Germany's government has flagged plans to legislate mandatory gender quotas, setting minimum requirements on the number of women serving on the boards of listed companies. If enacted, the proposed changes would mean that: ▪ The boards of listed listed companies with co-determination, will need to include at least one woman (if the board has four or more members). ▪ The supervisory boards of companies in which the federal government holds a majority stake would need to include at least 30% female members. The government also plans to introduce similar requirements for health insurance companies and pension and accident insurance institutions, as well as the Federal Employment Agency. [Source: BMFSFJ media release 20/11/2020] More women sitting on boards: AICD data shows there has been an overall increase in female board representation over the twelve months to 31 October The Australian Institute of Directors' (AICD) latest report into female representation on ASX 300 boards has found that the number of women sitting on boards has increased over the past twelve months, with representation on ASX 200 boards now standing at 32.10% - cracking the 30% target for the first time. Governance News | COVID-19 Special Edition Disclaimer: This update does not constitute legal advice and is not to be relied upon for any purposes MinterEllison | 5 ME_171017618_1 Though the number of women sitting on boards increased across the board, the increase was highest at smaller companies – though smaller companies still have the most work to do to meet the 30% target. Though welcoming the overall increase, the AICD considers that there is still significant progress to be made. ▪ There were two companies on ASX 200 with no women on their boards as at 31 October2020. ▪ There are 87 ASX 200 companies yet to reach the 30% target. Of this group, 76 would only need to appoint one female director to meet the target. ▪ Representation on ASX 300 boards overall standards at 29.6%, dropping to 24.6% for companies falling into the ASX 201-300 bracket. Commenting on the findings, AICD CEO and Managing Director Angus Armour, said 'This continuing upward trend indicates that the message about diversity is being heard. I am confident that we will see the ASX 300 reach the aggregate target in the very near future. We are calling on all companies who have not yet made active steps towards gender-balance in their leadership to consider the full pool of board-ready candidates for their next appointment.' Mr Armour said that diversity in leadership is critical to ensure 'an effective post-COVID recovery'. [Source: AICD media release 18/11/2020] 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% ASX 20 ASX 50 ASX 100 ASX 200 ASX 300 ASX 201-300 Female board representation 31/10/2019 Female board representation 31/10/2020 Female board representation Increase Governance News | COVID-19 Special Edition Disclaimer: This update does not constitute legal advice and is not to be relied upon for any purposes MinterEllison | 6 ME_171017618_1 Disclosure and Reporting KPMG finds most ASX 100 companies acknowledge climate risk as a financial risk in their reports, but trail their global peers in disclosing emissions reduction targets KPMG has released the results of research into the quality of climate reporting by the world's 250 largest companies (G250) (based on Fortune Global 500 ranking for 2019). The survey reviewed annual financial or integrated reports, sustainability reports and stand-alone reports and information on company websites published between 1 July 2019 and 30 June 2020. Quality of reporting was assessed against 12 quality criteria, developed by KPMG. Pages 6-8 of the report outline the each of the criteria in detail. Overall, the report found that work is needed to lift reporting quality, especially with respect to: use of scenario analysis and long term planning; reporting against the TCFD recommendations; and providing clear explanations of the extent to which companies are on track to meet carbon reduction goals/how their strategy supports the achievement of carbon reduction targets. Separately, KPMG has also released a supplementary report outlining key trends in climate risk reporting by ASX 100 companies. This report highlights that though Australian companies are leading their global peers in terms of acknowledging climate risk as a financial risk, they are slower to set carbon reduction targets. The table below provides a snapshot of KPMG's observations on the quality of reporting by G250 companies by reference to KPMG's quality criteria and the quality of reporting by ASX 100 companies. Governance News | COVID-19 Special Edition Disclaimer: This update does not constitute legal advice and is not to be relied upon for any purposes MinterEllison | 7 ME_171017618_1 G20 reporting vs ASX 100 reporting: How does the quality of reporting by ASX 100 companies compare? KPMG'S 12 QUALITY CRITERIA REPORTING BY THE 250 LARGEST COMPANIES GLOBALLY (G250) REPORTING BY ASX 100 COMPANIES Governance of climate related risk ▪ Reporting reflects that the company has assigned board responsibility for overseeing the company's response to climate change ▪ 44% of G250 companies report they have assigned board responsibility for overseeing the company's response to climate change. ▪ 100% of the 28 Japanese companies in the G250 sample have done so. ▪ 78% of ASX 100 companies clearly acknowledge in their reporting that climate change is a risk to their business which is significantly higher