Regulatory news

A new chapter in the history of insurance in Australia began on 1 January 2022 when the claims handling and settling service reforms came into full force. Persons who provide claims handling and settling services are now required to hold an AFS licence. This means that they must comply with the obligations owed by a person licensed to provide financial services. This includes ensuring those financial services are provided in an efficient, honest and fair manner.

ASIC will take over administration of the financial adviser exam from the Financial Adviser Standards and Ethics Authority from 1 January 2022 following the commencement of the Financial Sector Reform (Hayne Royal commission Response – Better Advice) Act 2021.

The first exam sitting of 2022 will be held from 17 February until 21 February 2022. ASIC publishes information relevant to financial advisers on their Financial Adviser Hub

The Government is committed to ensuring that Australians have access to high quality, affordable and accessible financial advice. Consistent with recommendations 2.3, 2.5 and 2.6 of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Royal Commission), the Government has released for feedback and stakeholder views draft Terms of Reference for the ‘Advice Review’.

The Advice Review will consider whether measures that have been implemented by government, regulators and financial services entities have improved the quality of financial advice, whether further reforms or other changes are needed, and whether any measures or obligations are redundant or can be streamlined. The review will also consider how to ensure the regulatory settings support Australians getting access to affordable financial advice.

In 2017, the Government introduced professional standard reforms for ‘relevant providers (financial advisers). This included setting up the Financial Adviser Standards and Ethics Authority (FASEA) to set education and training requirements for financial advisers.

On 1 January 2022, the Minister for Superannuation, Financial Services and the Digital Economy will assume responsibility for setting the education and training standards. The Government has released a policy paper seeking feedback on the education standards and whether they remain fit for purpose including by ensuring that they adequately recognise on-the-job experience of advisers. Unless the standards made by FASEA are amended or replaced, the existing standards continue to set the requirements for financial advisers.

ASIC welcomes the following appointments to the Operations group:

• Mrs Zak Hammer as Executive Director, Operations (commencing January 2022);
• Mr Peter Dunlop, Chief Financial Officer; and
• Ms Nicole Collins, Chief People Officer.

Reporting to Chief Operating Officer, Mr Warren Day, these appointments bring extensive technical expertise and industry experience to ASIC, drawn from the private and public sectors.

‘The combined knowledge and experience of Zak, Peter and Nicole will support ASIC to deliver our priorities to achieve a fair, strong and efficient financial system for all Australians’, ASIC Chair Joe Longo said.

‘They will help us better identify and seize opportunities to enhance ASIC’s capabilities to work more efficiently and effectively in an environment that supports our people internally and our stakeholders externally’, he said.

The Australian Prudential Regulation Authority (APRA) has published remarks delivered yesterday evening by APRA Chair Wayne Byres to the AMF-BCBS-FSI High-level meeting on the post COVID-19 banking system.

Lessons from the pandemic for financial regulation and supervision

Lesson 1: A strong foundation is essential
The first lesson is a statement of the obvious, but one that always bears repeating: preserving a strong and resilient financial system in good times is valuable insurance for when a crisis hits.

Lesson 2: Be prepared for the unexpected
The second lesson is another fairly obvious one: be prepared for the unexpected.

Lesson 3: Third-party suppliers are increasingly critical to operational resilience
My third lesson relates to the need to better understand operational resilience, and particularly the potential vulnerabilities that emerge from third-party relationships.

Lesson 4: The value of data and transparency
My fourth lesson is on the value of good quality data and transparency.

Lesson 5: Have the courage to act counter-cyclically
Lesson five relates to the willingness and ability to act counter-cyclically in bad times.

Lesson 6: Don’t lose sight of bigger trends
My last lesson is perhaps more of a note of caution… Technology, digitisation and new forms of finance have evolved considerably while we have had ‘all hands to the pump’ responding to the pandemic. Indeed, in many ways COVID-19 turbo-charged the digital shift already underway (retail payments being a particular case in point).

The Australian Prudential Regulation Authority (APRA) has provided an update on the implementation of APS 220 Credit Risk Management, to assist authorised deposit-taking institutions (ADIs) in meeting their new requirements.

Consistent with prior communications, ADIs will be required to meet the requirements of Prudential Standard APS 220 Credit Risk Management (APS 220) from 1 January 2022. The final standard was released by APRA in December 2019 and is available on the Federal Register of Legislation.

APRA has released a new set of frequently asked question (FAQs) on Prudential Standard APS 210 Liquidity (APS 210) and Reporting Standard ARS 210.0 Liquidity (ARS 210.0).

The new FAQs and updates to the existing FAQs published today clarify the liquidity treatment of certain types of deposits, specifically, the treatment of intermediated deposits, personal investment entity deposits and deposits from government or governmental entities under APS 210 and ARS 210.0.

ASIC has released a consultation paper, Product Intervention Orders: Short Term Credit and Continuing Credit Contracts, on its proposed use of its product intervention powers to address significant consumer detriment in the short term credit and continuing credit contracts industries.

ASIC invites stakeholder feedback on two proposals:

• Proposal D1 – Make the short term credit product intervention order
• Proposal D2 – Make the continuing credit product intervention order

Any feedback should be sent by 21 January 2022

ASIC has commenced civil penalty proceedings in the Federal Court against Australia and New Zealand Banking Group Ltd (ANZ) for failing to provide certain benefits it had agreed to give customers with offset transaction accounts or a ‘Breakfree’ package.

ASIC’s investigations reinforce that financial services institutions must:

• Always put their customers first
• Fulfil any promises made to their customers
• Ensure all consumers are treated fairly
• Ensure that they do not take advantage of vulnerable consumers
• Put in place the correct and legal compliance processes to monitor their activities, and
• Maintain the appropriate governance, oversight, and systems over those compliance processes.

This proceeding also marks the final civil case for ASIC arising from the Financial Services Royal Commission.