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Keeping on top of the latest financial services regulatory & compliance trends?

Investing time in your professional development within a rapidly changing financial services industry is challenging. To meet that challenge, the Australian regulators weekly wrap is designed to keep you at forefront of your practice by quickly setting out the top 5 developments from the past week, analysis and practical considerations for the future.

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1. Exchange traded products (ASIC): ASIC has released Consultation Paper 356 ETP naming conventions: Updates to INFO 230 (CP 356), seeking feedback on proposals to update the guidance in Information Sheet 230 Exchange-traded products: Admission guidelines (INFO 230), on naming conventions for licensed Australian exchanges that admit exchange traded products (ETPs). ETPs are open-ended investment products that are traded on licensed exchanges. ETPs trade and settle like listed share securities and give investors exposure to underlying assets without owning those assets directly. ETPs differ from other listed investment vehicles — for example, listed investment companies and listed investment trusts — because they are open-ended. This means that the number of units on issue may increase or decrease daily depending. ETPs have different structures, features, strategies and risks to other listed products, so ASIC considers that they should be labelled in a way that differentiates them — basic, but sensible stuff in my view. Submissions are due by 3 March 2022.
2. Privacy reforms (OAIC): I have previous written about the major discussion paper currently being considered to strengthen Australia's privacy reforms. Among other areas, it seeks feedback on a raft of measures aimed at empowering consumers to take control of their personal information through new rights and enhanced transparency requirements, and establishing a regulatory framework that supports proactive and targeted regulation, strategic enforcement, efficient and more direct avenues of redress for individuals, and appropriate deterrents against mishandling of personal information. The OAIC has just made available its submissions, and it is notable (if not surprising) for how just eager it is to ratchet up the enforcement powers it can utilise. OAIC Commissioner Falk said “We have recommended changes to the Privacy Act enforcement framework to give the OAIC a greater range of effective tools to uphold the law and respond to emerging threats in a proportionate and pragmatic way…This can occur through a simplified civil penalty regime, supported by infringement notices as a quick and cost-effective way to deter non-compliant behaviour without the need for court proceedings.” The OAIC has also been strongly in support of the introduction of a direct right of action and statutory tort of privacy that would give individuals access to additional options to protect their privacy rights. My top read for the week, and definitely an area to watch this year!
3. Capital reporting (APRA): the prudential regulator has released for consultation an update to the reporting schedule for Reporting Standard ARS 115.0 Capital Adequacy: Standardised Measurement Approach to Operational Risk (ARS 115.0). It simplifies the reporting requirements for authorised deposit-taking institutions by extending the reporting frequency for submissions on ARS 115.0 from quarterly to annually — I doubt they will get any push back on this one…
4. Market disclosure (ASIC): ASIC will be working with five Government funded regulatory technology entities dealing with the challenges of corporate disclosure. ASIC’s selected challenge, funded by the Department of Industry, Science, Energy, and Resources, explores the potential of using technology to help identify and assess poor market disclosure by listed companies. ASIC’s challenge to these applicants focuses on developing a technology solution to help ASIC analyse corporate disclosures, and other datasets, to identify and assess compliance by listed companies with a range of requirements, including continuous disclosure (price sensitive disclosure) and other disclosure obligations to the market; financial reporting obligations; the prohibition against misleading or deceptive disclosure (such as misleading categorisation of market announcements); and, the prohibition against practices that manipulate the pricing of securities. ASIC is already doing pretty well in this space — it has various algorithms which scan the interest for particular words, and no doubt that capability will only increase with initiatives like this!
5. SMSF (ASIC): ASIC has issued a warning on self-managed super funds and crypto investments. It said that it has noticed an increase in marketing recommending Australians switch from retail and industry superannuation funds to self-managed superannuation funds so they can invest in a ‘high return’ portfolio, while SMSF trustees are being targeted to invest in crypto-assets. ASIC has said that crypto-assets are a ‘high risk and speculative investment’, and that advice should be sought from a licensed financial adviser before agreeing to transfer superannuation out of a regulated fund into an SMSF. I agree that financial advice should be sought before making any major financial decision regarding superannuation, though crypto assets are just like any other investment to my mind - whether or not they are suitable for a superannuation portfolio and in what proportion depends on individual needs and risk tolerance.

Thought for the future: the UK FCA has identified there is growing competition in retail banking which is driving choice and lower prices for consumers and small businesses, despite the financial impact of the pandemic. The FCA found that, while still strong, ‘there are signs large banks’ historic advantages are starting to weaken, driven by digital innovation and changing consumer behaviour’. An open question, if Australia will follow.