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.
- BEAR / Westpac (APRA): the prudential regulator has closed its investigation into possible breaches of the Banking Act 1959 (Cth), including the Banking Executive Accountability Regime, by Westpac. APRA commenced the investigation in December 2019 to examine prudential concerns arising from allegations by AUSTRAC that Westpac had breached anti-money laundering and counter-terrorism laws. APRA’s investigation also examined the bank’s actions to rectify and remediate the issues after they were identified. Westpac remains subject to a court enforceable undertaking to put in place an integrated risk governance remediation plan to uplift risk governance and a 1 billion operational risk capital add-on by APRA. For a regime characterised by its broad principles-based requirements e.g. the requirement to act with ‘integrity’ and ‘co-operate with APRA’, I think APRA’s media release is lackluster, and it has missed an opportunity to pass much needed information along to its regulated population.
- Business registers (ASIC): the ‘Modernising Business Registers’ Program which aims to unify the Australian Business Register and 31 business registers administered by ASIC onto a single platform is now subject to a consultation paper. The MBR Program will include the introduction of a director identification number which is a unique identifier that a director will keep forever, and designed to prevent ‘rolling bad apples’. The amount of different entries for the same person in the ASIC portal is quite amazing, based on things like misspelling, missing middle names and the like. I think it is a good idea, and am hoping we get something like NZ’s great free resource offered by its companies house. Our Antipodean cousins have a great system, which you can judge for yourself here.
- Add-on insurance (ASIC): ASIC is seeking stakeholder feedback on proposals for a Regulatory Guide and prescribed customer information for the forthcoming deferred sales model for add-on insurance. Comments close 23 April 2021. The Hayne Royal Commission recommended that a deferred sales model should be introduced for all add-on insurance products other than comprehensive motor vehicle insurance: Recommendation 4.3. Under the deferred sales model, providers of add-on insurance must wait for four clear days after a customer has committed to acquire a principal product or service before selling them an add-on insurance product: s12DP(1) of the ASIC Act. ASIC has since undertaken substantial work and issued multiple reports which found systemic problems with the sale of add-on insurance through car yards and lenders. Draft Regulatory Guide 000 — The deferred sales model for add-on insurance (draft RG 000), which ASIC is seeking feedback on, cover the the scope of the deferred sales model, ASIC’s our expectations of providers of add-on insurance products in complying with the deferred sales model, and ASIC’s our interpretation of the factors ASIC must consider when deciding whether to grant an exemption from the new rule. Having read through the proposed guide, my initial view is that it is a quality product, and tackles some knotty issues, for e.g. the casual nexus. For example, a lender may provide a home loan product to a customer and, under an arrangement, give the customer’s contact details to an issuer of home building insurance. If the issuer of the insurance contacts the customer three weeks later, the offer will still be ‘in connection with’ the customer acquiring the principal product. That is quite broad!
- Continuous disclosure (Treasury): The Treasury Laws Amendment (2021 Measures №1) Bill 2021 has this week been referred to the Senate Economics References Committee, with the Report due 30/06/2021. The legislation seeks to amend the Continuous Disclosure Laws to introduce a higher threshold for liability e.g. recklessness or negligence. The report of the Senate Standing Committee on Economics into the provisions of the bill was tabled on Friday 12 March 2021.
- Electronic signatures (Treasury): the COVID legislation permitting electronic signatures were temporary measures put in place during the pandemic. As these come to expiration on 21 March 2021, the current legislative requirements around electronic signing under the Corporations Act 2001 (Cth) will revert back to the pre-COVID requirements. While there has been talk of extension, and a bill has been introduced into Parliament, it has not passed. On 16 March, the Senate agreed to refer the Bill to the Economics References Committee for inquiry and report by 30 June 2021, with no debate on the Bill in the Senate until August 2021. It is therefore likely the COVID-19 measures will lapse, and pre-COVID-19 measures need to be readopted. My firm has worked on large table covering the legislative position across each of the Federal and State jurisdictions, for all different types of instrument e.g. deeds, agreements, etc. Happy to provide a copy to those who reach out!
Thought for the week: there is a fascinating article in the AFR this week on why corporate criminals act, that is the rationalizations they use to justify their crimes. Some include ‘temporary use’, ‘victimless crime’, ‘ubiquity’ and ‘economic necessity’. With all the regulatory change projects underway at the moment e.g. FAR, it is a timely reminder that good risk frameworks comply with the letter of the law. Great risk frameworks respond to these deeper personal and potentially cultural drivers.