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. Licensing update (ASIC): I attended an ASIC licensing update earlier in the week, and it was fascinating! My notes are in my weekly newsletter, which you can access here (reach out to me if you wish to be on the emailing list). The resourcing, consistency and strategy of the division was discussed, together with other matters. Here is what I found most interesting. Predictably, an issue that arises in licensing when RMs go for multiple roles they must prove they have competence all over again. ASIC is aware of this, and the fact that ASIC holds data over multiple storage areas within in the organisation on individuals. ASIC plan to use AI to aggregate data on individuals to accelerate the process each time an RM or Director needs to be approved, i.e. the information will be pre-populated. This is obviously convenient and logical. Here is the interesting part — the aggregated data on individuals, across all of ASIC’s divisions (eventually), will also be used to assess FAR Accountable Persons. This is something that occurs in the UK where the approved persons regime and senior managers regime, which govern individual accountability and regulation, have been in place a lot longer. It is different for Australians, however…
  2. ‘Best interest’ duty (Court): The Federal Court has imposed a $7.2 million penalty on Dixon Advisory for advice failures. The Court found that on 53 occasions between October 2015 and May 2019, Dixon Advisory was the responsible licensee of six representatives who did not act in the ‘best interests’ of eight clients when they advised these clients to acquire, roll-over or retain interests in the US Masters Residential Property Fund related products. Those representatives did not conduct a reasonable investigation of the clients’ circumstances before providing the advice. In some cases, this inappropriate advice resulted in the client’s self-managed superannuation fund being insufficiently diversified and exposed to risk of capital loss. The Court held: ‘There is no evidence that the (Dixon Advisory) representatives conducted the necessary reasonable investigations into the recommended financial products or any alternative financial products, nor is there evidence that they considered the personal circumstances of the clients.’ A useful case in setting out the benchmark for personal advice duties, the judgment is here.
  3. Superannuation (ASIC): ASIC Commissioner Danielle Press gave a speech to the AIST Conference of Major Superannuation Funds stating that there are three key areas for super funds to be focused on now. 1) capture and harness the data in the super system to better understand the financial future of Australians; 2) how to respond to consumer harms should they emerge, including identifying breaches of the law, internal-dispute resolution mechanisms and improving remediation practices; and 3) trustees’ obligations relating to market integrity. A useful speech, with a sting in the tail at the end. Ms Press stated that “Earlier I said that our principal expectation of super funds remained the same. The other constant — now and over the next five years and beyond — is our willingness to take enforcement action where funds fall foul of the law…I strongly encourage trustees to engage in open and transparent dialogue with ASIC — if there are serious concerns and a civil penalty action against the trustee, this may be taken into consideration by Courts.”
  4. Entain group (AUSTRAC): AUSTRAC has commenced an enforcement investigation into Entain Group, following an extensive supervisory campaign that assessed entities within the corporate bookmakers sector. The investigation will focus on whether Entain has complied with its obligations under the AML/CTF Act, and AUSTRAC’s stated aim is that other corporate bookmakers sector take notice. It is a little odd to me, announcing an investigation, as opposed to a finding. What happens if AUSTRAC finds nothing, but the company has suffered from the bad press in the interim? More interestingly, as a matter of human nature, is there more pressure to find something once you have publicly made the statement?
  5. M&D (ASIC): not so much a regulatory update as a reminder just how serious ASIC takes being told the truth under s.1308(3) of the Corporations Act 2001 (Cth). ASIC alleged that on 12 May 2020, Mr De Oliveira made a false statement on a form lodged with ASIC to voluntarily deregister Shiera Wellbeing Centre. ASIC alleged that Mr De Oliveira falsely declared in the form that Shiera Wellbeing Centre had no outstanding debts, when in fact Shiera Wellbeing Centre had an outstanding debt following an order made by the Queensland Civil and Administrative Tribunal. She was convicted and fined this month.

Thought for the future: A cryptocurrency mixer known as Tornado Cash was sanctioned by the US in August 2022. Tornado Cash is an open-sourced self-executing protocol, which makes it the first time a piece of software rather than a legal entity has been sanctioned. There are a host of legal questions and unintended consequences with this approach, but it is notable for the major development it represents!

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