Australian Regulators Weekly Wrap — Monday, 13 March 2023

13 March 2023
Liam Hennessy, Partner, Brisbane

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.

  1. Financial accountability regime: The Federal Government has (re)introduced legislation for the Financial Accountability Regime and Compensation Scheme of Last Resort. The bills were read a first time and the second reading moved. The bills are almost the exact same as last year – no changes to civil penalties (no direct liability for APs, but ancillary liability remains – including for third parties) and no change to the indemnity. SREs can’t indemnify AEs (though this doesn’t extent to parents), but there’s no limitation on AP indemnity. The only real change is to s 16, which amends the Minister’s ability to grant exemptions to accountable entities. Under the new iteration of the Bill, the Minister can only provide exemptions through a notifiable instrument and only if they believe that it is unfair for the accountable entity to follow the Bill. The consequent amendments Bill does not have anything particularly interesting in it from my initial skim. See here. Exciting times, and those who haven’t started their implementation should now!
  2. Whistleblowers (ASIC): ASIC has released REP 758, which sets out the good practices ASIC observed from its review of seven entities’ whistleblower programs. In short, ASIC found that programs with considered and well-publicised arrangements for protecting whistleblowers and handling disclosures received useful reports and tip offs about concerns and issues in the workplace. ASIC has encouraged entities to consider how to scale and tailor the good practices in the report to suit their operations. Sensible stuff in my view.
  3. Unlicensed lending (ASIC): ASIC’s crusade against unlicensed conduct continues – it has commenced Federal Court action alleging that Green County and Max Funding failed to make reasonable inquiries about the purpose of loans, which led to Green County providing personal loans to certain borrowers. Neither Green County nor Max Funding were licensed to provide personal loans or act as an intermediary. No doubt they were aiming to provide loans which fell outside the consumer lending laws, but may have gotten it wrong – a timely reminder on structuring credit to fall within the right relevant framework (stating with ‘business purpose’ disclaimers).
  4. AAT (Government): A decision by the Administrative Appeals Tribunal (AAT) that reproduced almost entirely verbatim and without attribution the submissions of the winning side’s argument has been criticised. Rightly so, in my opinion – the AAT is an important check on the exercise of executive power through regulatory bodies. Hopefully its successor (the AAT is being dissolved by the Albanese Government) takes a more serious approach. It will be responsible for FAR challenges, and many other really serious matters in the coming years. We are conducting proceedings in the AAT now, for example, on the cancellation of an AFSL – we are getting a considered, and fair hearing. I would hate to think it might be otherwise if this behavior is left unchecked…
  5. Directors duties (ASIC): Chair Longo has given a speech to the AICD which outlines his views of directors’ duties, and the expanded approach one needs to take to them (following the recent Star action). He has stated that the following “fundamental principles…should be on every director’s mind”. Do I understand the business of the company of which I am a director? Do I have a continuous curiosity in understanding all aspects of the company’s core business, the reasonably foreseeable financial and non-financial risks posed by that business? Am I committed to challenging management to ensure my understanding is well-founded? In addition, and importantly, he said that to satisfy their directors’ duties in relation to a company’s compliance with legal and regulatory obligations, directors need to pay attention to information and reporting systems. They need to ask themselves: what resources need to be allocated? What compliance systems and processes should be established, and how can the board ensure they have the right people in place to enable the company to comply in an effective way?

Thought for the future: Directors’ duties are important, but they have nothing on FAR duties in terms of principles-based obligations…

Published on Australian Regulators Weekly Wrap

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Authored by:

Liam Hennessy, Partner

This update does not constitute legal advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of the content.

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