Mid-year update Australian Financial Services in 2022

• The Financial Sector Reform (Hayne Royal Commission Response – Better Advice) Act 2021 (the Better Advice reforms) came into force on 1 January.
• The Better Advice reforms include an expansion to the role of the Financial Services and Credit Panel within ASIC to operate as a single disciplinary body for financial advisers, the introduction of new penalties and sanctions for financial advisers who have breached their obligations under the Corporations Act, and a new registration system.
• Education and training standards were introduced that require:
  • Financial advisers who have sat the Financial Advisor exam at least twice before 1 January 2022 will have until 1 October 2022 to re-sit and pass the exam. Those who have not sat the exam twice, must have passed the exam by 1 January 2022 to continue to provide personal advice.
  • Financial advisers who have not yet sat the Financial Advisor exam must hold a degree standard qualification, pass the Financial Advisor exam, complete 40 hours of CPD each year, and complete a full-time professional year with at least 100 hours of structured training.

• ASIC, APRA and the RBA have all stated that use of the London Interbank Offered Rate (LIBOR) should cease in new contracts from 1 January 2022.
• The regulators have also stated that they expect market participants to accelerate the conversion of legacy LIBOR contracts.
• Read more about the transition away from LIBOR in our publication.

• The definition of "financial service" under Chapter 7 of the Corporations Act has been extended to claims handling and settling services by the Financial Sector Reform (Hayne Royal Commission Response) Act 2020.
• Insurers and other people who provide claims handling services for insurers must now hold an AFSL authorising the provision of such services, or alternatively, be authorised by a person who holds the required AFSL.
• Those same people must comply with the general obligations under section 912A of the Corporations Act, including acting efficiently, honestly and fairly with regards to claims handling and settling services, and having compliant internal dispute resolution processes in place.

• Treasury released a report on the outcomes of the Consumer Data Right Strategic Assessment.
• The Strategic Assessment was an assessment undertaken by Treasury into the economy-wide roll out of the Consumer Data Right.
• The report has identified that "Open Finance", covering general insurance, superannuation, merchant acquiring, and non-bank lending is the next priority area for CDR.
• Treasury will undertake further targeted consultation to understand what the priority datasets in Open Finance are likely to be. Treasury aims to complete these consultations in 2022.
• Read more about Consumer Data Right Rules Framework in our publication.

• In November 2021, ASIC sought comments on its consultation paper, CP 350 Consumer Remediation about the updated draft guidance on consumer remediation.
• The draft regulatory guide (draft RG 000) attached to CP 350 sets out the principles and guidance for financial services licensees.
• The draft regulatory guidance would replace RG 256 and extends coverage of the current RG 256 to cover all financial services licensees, credit licensees and retirement service providers.
• Comments on CP 350 and the draft regulatory guide were due by 11 February 2022.
• Read more about remediation in our publication.

• The Senate Standing Committees on Economics report on the inquiry into the Financial Accountability Regime Bill 2021 and Financial Services Compensation Scheme of Last Resort Levy Bill 2021 and related bills was issued on 15 February 2022.

• The Senate Committee recommended the Bills be passed without amendment.

• However, Labor senators expressed concern that the proposed compensation scheme did not cover managed investment schemes, and separately recommended their inclusion.

• The Bills ultimately lapsed at the calling of the 2022 Federal Election. Their potential reintroduction will depend on the outcome of the election and the government's priority.
  

• The ACCC's draft determination, released 8 December 2021, proposed to re-authorise the Finance Brokers Association of Australia (FBAA). Submissions on the draft determination were due by 14 January 2022.
• The ACCC issued its final determination granting re-authorisation until 10 March 2027.
• In its final determination, the ACCC determined that the disciplinary scheme is unlikely to result in public detriment and is likely to lead to more effective and transparent regulation of FBAA members.

• In November 2021, ASIC released a consultation paper seeking comments on its proposed changes to the Class Order 11/842.
• The Class Order provides relief on PDS requirements where a quote is given for a general insurance product over the phone.
• ASIC determined that the Class Order was in the public interest as it facilitates customers comparing a number of general insurance products (see ASIC's media release).
• ASIC remade CO 11/842 in substantially the same form until 1 March 2027 (see the new instrument Class Order 2022/66).

