Australian Regulators Weekly Wrap — Monday, 5 April 2021
6 April 2021
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 the forefront of your practice by quickly setting out the top five developments from the past week, analysis and practical considerations for the future.
- CFDs (ASIC): ASIC’s product intervention order which reduces CFD leverage available to retail clients and targets CFD product features and sales practices that amplify retail clients’ CFD losses, such as providing inducements to become a client or to trade, has now taken effect. CFDs are a leveraged derivative that allows a client to speculate in the change in value of an underlying asset, such as foreign exchange rates. It is worth noting that the ASIC’s proposal to ban the issue and distribution of binary options remain outstanding. For other products which may be on ASIC’s radar, given its product intervention powers have been around in some form in other comparable jurisdictions for some time, see here.
- AFCA review (AFCA): AFCA’s submission to the Government on its performance over the last two years is an interesting read. It received more than 153,000 complaints, and finalised over 146,000 complaints in this period. The overall average time it took to finalise all complaints in the first two years was 74 days. AFCA has also established and administered a legacy jurisdiction covering historical complaints going back to 1 January 2008. Three parts that leapt out at me were, firstly, where it notes it had “…delivered access to justice to many thousands of Australians, achieving $477 million in compensation or refunds in its first two years”. Second, that AFCA’s systemic issues and serious contravention work led to a range of enforcement actions by regulators, resulting in more than $202 million in financial remediation for consumers and small businesses over the two-year period. The information that AFCA is passing to ASIC, in other words, is getting acted upon in quite a large way! Finally, boldly, AFCA has taken the opportunity to ask for a broader remit, stating: “It is important that AFCA’s compensation cap for non-financial loss enables AFCA to compensate a complainant for more significant and extreme stress and inconvenience caused by the conduct of a financial firm…AFCA proposes an increase to the compensation cap for nonfinancial loss”.
- KYC (AUSTRAC): the anti-money laundering regulatory has updated the applicable customer identification procedures (ACIP) and ongoing customer due diligence resources, to assist regulated entities in strengthening these parts of their AML/CTF program. The updates include new guidance and example scenarios that will help regulated entities to identify gaps in their customer identification, verification and ongoing customer due diligence processes. I think it is great from AUSTRAC — AML / CTF can be labyrinthine to navigate at times — you can access the new resources here.
- Responsible lending (Treasury): the Assistant Treasurer, Michael Sukkar, has given an interesting speech justifying the removal of the responsible lending laws. He called them a “… a rigid and inflexible system that has frustrated many consumers and lenders alike impeding prospective and good borrowers from much-needed credit because of their granular spending habits rather than their ability to service a loan”. Once scrapped, the responsible lending laws will only remain for small amount credit contracts and consumer leases. For all other credit, lenders will still have to undertake credit assessments based on a borrower’s capacity to repay without substantial hardship but have greater flexibility to do so. Mr. Sukkar mentioned APRA’s lending standards, the Code of Banking Practice and AFCA in the context of maintaining lending standards. In Parliament, the progression of the bill repealing responsible lending laws has been delayed, after Senate adjourned the debate of its second reading until 11 May 2021.
- Elder abuse (ABA): the Australian banking association has called on governments across Australia to establish: Power of Attorney (POA) laws which are the same across the country and protect people from elder abuse; a POA register to check if POA documents are legitimate and current; and, somewhere to report abuse in each state that can investigate and act. The goal is to prevent elder financial abuse and, in my view, is a great use of the ABA’s insights and clout.
Thoughts for the future: anyone who has spoken to me about AFCA knows my view that it is a quasi-regulator, and I think the tonality of the above statement that it has delivered access to justice in the form of half a billion in compensation / refunds supports that view. I appreciate that mine is a one sided view though, so do get in touch if you think differently, I’d love to chat with you about it.
Published on Australian Regulators Weekly Wrap.
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Liam Hennessy, Director
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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.