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. Breach reporting (ASIC): ASIC has issued Consultation Paper 340, seeking stakeholder feedback on proposed updates to its draft guidance on upcoming breach reporting reforms. ASIC seeks public comment on the draft guidance and information sheet by 3 June 2021. The consultation paper follows the Treasury consultation seeking to limit the scope of the legislation — which did not go far enough in my view. In the consultation paper, ASIC set outs that it proposes: 1) to give consistent guidance for AFS licensees and credit licensees on how they can comply with the breach reporting obligation, with examples of how the obligation applies in particular situations; 2) to provide high-level guidance to help AFS licensees and credit licensees identify what they must report to ASIC; 3) to include guidance in draft RG 78 about the obligation for licensees to report to ASIC within 30 days after they first know that, or are reckless with respect to whether, there are reasonable grounds to believe a reportable situation has arisen; 4) to provide high-level guidance on compliance systems for breach reporting to help licensees comply with the breach reporting obligation (which accords my firm’s development of the Gadens breach manager). All of which makes sense, together with an ASIC spreadsheet outlining the “notify, investigate and remediate” for AFSLs and mortgage brokers which set out the obligations for these licensees to investigate certain breaches of the law and notify and remediate clients and consumers in certain circumstances — see here. The new breach reporting regime — stay tuned for a detailed analysis of the regulatory guide soon — will prove to be a large shock to the system in October 2021, as ASIC itself acknowledges stating that it “…expects a significant increase in the volume of reports received as a wider range of entities will be required to report and a wider range of breaches will be subject to reporting.” Together with DDO starting in October 2021, start preparing now is my advice!
  2. AGMs (ASIC): ASIC will extend the deadline for both listed and unlisted entities to lodge financial reports by one month for balance dates from 23 June to 7 July 2021. ASIC has adopted a ‘no action’ position where public companies do not hold their Annual General Meetings (AGMs) within five months after the end of financial years that end up to 7 July 2021, but do so up to seven months after year end. These are likely to be the last COVID-19 related developments are affecting financial reporting, audit and AGM obligations for balance dates after 7 July 2021. ASIC has stated that there is no indication that further extensions of time will be necessary.
  3. Financial resources (ASIC): Under s 912A(1)(d) of the Corporations Act 2001, an AFSL is generally required to maintain adequate resources, including financial resources, to provide the financial services that it is authorised to provide under the terms of its AFSL. These financial requirements are specified in each AFSL and are based on PF 209 and various ASIC legislative instruments. ASIC has made changes that will allow certain AFS licensees to include, where the licensee is a lessee, a right-of-use asset in the calculation of their net tangible assets and, where the right-of-use asset is a current asset, adjusted surplus liquid funds and surplus liquid funds. A sensible change, in my view; revamping the regulatory guides which pertain to calculation of NTA and other ASIC-specific financial metrics would be a worthwhile exercise as well in due course. Working through them can get horribly complicated quickly…
  4. Prudential focus (APRA): Chair Waynes Byres gave a speech to the Committee for the Economic Development of Australia in which he focused on three important issues that he saw were relevant right across the financial sector, and are critical to its long-term strength and resilience. First, climate-related risks. In this regard he noted that one of the biggest challenges in doing so is to shift from subjective judgements to data-driven analysis. The scientific link between rising carbon emissions and warming temperatures is clear, but the tools and methods for risk analysis are still in their relative infancy. Not only are the direct impacts difficult to assess, but so are the potential technological and policy responses. Second, governance, culture, remuneration and accountability. APRA’s view is that systemic weaknesses in GCRA are often the root cause of problems that crystallise into significant, unexpected and damaging financial losses. It highlighted its work on remuneration e.g. the new CPS 511, and a new s pilot risk culture survey involving 10 general insurers, which involves staff in the pilot institutions completing an online survey of 40 odd questions that explore attitudes and behaviours in relation to risk, and willingness and capacity to speak up when things aren’t right. The plan is to role the survey out to 60 + institutions. Third, cyber risk. APRA spoke to CPS 234 Information Security, which came into effect in July 2019, and in November last year, the fact that its new Cyber Security Strategy. Not much new information, though useful nonetheless.
  5. Retail funds (ASIC): the corporate regulator ASIC conducted a review of 14 managed funds between June and November 2020 to identify any potential liquidity issues. The review covered 14 registered funds across three different strategies (four mortgage, five direct property and five fixed income funds) with an aggregate of $1.7 billion in assets under management and approximately 8,500 investors. It identified, in summary, that: there was a significant deterioration in cash received from investor applications versus cash paid out in investor redemptions across the funds during the first half of 2020; there was no material decrease in the liquidity of fund assets over the first half of 2020; most of the funds’ responsible entities introduced enhanced liquidity monitoring in March 2020; and, overall, liquidity risks and redemption rights were appropriately disclosed to investors. ASIC has said that responsible entities should also ensure that their websites accurately represent the reliability of redemptions and distributions (see 20–218MR).

Thought for the future: the Treasurer this week announced the “regulator of regulators”, the Financial Regulator Assessment Authority (FRAA), which will be responsible for overseeing the “effectiveness and capability” of ASIC and the prudential regulator, APRA. It makes complete sense. Parliament is, in my view, ill equipped to be the monitoring body given the expertise gap and politicization that can occurs as anyone who spends time reading the Hansards of the FS Committee will likely pick up.



Liam Hennessy

AU financial services lawyer in compliance, regulatory & disputes. Email sign-up: and LinkedIn: