance to them in handling claims are licensed; and, ASIC will work with industry to address any challenges they may face in the course of implementing these significant reforms. The update is part of ASIC’s role in educated the public about unscrupulous operators who are acting without an AFS licence, and I think is quite a good piece of work in that regard!
  3. 2021 in review (OAIC): the OAIC has release a helpful infographic covering its activities in 2021. Save for the expect activities e.g. embedding the CDR, the most useful detail to me was the data breach statistics. OAIC has stated that it ensured more than 700 data breaches were notified to individuals, rectified and remedied, finalised Commissioner-initiated investigations on high privacy impact technologies, security and FOI, and finalised more than 2,000 privacy complaints from individuals. That is quite a rise — expect more to come, especially as OAIC gets more capacity.
  4. Financial adviser exam (ASIC): from January 2022, ASIC will take over the administration of the financial adviser exam from the Financial Adviser Standards and Ethics Authority following the commencement of the Financial Sector Reform (Hayne Royal commission Response — Better Advice) Act 2021. Financial advisers who are ‘existing providers’ or new financial advisers must pass the financial adviser exam to comply with the professional standards for financial advisers. Passing this exam is one of the education and training standards specified in section 921B of the Corporations Act 2001. The exam tests the practical application of a financial adviser’s knowledge in the following competency areas: financial advice regulatory and legal requirements, including obligations under Chapter 7 of the Corporations Act, the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, the Privacy Act 1988 and the Tax Agent Services Act 2009; financial advice construction — that is, suitability of advice aligned to different consumer groups, incorporating consumer behaviour and decision making; and, applied ethical and professional reasoning and communication, incorporating the Financial Planners and Advisers Code of Ethics 2019 .The first sitting of the financial adviser exam for 2022 commences 17 February 2022, with enrolments ending by 28 January 2022 — good luck for those sitting the exam!
  5. Debt management services (ASIC): a reminder that, in addition to claims handling services, debt management services also require a licence now! ASIC has been quick to point this out recently e.g. in relation to SR & Associates. On 29 April 2021, the National Consumer Credit Protection Amendment (Debt Management Services) Regulations 2021 (now set out in the National Consumer Credit Protection Regulations 2010) were made, which prescribe certain debt management services as a ‘credit activity’ for the purposes of the National Credit Act. Under these amendments, from 1 July 2021, providers of debt management services (including firms offering ‘debt negotiation’ or ‘credit repair’ services) are regulated under the National Credit Act, and are required to obtain an Australian Credit Licence authorisation to provide a debt management service.

Thought for the future: the US SEC is very public about how it financially rewards whistleblowers — see here, for example. We do not have the same system in Australian — though it was considered recently — but I think we can expect ASIC to continue to be active encourage whistleblowers to come forward this year under the new Corporations Act regime.

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