The Full Federal Court has ruled in ASIC’s favour, finding that in calls to 14 of 15 customers in two telephone campaigns conducted by members of Westpac’s Super Activation Team, the Westpac staff did provide them personal advice, in breach of the Australian financial services licences of two Westpac subsidiaries. The Full Court also found that by providing personal advice to their customers, the Westpac entities failed to comply with other financial services laws in the Corporations Act, including the ‘best interests duty’.
While not exactly the death knell for general advice, this case highlights some important issues for market intermediaries, such as how telesales are designed and closed, customer relationships of trust and what acting in ‘best interest’ means, ethical use of techniques such as social proofing, and the timing and nature of regulatory requirements such as general advice warnings and other disclosures. With implementation of Royal Commission recommendations well underway, design and distribution obligations being phased in, and long awaited review of RG 146 looming, the whole industry should keep an eagle eye on developments in this area.
ASIC has issued RG 270 Whistleblower policies to help companies establish policies that support and protect whistleblowers. The Regulatory Guide sets out the components that a whistleblower policy must include to comply with the law, and provides good practice guidance to assist companies develop and implement policies that are tailored to their operations.
As part of corporate sector whistleblower reforms, public companies, large proprietary companies, and proprietary companies that are trustees of registrable superannuation entities must have a whistleblower policy available to their officers and employees by 1 January 2020, supplementary to whistleblower protections in the Corporations Act that took effect for all companies from 1 July 2019.
Following concerns raised by ASIC about unfair telephone sales of life insurance, The Colonial Mutual Life Assurance Society Limited (trading as CommInsure) has conducted a remediation program expected to be finalised by the end of 2019. Refunds exceeding $12 million are to some 30,000 policyholders who were Commonwealth Bank customers between 2010 and 2014 and were sold a range of life insurance products via telemarketing calls by Aegon. CommInsure has also pleaded guilty to 87 counts of offering to sell insurance products in the course of unlawful, unsolicited telephone calls, contrary to s992A(3) of the Corporations Act – conduct colloquially known as ‘hawking’.
While CommInsure progressively ceased all outbound telemarketing of life insurance by December 2014, ASIC Deputy Chair Daniel Crennan QC commented on the conduct in question, saying “ASIC is concerned that the way in which these products were sold was manifestly unfair, with customers given insufficient information to make an informed decision”. ASIC identified concerning sales practices by CommInsure in its report released in August 2018, REP 587 The sale of direct life insurance.
A joint publication by ASIC and the Dutch Authority for Financial Markets has explored the effectiveness of disclosure and warnings in influencing consumer behaviour.
ASIC, in collaboration with its Dutch counterpart, spotlight the multiple cases where disclosure has been less effective than intended, ineffective or has actually backfired. The report identifies key limits of disclosure, supported by 33 case studies. A timely examination of this issue in the wake of the Financial Services Royal Commission and passing of design and distribution obligations legislation.
ASIC has called on superannuation trustees to improve the standard of communication to fund members about important reforms impacting member insurance arrangements. As a result of the recent Putting Members’ Interests First reforms, by 1 December 2019 superannuation trustees are required to write to members with a balance of less than $6,000. These members must be notified that their insurance cover may cease from 1 April 2020 unless they opt-in to continue this cover. By 1 April 2020, insurance is not to be provided to members who have an account balance less than $6,000 or for members under-25 years old, unless the member has elected in writing to take out or maintain insurance.
ASIC expects trustees to help their members understand the impact of the reforms on them and make good decisions by:
- providing balanced and factual communications, that include appropriate context about the reforms, and
- tailoring communications to the needs of their members.
An afr story revisits the Financial Action Taskforce’s latest report on Australia, which found that Australia is falling short on some counts, particularly in relation to real estate agents, lawyers and accountants still being only partially regulated under current AML/CTF rules. Regulatory reform has been slow, considering it has been proposed since 2013. Meanwhile, New Zealand, UK, Canada, Singapore, Hong Kong, and Malaysia are among regions introducing laws to cover these sectors, currently classified as ‘designated non-financial businesses or professions’ under global AML/CTF standards.
AUSTRAC has urged Australia’s mutual banking sector to take note of its latest money laundering and terrorism financing risk assessment report specific to the sector. The financial crime watchdog finds that while the mutual banking sector has a high level of vulnerability to financial crime, particularly as a target for such fraudulent activity as identity theft and scams, tax evasion, and welfare fraud, the overall money laundering and terrorism financing risk is Medium.
The European Securities and Markets Authority (ESMA) and ASIC announced that they have signed a Memorandum of Understanding setting out cooperation arrangements in respect of Australian benchmarks. In July 2019, the European Commission recognised Australia’s legal and supervisory framework applicable to the administrators of certain financial benchmarks as equivalent to the corresponding requirements under EU Benchmarks Regulation, and deemed that those requirements are subject to effective supervision and enforcement.
The MoU signed will allow benchmarks declared significant by ASIC (BBSW, S&P/ASX 200, Bond Futures Settlement Price, CPI, and Cash Rate) to be used in the EU by EU-supervised entities.
Keynote address by ASIC Commissioner Sean Hughes at the ARCA National Conference, Gold Coast, 14 November 2019
ASIC Commissioner, Sean Hughes, discussed the following at the Australian Retail Credit Association conference:
- Why does responsible lending matter?
- Why is ASIC updating its guidance, and why now?
- What does an update to the guidance mean and what will it achieve?
- Some misconceptions about responsible lending.
Read the full speech here.