Regulatory Policy Watch – October

ASIC calls on product issuers to improve DDO compliance

ASIC is calling on product issuers to ensure distribution practices are up to scratch, so consumers can feel confident that the products they purchase suit their needs.

It reported the findings of surveillance of 19 issuers of high-risk investment, insurance and credit products between October 2023 and August 2024 in REP 795 Design and distribution obligations: Compliance with the reasonable steps obligation.

The report’s publication coincided with release of ASIC’s latest Enforcement and regulatory update (1 January to 30 June 2024), which highlighted recent surveillances of home lenders and superannuation trustees and reiterated ASIC’s continuing investigation of greenwashing. Learn more

Being green is not easy

ASIC’s Vanguard greenwashing action has resulted in a record $12.9 million penalty. The investment firm was found to have made misleading claims about environmental, social and governance (ESG) exclusionary screens applied to investments in the Vanguard Ethically Conscious Global Aggregate Bond Index Fund.

Financial services firms are encouraged to read ASIC’s Report 791 ASIC’s recent greenwashing interventions and INFO 271  How to avoid greenwashing when offering or promoting sustainability-related products for guidance on how to avoid greenwashing when offering or promoting sustainability-related or ethical products and investments.

The penalty imposed compared with the $11.3 million penalty Mercer Super was ordered to pay earlier this year. Learn more

Fitting the Bill in major policy areas

The federal government has introduced two bills into parliament in quick succession, covering reforms to Australia’s Privacy and Anti-Money Laundering (AML) regimes.

As well as extending AML/CTF obligations to additional services provided by so-called ‘tranche 2’ entities, the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024 aims to simplify, clarify and modernise the regime and better meet international standards.

Set to take full effect from 1 July 2026 (with 31 March 2026 a key date for some requirements), the reforms represent the most significant and substantial changes to Australia’s AML/CTF regime since its inception, imposing measures that dramatically affect both current reporting entities and services being captured for the first time.

The Privacy and Other Legislation Amendment Bill 2024 is designed to strengthen the OAIC’s enforcement and information-sharing toolkit, require the OAIC to develop a new Children’s Online Privacy Code, introduce a statutory tort for serious invasions of privacy, and criminalise the release of personal data in a manner that is menacing or harassing (‘doxxing’).

Treasury looks to legislate genetic testing ban

The Albanese Government has pledged to legislate a ban on predictive genetic tests being used in life insurance underwriting.

The measure was welcomed by various advocates, including the Australian Medical Association (AMA) and the Council of Australian Life Insurers (CALI).

There is currently a moratorium on genetic tests in life insurance in the Life Insurance Code of Practice owned and published by CALI, but the reform will make the ban legally enforceable. Learn more.

Climate-related financial reporting blows in

Following passage of the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 (Cth), ASIC has established a dedicated sustainability reporting page on its website to provide information about the new regime and how ASIC will administer it.

Mandatory climate-related financial disclosures requirements will be phased in over the next three years, with large Australian businesses and financial institutions the first cohort needing to prepare annual sustainability reports for the financial year commencing on or after 1 January 2025.

Unlike jurisdictions that have currently restricted scope to listed entities only, both listed and unlisted entities will be required to report in Australia. Learn more