• In December 2021, ASIC released a consultation paper seeking submissions on whether it should extend the relief provided by Class Order 14/41.
• The Class Order exempted credit licensees who enter into hardship variations of less than 90 days from the obligation to provide written notice of those changes to the customer. Normally, where a customer notifies a credit licensee of hardship, the licensee is required to provide written notice of changes (if any) to the credit contract.
• ASIC considered that the renewal of the Class Order was appropriate to ensure credit providers could quickly offer temporary assistance to customers (see media release).
• ASIC remade CO 14/41 in substantially the same form until 1 April 2024 (see the new instrument Class Order 22/81).

• ASIC published a report (Report 718) on updates to the ePayments Code.
• The ePayments Code is a voluntary code of practice that sets standards for electronic payments, including ATM withdrawals and mobile banking. ASIC is currently reviewing the Code to ensure it remains relevant and effective.
• The report is in response to ASIC's Consultation Paper 341 (Review of the ePayments Code) which was released in May 2021.
• ASIC's review is focussed on making incremental updates to the code to address key issues. ASIC's report released on 7 March 2022, relates to updates to the Code ASIC intends to release in mid-2022.
• The report covers both the intended updates, which are designed to account for significant technological innovation, as well as updates to the following areas of the Code:
  
  • compliance monitoring and data collection;
  • compliance monitoring and data collection;
  • mistaken internet payments;
  • unauthorised transactions;
  • complaints handling; and
  • facility expiry dates.

• Read more about the future of regulation of Australia's payment systems in our publication.

• On 19 November 2021, the Mortgage and Finance Association of Australia (MFAA) lodged an application for revocation and substitution of an existing authorisation concerning its Disciplinary Rules. MFAA sought re-authorisation for its revised Disciplinary Rules.

• The amendments sought to simplify the wording of the Disciplinary Rules, remove duplication and clarify some of the processes of the MFAA Tribunal. The Rules have been authorised since 2004 and were most recently reauthorised in 2020.

• On 9 March 2022, the ACCC issued a final determination granting re-authorisation until 31 March 2027.
  

• On 7 October 2021, the Insurance Council of Australia (ICA) lodged an application for authorisation relating to the provision of business interruption cover.
• On 24 March 2022, the ACCC released its final determination granting authorisation until 2 October 2023. The authorisation was granted as the ACCC was satisfied that the ICA's action would benefit the public through more efficient claims processes and experiences, which outweighs the minimal public detriment, ensuring that insurance providers can enter into arrangements to use a web-based tool developed to assist in the assessment of BI claims arising from COVID-19 (the DSpark Tool).
• Read more about business interruption insurance and issues to consider in this publication.

• In February 2022, ASIC released its consultation paper CPS 350 on the proposed updates to RG 263 Financial Services and Credit Panel. The updates includes guidance as to:
  
  • the types of matters to be referred to the Panel;
  • variation or revocation of Panel orders; and
  • the processes and procedures of the Panel.
• Submission on the draft RG are due by 28 March 2022.

• ASIC has released the final mandatory requirements for the reporting of internal dispute resolution (IDR) data in the form of an IDR data reporting handbook.
• From 5 October 2021, financial firms have been under an obligation to record all complaints received and information about those complaints, the "IDR Data".
• From 28 February 2023, an initial 11 large financial firms will need to report IDR Data to ASIC.
• From 31 August 2023, all remaining financial firms are required to report IDR Data to ASIC.
• Read more about internal dispute resolution procedures in this publication and data in this publication.

• In 2021 the Senate referred the adequacy and efficacy of Australia's anti-money laundering and counter-terrorism financing (AML/CTF) regime to the Legal and Constitutional Affairs References Committee for Inquiry and report.
• On 30 March 2022, the Senate handed down its report, which covers a range of issues including (but not limited to):
  
  • the efficacy of the Australian Transaction Reports and Analysis Centre;
  • how Australia's AML/CTF laws could be strengthened;
  • the effectiveness of the Anti-Money Laundering and Counter-Terrorism Financing Act 2007 at preventing AML outside the banking sector;
  • whether Australia was an attractive destination for the proceedings of foreign crime and corruption; and
  • the regulatory impact, costs and benefits of extending AML/CTF reporting obligations to designated non-financial businesses and processions.

   

• The Legal and Constitutional Affairs Reference Committee recommended that the Commonwealth Government:
  
  • accelerates its consultation on the implementation of tranche 2 reforms form the Financial Action Task Force recommendations;
  • seeks advice as to whether s 242 of the Anti-Money Laundering and Counter Terrorism Financing Act 2006 should be amended to ensure proper operation of legal professional privilege; and
  • seeks to create a beneficial ownership register.

