Australian regulators weekly wrap — Monday, 28 February 2022

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. Ransomware (Parliament): on 17 February 2022, the Crimes Legislation Amendment (Ransomware Action Plan) Bill 2022 was introduced into the House. The bill amends the Criminal Code Act 1995, the Crimes Act 1914 and the Proceeds of Crime Act 2002 to updated criminal offences and procedures to respond to the threat of ransomware. It introduces a standalone cyber extortion offence, which will criminalise the extortive conduct associated with ransomware; an aggravated offence relating to cyber attacks on critical infrastructure assets as defined under the Security of Critical Infrastructure Act 2018; a standalone offence of dealing with data obtained by unauthorised access or modification; and, an aggravated offence criminalising producing, supplying or obtaining data under arrangement for payment. In relation to crypto currency, it extends the powers of existing law enforcement agencies to ensure they have the appropriate capabilities to investigate the use of, and ability to seize, these digital assets. This includes ensuring that existing information gathering powers and freezing orders available in relation to financial institutions are applicable to digital currency exchanges. Interestingly, the Bill does not make the payment of a ransom as such illegal.
2. Electronic signing (Parliament): the Corporations Amendment (Meetings and Documents) Bill 2021 (Cth) is now in effect. Companies can execute documents in electronic form and using electronic means, and importantly this extends to deed. An individual agent can execute documents (including deeds) on behalf of companies under s. 126. Witnessing and delivery is not required. The agent can also sign documents in electronic form and using electronic means. If a company executes a document through an agent under s. 126, a person will be able to rely on the assumptions in s. 129(3) for dealings and transactions in relation to the company. Sole director companies can use the statutory document execution means — a long overdue, and very welcome change!
3. CDR (Treasury): on 14 February 2022, Minister Hume announced the commencement of a statutory review on the operation of the Consumer Data Right. The review is initiated under section s. 56GH of the Competition and Consumer Act 2010 and will explore the extent to which implementation of the CDR statutory framework supports the core policy objectives of driving value for consumers, increasing competition within designated sectors, and driving innovation across the data services sector. The terms of reference for the review are here.
4. General insurance quotes (ASIC): ASIC has remade Class Order [CO 11/842] PDS requirements where a quote for a general insurance product is given, for a further five years. ASIC Corporations (PDS Requirements for General Insurance Quotes) Instrument 2022/66, continues to provide relief to address the practical difficulties for general insurers in giving a PDS to a consumer during a phone call. It facilitates insurance quotes being given to consumers over the phone, enabling consumers to easily compare.
5. Crypto (UK): the FCA is planning to bring ‘qualifying crypto assets’ into its financial promotions regime. It will adopt the UK government’s definition of ‘qualifying crypto assets’ (as confirmed in its consultation response of 18 January 2022). It should release its rules in mid 2022. The regime will capture local and international promoters, and subject them to the standard requirements which deal with who can issue a promotion, the format and substantive content of materials, and how risk is expressed. Unregulated firms will need to prepare for a higher level of regulation, and operational changes. Interestingly, like in Australia, this will create a somewhat fragmented regulatory structure for crypto firms operating in the UK as this level of regulation does not cover the entire product itself — only a narrow subset such as investments and speculative trade as ‘qualifying crypto assets’.

Thought for the future: the regulation of crypto is increasing globally, so much is clear. The US, UK and Australia are all very much feeling their way through the landscape at the moment, and adding pieces of regulation on — there is no wholesale licensing requirements as yet. That is a good thing in my view — overregulation is easy in terms of policy, but not in anyone’s overarching interest.