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. Financial institutions levy: financial industry levies recover the operational costs of APRA and other specific costs incurred by certain Commonwealth agencies, including the Australian Securities and Investments Commission, the Australian Taxation Office, and the Australian Competition and Consumer Commission. The Treasury has released a paper which seeks submissions on the proposed financial institutions supervisory levies for the 2021–22 financial year. Interestingly, the funding increases for APRA are set to rise by 20%!
  2. ePayments (ASIC): ASIC aims to improve the existing code around electronic payments including ATM, EFTPOS, credit and debit card transactions, online payments, and internet and mobile banking with a consultation paper. ASIC is focusing on (a) compliance monitoring and data collection; (b) mistaken internet payments, including retrieval of partial funds and the responsibilities of the sending and receiving ADIs; (c) extending the Code protections to small business customers; (d) unauthorised transactions and the pass code security requirements; (e) modernising the Code; (f) complaints handling; (g) facility expiry dates; and (h) transition and commencement of the updated Code. Submissions are due by 2 July 2021.
  3. Prudential risk (APRA) : APRA has issued a letter to ADIs to improve the consistency of the application, capital outcomes and reporting of Risks-not-in-Value at Risk (RNIV) for ADIs accredited to use the internal model approach to traded market risk. RNIV is a concept introduced by the UK Financial Conduct Authority in 2010 to account for risks not captured in a VaR model. (VaR modeling determines the potential for loss in the entity being assessed and the probability of occurrence for the defined loss. Banks commonly apply VaR modeling to firm-wide risk due to the potential for independent trading desks to unintentionally expose the firm to highly correlated assets.) RNIV are required to be identified, capitalised and reported in accordance with the existing Prudential Standard APS 116 Market Risk. The letter to ADIs is available on the APRA website at Market Risk Modelling: Risks-not-in-VAR
  4. Crypto warning (ASIC): ASIC has stated that it has received an increased number of reports from consumers who have lost money after responding to advertisements disguised as fake news articles. In the main, these advertisements promote crypto assets and CFDs; in some instance they false use ASIC’s logo or misleadingly say that the investment is approved by ASIC — a dead giveaway for fraud.
  5. Australia as a technology centre (Treasury): the senate committee tasked with how Australia can market its strengths to position itself globally as a technology and finance centre has released its third issues paper. What I picked up is that the the committee is interested in the economic opportunities posed by blockchain technology and digital asset technology in particular. Thus far, the committee has heard blockchain has applications across sectors and industries. The committee will be assessing options for the development of a comprehensive regulatory framework for cryptocurrency and digital assets. Existing regulatory schemes, especially those in comparable jurisdictions, will be examined.

Thought for the future: the new onerous breach reporting regime is coming in October 2021. Under it, a ‘deemed significant breach’ which needs to be reported is anything — irrespective of the circumstances which: (a) constitutes the commission of an offence and the commission of the offence is punishable on conviction by a penalty that may include imprisonment for: (i) three months or more if the offence involves dishonesty; or (ii) 12 months or more in any other case; (b) contravenes a civil penalty provision (except where excluded by the regulations — of which none have been yet) or for credit licensees constitute a contravention of a key requirement under s111 of the National Credit Code (Sch 1 to the NCCP); (c) contravenes s1041H(1) of the Corporations Act or s12DA(1) of the ASIC Act (misleading or deceptive conduct); or (d) that result, or are likely to result, in material loss or damage to clients, or to members of a managed investment scheme or superannuation entity. My firm has developed a really comprehensive and intuitive hyperlinked register which covers all (a)–(c) above for the key items of legislation e.g. CA, ASIC Act, NCCP, etc. Some of our clients are using this work product to retrospectively consider their incidents register to see how much extra reporting they will need to do come October 2021. Please get in touch if you wish to obtain a copy!

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AU financial services lawyer in compliance, regulatory & disputes. Email sign-up: http://eepurl.com/gG9Kk1 and LinkedIn: https://www.linkedin.com/in/lthennessy/

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Liam Hennessy

Liam Hennessy

AU financial services lawyer in compliance, regulatory & disputes. Email sign-up: http://eepurl.com/gG9Kk1 and LinkedIn: https://www.linkedin.com/in/lthennessy/

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