Read more about Anti-Money Laundering in our publication. 

• APRA has released a discussion paper which outlines its plans to collect data from the entities it regulates.
• APRA intends to start collecting "deeper, broader data sets" for use in various ways, including identifying emerging issues.
• APRA will also aim to share that data with its "peer agencies" to reduce the burden on the industry and share more insights with peer agencies.
• The discussion paper sets out the proposed road map for each industry that reflects the work already undertaken and the expected regulatory policy agenda.

• In 2020, ASIC made a product intervention order imposing conditions on the issue and distribution for contracts for difference (CFDs) to retail clients.
• The product intervention order imposes leverage and margin restrictions, protects against negative account balances, and bans certain customer inducements.
• In October 2021, ASIC released Consultation Paper 348, proposing to extend the product intervention order.
• On 6 April 2022, ASIC extended the product intervention order for a further five years.
• Read more on CFD in our publication.

• On 29 November 2021, Australian Payments Network Limited (AusPayNet) lodged an application for re-authorisation for its High Value Clearing System (HVCS) Regulations and Procedures that apply to the suspension and termination of HVCS members and the requirement that HVCS members join the Society for Worldwide Interbank Financial Transactions (SWIFT).

• The ACCC has authorised a form of this conduct since 1998 and the conduct is substantially unchanged.

• On 14 April 2022, the ACCC issued a final determination granting re-authorisation for the conduct until 6 May 2032.

• In April 2021, ASIC further extended certain temporary relief measures to improve access to financial advice for consumers that have been impacted as a result of the COVID-19 pandemic.
• This included the record of advice relief measure, which allowed financial advisers to provide a record of advice rather than a statement of advice, to existing clients requiring financial advice due to the impact of the pandemic.
• ASIC has not extended this relief which ended on 15 April 2022.
• To read more about ASIC's relief to financial advisers advising consumers read this publication.

• On 18 February 2022, APRA released a discussion paper outlining the proposals for the publication and the confidentiality of data reported under the new superannuation reporting standards, including what information will and will not be treated a confidential under the 10 new reporting standards.
• Submission on these proposals were due 15 April 2022.

• In April 2022, ASIC extended the relief under CO 2022/264 that exempts litigation funding schemes from the requirement to disclose certain sensitive information in dollar disclosures in their PDS.
• Prior to this instrument being made, the existing relief was due to expire on 28 April 2022.
• ASIC extended the relief to avoid the disclosure of certain information that might provide a tactical advantage to opposing parties in class actions.

• APRA is consulting on new prudential standards. These standards are designed to ensure banks insurers and superannuation trustees are prepared to respond to future financial crises.

• There are two proposed standards:
  
  • CPS 190 Financial Contingency Planning. This would require all APRA-regulated entities to have plans for responding to severe financial stress; and
  • CPS 900 Resolution Planning. This would require "large or complex APRA-regulated entities" to plan for, and take proactive steps to address, to ensure that in the event of their failure, APRA can resolve them with limited impacts on the community and financial system. This includes ensuring that critical financial services can continue to be provided with minimal disruption.
• Consultation closed on 29 April 2022, with further consultation on supporting guidance material to occur during 2022.

• Following the passage of the Better Advice reforms, the Financial Services and Credit Panel has been granted its own legislative functions and powers.
• These powers enable the Panel to address certain types of misconduct by financial advisers (eg where an adviser has contravened educational requirements or breached financial services laws).
• ASIC has released a consultation paper, CP 359, seeking submissions on its proposed approach to (1) determining when to convene a sitting of the Panel, (2) the use of technology in such hearings and (3) publicising Panel decisions and the corresponding updates to RG 263. RG 263 sets out the principles and processes relating to the Panel.
• ASIC expects to release the final RG 263 in May 2022.           

• On 4 April 2022, APRA released a discussion paper outlining the proposed scope and approach to Phase 2 of its Superannuation Data Transformation project.
• The discussion paper is part of APRA's broader Superannuation Data Transformation project, which aims to address gaps in the "coverage and quality of superannuation data".
• Phase 2 of the Superannuation Data Transformation Project focusses on the "depth" of data collected, ie. the collection of more granular data and the removal of duplicated or redundant data.
• Submissions on the APRA proposals were due on 12 May 2022.

• On 16 May 2022, ASIC released Consultation Paper 361, seeking comments on proposed changes to the ASIC Derivative Transaction Rules (Reporting).
• ASIC is proposing specific changes to the current rules in relation to the long lead time elements of implementing the unique transaction identifier, unique product identifier and data elements international standards. ASIC also seeking to specify ISO 20022 as the data messaging standard.
• Submissions are due by 8 July 2022.

