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.
- Enforcement report (ASIC): ASIC has released its enforcement update report for the period 1 July to 30 December 2020. Comparing the 2018 and 2020 calendar years, ASIC has recorded a 64% increase in civil penalty proceedings as well as a 36% increase in the number of criminal proceedings commenced. This included ASIC’s two largest ever civil penalty outcomes — penalties totalling $57.5 million were imposed on two NAB subsidiaries for fees-for-no-service misconduct, and penalties totalling $75 million were imposed on OTC derivatives provider AGM Markets Pty Ltd and two of its authorised representatives for systemic unconscionable conduct. In that case, the court heard that account managers were told to ‘kill your customers’, a reference to encouraging their clients to make deposits and trades. These deposits and trades resulted in trading losses totalling approximately $32 million, which the court found had translated to revenue for the FX provider.
- Mayfair 101: Federal Court has restrained Mayfair 101 director James Mawhinney from promoting and raising funds through financial products for 20 years . This follows the 23 March 2021 decision of the Federal Court that found that companies in the Mayfair 101 Group made statements that were false, misleading or deceptive in advertisements for its debenture products. Justice Anderson found Mr Mawhinney has been ‘involved in multiple contraventions’ and his conduct can be ‘characterised as ‘serious, incompetent and reckless and displaying a propensity for conduct in disregard of the requirements of financial services laws.’ His Honour also found Mayfair Wealth Partners, which promoted the Australian Property Bonds, took $100,000 from an investor without issuing the investor with the product or contacting the investor, stating that: ‘… conduct is reprehensible. No competent, fair or reasonable financial services provider takes money from an investor without having proper administrative procedures in place to ensure the relevant product is issued to the relevant investor.’
- Financial advisers (Treasury): Commissioner Hayne recommended the establishment of a single disciplinary body for financial advisers and the requirement that all financial advisers who provide personal financial advice to retail clients be registered. Draft legislation has now been released which expands the role of the Financial Services and Credit Panel within ASIC to operate as the single disciplinary body for financial advisers. It also creates new penalties and sanctions which apply to financial advisers found to have breached their obligations and introduces a new annual registration system for financial advisers. There is a really good flow chart of the disciplinary process which you can see here — my top read for the week! You can submit responses to this consultation up until 14 May 2021.
- Fintech (UK): this announcement caught my eye earlier in the week. UK Chancellor Rishi Sunak set out proposals to enhance the UK’s competitive advantage in fintech, from regulatory support and reforms to help firms grow to a new taskforce to lead the UK’s work on a central bank digital currency. In essence, the UK is doubling down on its ‘regulatory sandbox’ which is designed to reduce red tape to assist fintech firms successfully make it to market and grow; Australia has a similar version, though my sense is that it is not largely utilised. The proposals include: new FCA ‘scale box’ (a package of measures to enhance its regulatory sandbox) and Centre for Finance, Innovation and Technology to boost growth; UK to lead digitisation of finance with central bank digital currency taskforce and support for new technologies and infrastructures (a new Taskforce, bringing together HM Treasury and the Bank of England, will be established to explore a possible UK central bank digital currency . Two new forums will also be established to engage technical experts, and key stakeholders — including financial institutions, merchants, business users, civil society groups, and consumers — through the process.); and, additional plans for capital markets reform to enhance open and dynamic financial centre — the UK is looking to improve the efficiency of rights issues. All in all, it sounds quite exciting to me and a good effort by the UK.
- Climate change (APRA): APRA has released a draft guide for Prudential Practice Guide CPG 229 Climate Change Financial Risks (CPG 229), designed to assist banks, insurers and superannuation funds in managing climate-related risks and opportunities as part of their existing risk management and governance frameworks. The guidance covers APRA’s view of sound practice in areas such as governance, risk management, scenario analysis and disclosure, but APRA states that it does not create new requirements or obligations. There is a nifty infographic that accompanies the update as well, and set it all out in detail. The guide is out for consultation, and APRA is seeking stakeholder feedback on the draft CPG 229 by 31 July 2021.
Thought for the week: there is a lot of information to absorb from the regulators, particularly in the last two years. Getting that information across to the regulated population is critical; I think both ASIC’s and APRA’s use of infographics and related devices is commendable and should be kept up!