Stay current with the latest trends in financial services regulation and compliance?
Investing time in your professional development within a rapidly changing financial services industry is a challenge. To meet this challenge, the Australian Regulators Weekly Envelope is designed to keep you at the forefront of your practice by quickly settlingng on the five main developments of the past week, analysis and practical considerations for the future.
- Liquidity facility (APRA): APRA issued a letter to banks announcing that the overall committed liquidity facility was reduced to $102 billion on January 1, 2022 from $140 billion on September 10, 2021. As of January 2015, ADIs to which APRA applies Basel III liquidity standards must hold sufficient High Quality Liquid Assets (HQLA) to withstand a 30-day stress period as part of the Liquidity Coverage Ratio (LCR) requirement. Apart from government securities, the only other significant assets recognized in HQLA are the liabilities of the Reserve Bank; namely, banknotes and ES balances. The Basel III standards allow jurisdictions to use an alternative treatment for holdings of HQLA stock when the supply of HQLA is insufficient. The Committed Liquidity Facility is the Reserve Bank and APRA’s alternative treatment and, under this agreement, certain ADIs may use a contractual Reserve Bank Liquidity Commitment to meet their LCR. The letter is available on the APRA website here.
- Claims management (ASIC): ASIC has issued a helpful reminder about consumer complaint handling requirements. It notes that from 1 January 2022, persons providing claims handling and settlement services must hold an Australian Financial Services License (AFS); insurance applicants have the right to ask whether those assisting them in handling claims are licensed; and, ASIC will work with the industry to address any challenges it may face during the implementation of these important reforms. The update is part of ASIC’s role in educating the public about unscrupulous operators operating without an AFS license, and I think it’s a good job in that regard!
- 2021 in review (OAIC): OAIC has released a useful infographic covering its activities in 2021. Other than expected activities, e.g. CDR integration, the most useful detail for me was the data breach statistics. OAIC said it ensured that more than 700 data breaches were notified to individuals, rectified and corrected, that it finalized Commissioner-initiated investigations into high privacy impact technologies , security and access to information, and that it has finalized more than 2,000 privacy complaints from individuals. That’s quite a boost – expect more, especially as the OAIC gets more capacity.
- Financial Advisor Exam (ASIC): from January 2022, ASIC will take over the administration of the Financial Adviser Standards and Ethics Authority Financial Adviser Exam after the start of the exam Financial Sector Reform Act 2021 (Hayne Royal Commission response — best advice) (Cth). Financial advisors who are “existing providers” or new financial advisors must pass the financial advisor exam to meet the professional standards for financial advisors. Passing this examination is one of the education and training standards specified in Section 921B of the Companies Act 2001 (Cth). The exam tests the practical application of a financial adviser’s knowledge in the following areas of competence: regulatory and legal requirements for financial advice, including obligations under Chapter 7 of the Corporations Act, the Anti-Money Laundering and Terrorist Financing Act 2006 (Cth), the Privacy Act 1988 (Cth) and the Tax Agent Services Act 2009 (Cth); the construction of financial advice – i.e. the relevance of advice adapted to different groups of consumers, integrating consumer behavior and decision-making; and, applied ethical and professional reasoning and communication, incorporating Code of Ethics for Financial Planners and Advisors 2019 The first session of the Financial Advisor Exam for 2022 begins on February 17, 2022, with registration closing on January 28, 2022 – good luck to those taking the exam!
- Debt management services (ASIC): remember that in addition to claims management services, debt management services now require a license! ASIC has been quick to point this out recently, for example with regard to SR & Associates. On April 29, 2021, the Domestic consumer Credit Protection (Debt Management Services) Amendment Regulations 2021 (now defined in the National Consumer Credit Protection Regulations 2010) have been made which prescribe certain debt management services as a “credit activity” for the purposes of the National Credit Act. Under these amendments, as of July 1, 2021, debt management service providers (including companies offering “debt negotiation” or “credit repair” services) are governed by national law. on credit and are required to obtain an Australian Credit License Authorization to provide debt management service.
Thought for the future: the US SEC is very public about how it financially rewards whistleblowers – see here, for example. We don’t have the same system in Australia – although it has been considered recently – but I think we can expect ASIC to continue to be active in encouraging whistleblowers to come forward this year under the new company law regime.