• On 22 December 2021, Cardtronics Australasia Pty Ltd (Cardtronics) sought authorisation to enter into agreements with financial institutions in respect of its Allpoint and Allpoint+ ATM networks, whereby cardholders of these institutions will be able to have surcharge-free access to these ATMs, among other benefits.
• On 30 May 2022, the ACCC released its final determination granting authorisation until 30 May 2032. The ACCC determined the proposed conduct would likely result in public benefits through increased consumer choice and enhanced competition for ATM transaction services and retail banking services.

•  On 9 September 2021, the ACCC authorised the merger between BPAY Group Holding Pty Ltd and its subsidiaries (together, BPAY), eftpos Payments Australia Ltd (eftpos) and NPP Australia Ltd (NPPA).
• The ACCC accepted a court-enforceable undertaking offered by the parties, which requires them to agree on an industry-wide standard supporting payment with QR codes by the end of June 2022, in coordination with Australian Payments Network Limited, and to ensure the eftpos payments scheme and card based issuing and acceptance infrastructure and services are maintained.
• The ACCC also accepted a commitment from the entities to do all things in their control to make available and promote the least cost routing for at least four years.
• Read more about the amalgamation of payment service providers BPAY, eftpos and NPPA in our publication.

• In March 2022, the Government commissioned a review into how the regulatory framework could better enable the "provision of high quality, accessible and affordable financial advice".
• In response, Treasury released an Issues Paper, seeking feedback on how to address the issues identified in the terms of reference.
• The review is intended to cover the full gamut of financial advice, from personal advice provided by financial advisors to automated tools such as digital advice.
• In particular, the Review will seek to determine whether the costs of compliance could be reduced without prejudicing outcomes for customers.
• Submissions are due by 3 June 2022, with a final report to be provided to the Government by 16 December 2022.

• Enhancements to SPS 250 commence on 1 July 2022.
• In 2021, APRA consulted on revisions to Prudential Standard SPS 250 Insurance in Superannuation and Prudential Practice Guide SPG 250 Insurance in Superannuation.
• The revised prudential standard and guide are aimed at ensuring better member outcomes through updated requirements for trustees to select, manage and monitor members’ insurance arrangements.

• On 1 July 2022, amendments to the Privacy Act come into effect to permit reporting of financial hardship information within the credit reporting framework.
• The amendments establish a new category of credit information in the Privacy Act known as 'financial hardship information' for consistent reporting of repayment history information.

• 1 July 2022 is the end of the transitionary period in relation to obligations on fee recipients to provide clients fee disclosure statements (FDS) in certain circumstances (see ASIC's media release).
• From 1 July 2022, licensees engaging in ongoing fee arrangements must obtain written consent from their client before deducting ongoing fees under the arrangement.

• The ALRC is scheduled to release its second interim report on its review of the Corporations and Financial Services Regulation in September 2022.
• The ALRC's review is aimed at facilitating a more "adaptive, efficient and navigable framework of legislation".
• The second interim report will focus on regulatory design and the hierarchy of primary law provisions, regulations and class orders.

• ASIC will review and consider comments on the two proposals set out in Consultation Paper 355 between January and March 2022 and decide whether to exercise its power to make the product intervention orders.
• The two product intervention orders are outlined in CP 316 and CP 330.
• CP 316 details ASIC's proposed use of a product intervention order to prohibit credit providers from providing short term credit while outsourcing additional or collateral fees, such that the combined fees exceed the threshold set for the short term credit exception contained in the NCC.
• CP 330 sets out ASIC's proposed use of a product intervention order to prohibit credit providers and associates from issuing continuing credit contracts where the total fees exceed those set by the National Consumer Credit Protection Regulations.
• Comments on the two product intervention orders were due by 21 January 2022. ASIC will then consider the submissions and whether to make the product intervention orders.
• Read more about ASIC's decision to extend CFD product intervention order in our publication.

• On 7 June 2022, ASIC published its updated ePayments code. The scope of the extended code now covers payments made using the New Payments Platform.
• ASIC has similarly updated parts of the code that deal with compliance monitoring and data collection, mistaken internet payments, unauthorised transactions, complaints handling, and facility expiry dates.
• These amendments are designed to update the code prior to the introduction of the mandatory ePayments Code later in the year.

