Regulatory news

ASIC’s Commissioner Sean Hughes speaks at the 3rd Australian National Whistleblowing Symposium.

“Investigating misconduct revealed by whistleblowers is just one touchpoint ASIC has with the whistleblower protection regime. We do more than just:

1. investigate misconduct and
2. enforce breaches of the protections.

We also promote and foster compliance with the whistleblower protection regime.”

He outlines:

1. the Corporations Act reforms
2. the scope of ASIC’s review and our findings
3. what we are asking Australian CEOs to do.

APRA has outlined the framework it uses when assessing whether macroprudential intervention is appropriate, and which tool or combination of tools would best achieve its intended objective.

The paper covers:

• the risk factors APRA uses to identify emerging threats to financial stability
• the policy tools APRA can choose from, and
• the importance of consulting with other members of the Council of Financial Regulators as part of the decision-making process.

Victoria’s Crown Royal Commission released its final report, affirming findings made by a similar inquiry conducted in NSW. The report alleges that Crown Melbourne “had engaged in…conduct that was variously illegal, dishonest, unethical and exploitative”.

The Commission recommended that a Special Manager should be appointed for a two-year period to report on what has occurred and how the results of inquiries conducted in NSW, Victoria and WA have been responded to by Crown. The regulator will then decide whether it is ‘clearly satisfied’ that Crown Melbourne has returned to suitability and is therefore eligible to retain its casino licence.

Findings included that Crown Melbourne may have breached several anti-money laundering obligations. AUSTRAC’s enforcement team, which has been reviewing Crown as a result of an AML compliance assessment commenced in September 2019, will examine the inquiry reports as part of its investigations.

All regulated entities should ensure that they are familiar with and adequately training all staff on relevant AML-related matters. You can follow industry-specific guidance provided by AUSTRAC on its website.

APRA has published its analysis of the performance of choice superannuation products ahead of releasing its first Choice Product Heatmap in late 2021.

APRA Executive Board Member Margaret Cole said the findings demonstrate the importance of exposing and addressing underperformance among choice products. “With the annual performance test for choice products coming into effect next year, trustees of products that show up bright red across the heatmap would be well advised to quickly rectify any weaknesses.”

Chair Wayne Byres discussed APRAs role as a forward-looking prudential supervisor, needing to not only address the challenges of today but also ensure be prepared for those of tomorrow. Ensuring bank deposits are safe, that insurers have the capacity to pay claims when they are made, and that superannuation funds are managed in members’ best financial interests, remains at the heart of what we do.

ASIC published its quarterly update covering the period July to September 2021. The focuses of its activity included supporting licensees’ transition towards law reform in several areas, such as:

• Hawking reforms
• Breach reporting
• Deferred sales model for add-on insurance
• Design and distribution obligations
• Licensing of insurance claims handling and debt management services.

ASIC Chair Joe Longo said the regulator was taking a reasonable, common-sense approach to implementing law reforms that commenced in October 2021. However, he reminded licensees that it continues to pursue appropriate enforcement, regulatory and remediation action to penalise misconduct, deter further breaches and protect Australian investors and consumers.

APRA has published the findings of three thematic reviews undertaken over the past 12 months covering: strategic and business planning; fund expenditure; and unlisted asset valuation practices.

Collectively, the three reviews outline risks and vulnerabilities that trustees must have front of mind to drive better practices and improve outcomes for members.

ASIC Deputy Chair, Sarah Court, called on all general insurers to review their pricing systems and controls to prevent consumer harm as a matter of priority. In particular, general insurers should:

• identify any differences between the prices (including discounts) they promised their customers (over at least the past five years) and what those customers were charged;
• comply with their breach reporting obligations;
• remediate any customers impacted, including refunding overpaid premiums; and
• fix the systems, processes, controls and governance practices that have led to promised discounts not being honoured.

Insurers who do not take these actions run the risk of further enforcement action.

ASIC Deputy Chair Karen Chester said, ‘These changes put in place fairness protections, so consumers are not sold products they don’t want or don’t need. The restrictions mean consumer needs will be central to how firms offer products.’ The guidance provides further clarity to the industry on how they can comply with the regime and how the reforms affect commercial practices.

ASIC outlines key issues, new and proposed changes to licensing processes, and other work that affects licensees. They also provide information and data on licensing and registration applications from the 2020–21 financial year. ASIC approved 458 new AFSLs and ACLs (compared to 394 last year). ASIC also approved 537 variation applications by existing licensees (the same as last year).