• On 20 April 2022, the Customer Owned Banking Association (COBA) lodged an application seeking authorisation to implement provisions of its Customer Owned Banking Code of Practice for 5 years.
• On 27 May 2022, the ACCC in its draft determination, proposing to grant authorisation to COBA. The ACCC considered the relevant provisions would likely result in public benefits by improving accessibility to and affordability of banking services, enhance customer and guarantor protections, and improve competition by COBA members with other members of the banking sector.
• Submissions by interested parties are due by 10 June 2022, in response to the ACCC's draft determination, with the ACCC intending to release its final determination in June/July 2022.

• ASIC will begin publishing data about breach reports annually on its website from late 2022.
• For more information on the ASIC breach reporting regime, please see our previous publication.

Responsible Lending continues to be an area of focus since the Royal Commission. Reforms to the National Consumer Credit Protection Amendment Act are currently before Parliament. While the Senate Economics Legislation Committee recommended that the Bill be passed, both Greens and Labor senators provided dissenting reports. Accordingly, any changes to the Responsible Lending laws in Australia are likely dependent on the outcome of the 2022 Federal election.

For more information, see our Financial Services Snapshot here.

While the original FAR bills lapsed at the dissolution of Parliament following the calling of the election, we may see their reintroduction once a new government is formed. The exact form of any bill is uncertain, as is its reintroduction, however given the Economics Legislation Committee endorsed the original bills, it would not be surprising to see their re-introduction.

Read more FAR regime in our publication.

As with the FAR legislation, the Financial Services Compensation Scheme of Last Resort bills have lapsed following the calling of the election. These bills may also be re-introduced following an election outcome.

As with the FAR legislation, a bill to strengthen the unfair contracts term regime may be re-introduced by the new Labor government.
Read more about potential introduction of unfair contract terms reform in our publication.

There is increasing focus from Government and regulators on the need to regulate, and the possibility opportunities associated with, cryptocurrencies. For example, by the end of 2022, Treasury is expected to provide results of consultation on a single, tiered payments licensing framework by the end of 2022.

This framework will likely have separate authorisations for payment facilitation services and stored-value facilities. It may also have different tiers of authorisation depending on the service provided by the payment service provider.

• In its response to the Review of the Australian Payments System, the Senate Select Committee on Australia as a Technology and Financial Centre Final Report, and the Parliamentary Joint Committee Corporations and Financial Services Report on Mobile Payment and Digital Wallet Financial Services, the Government committed to comprehensive payments and crypto-asset reforms by mid to end of 2022.

Payments: by mid-2022 the government will have: 

• Set out a strategic longer-term plan for the payments system, developed with industry and reviewed on an annual basis;
• Settle details of additional powers for the Treasurer to set payment system policy; and
• Determined changes necessary to modernise payments system legislation to accommodate new and emerging payment systems, including Buy Now Pay Later and digital wallets.

Crypto-Assets: by mid-2022 the government will have:

• Completed consultation on the establishment of a licencing framework for Digital Currency Exchanges;
• Completed consultation on a custody or depository regime for business that hold crypto-assets on behalf of consumers; and
• Received advice from the Council of Financial Regulators on the underlying causes and policy responses to de-banking.

Read more about the Australian regulation of crypto currency and digital assets in our publication.

In December 2021, ASIC released its latest report on the cyber resilience of entities who operate within the financial services sector. The report noted that while, as a general rule, those entities are resilient against a changing cyber threat environment, any improvements have been minor.

Similarly, the Government introduced a (now lapsed) bill to amend aspects of the law in relation to computer offences, including ransomware attacks and dealing with data obtained by unauthorised access (the Crimes Legislation Amendment (Ransomware Action Plan) Bill 2022).

ASIC has noted that cyber resilience will continue to be a high priority for the regulator in 2022.

There is an increasing focus by both regulators, and investors, on the steps expected of listed companies (especially around disclosures) as it relates to climate change. For example, ASIC has publicly welcomed the establishment of an International Sustainability Standards Board, which will develop global baseline climate and sustainability disclosure standards to meet investors' information needs. ASIC also continues to encourage listed companies to take certain steps in response to climate change, including (1) consider climate risk, (2) disclosure any material business risks affecting future prospects and (3) disclose useful information to investors. This is likely to be a developing area and one directors and senior management of listed companies should continue to monitor.

Similarly, in late 2021, APRA released a prudential practical guide on the financial risks posed by climate change to assist entities develop risk management and government frameworks that consider climate change.