than the 56% of G250 companies that do so. ▪ 100% of miners, 100% of construction companies and 90% of financial services companies in the sample disclose this information. ▪ The Chair/CEO's message in the annual report or integrated report mentions climate change and/or climate-related risks ▪ 33% of G250 companies mention climate change in the Chair/CEO's message in the annual financial or integrated report. ▪ This proportion is higher for German companies: 59% of German companies do so. ▪ In contrast only 25% of US based companies and 15% of China based companies do so. ▪ Reports acknowledge climate change as a financial risk to the company ▪ A majority (56%) of G250 companies acknowledge climate change as a potential financial risk to their business in their financial reporting. ▪ This proprtion is higher for French, Japanese and US companies: 94% of French companies, 71% of Japanese companies and 54% of US companies acknowledge this in their reports. Only 47% of German companies do so (the report comments that many German companies still discuss the issue only in non-financial reporting). ▪ Overall, the oil and gas sector is the most likely to acknowledge climate risk as a risk to their business (81%). Health care is the least likely sector to do so (19%). Identification of climate related risk ▪ The annual report or integrated report contains a specific section on climate risk and/or the company publishes a stand-alone climate risk/TCFD report ▪ 31% of G250 companies include a section on climate-related risk in their annual financial (or integrated) reports OR publish a stand-alone climate risk or TCFD report. ▪ The proportion is higher for French companies: 78% of French companies do so. In contrast, only 6% of German companies and 2% of Chinese companies do so. ▪ 32% of ASX100 companies include TCFD or climate risk disclosures in the company's annual financial or integrated report and/or publish a standalone climate risk or TCFD report. This is broadly on par with Governance News | COVID-19 Special Edition Disclaimer: This update does not constitute legal advice and is not to be relied upon for any purposes MinterEllison | 8 ME_171017618_1 KPMG'S 12 QUALITY CRITERIA REPORTING BY THE 250 LARGEST COMPANIES GLOBALLY (G250) REPORTING BY ASX 100 COMPANIES ▪ Overall, 53% of financial services companies in the survey and 50% of oil and gas companies take this approach. G250 companies and a significant increase on three years ago. In 2017 only 4% of ASX 100 companies disclosed this information. ▪ Both the physical and transitional risks related to climate change and net zero transition are covered in the report ▪ 47% of G250 companies report on both the physical and transitional risks. ▪ The proprtion is significantly higher in certain countries: 72% of French companies do so and 71% of both German and Japanese companies do so. Impacts of climate related risk ▪ Scenario analysis of climate-related risk is included ▪ 22% of G250 companies include scenario analysis of climate-related risks in their reporting. This rises to 50% for Japanese companies. Only 1% of Chinese companies take this approach. ▪ 20% of ASX100 companies include scenario analysis of climate related risks in their reporting which is broadly on par with the G250 (22%). ▪ 75% of banks, 43% of construction/materials companies and 67% of electricity companies included in the sample do so. ▪ 'Reporting includes risk analysis in line with: a) two or more global warming scenarios and b) with a clear timeline' ▪ 12% of G250 companies report scenario analysis under two or more global warming scenarios. This proportion is significantly higher in Japan at 36%. ▪ 0% of French or Chinese companies report scenario analysis under two or more global warming scenarios. ▪ 17% of G250 companies report scenario analysis with clear timelines. 39% of French companies do so. ▪ Less than 10% of G250 companies reported under scenarios to 2050 (or beyond) ▪ Scenario analysis is aligned with 'recognised climate scenarios developed by reputable sources' ▪ 19% of G250 companies' scenario analysis was reported in alignment with recognised scenarios 'developed by reputable sources'. ▪ The most commonly used were the IPCC physical climate scenarios (which were used by around two thirds of the companies reporting scenario analysis) and the IEA transitional scenarios (which were used by just over half of companies reporting on scenario analysis). Reporting on net-zero transition ▪ Reporting 'states the company's ambition to achieve net zero carbon emissions at or before 2050 OR explains another target' ▪ 46% of G250 companies reported a net zero target OR other 'sciencebased targets'. Of this group, most (27%) reported against other 'science based targets'. ▪ 76% of German company reports included a net-zero target, dropping to 10% of US companies and 2% of ▪ 17% of ASX 100 companies report against a science based target as compared with 27% of G250 copanies. ▪ KPMG comments that though a further 6% Governance News | COVID-19 Special Edition Disclaimer: This update does not constitute legal advice and is not to be relied upon for any purposes MinterEllison | 9 ME_171017618_1 KPMG'S 12 QUALITY CRITERIA REPORTING BY THE 250 LARGEST COMPANIES GLOBALLY (G250) REPORTING BY ASX 100 COMPANIES Chinese companies. 41% of US companies opted to use other science based targets and 8% of Chinese companies also opted for this approach. intend to report in line with science based targets in future Australia still trails the G250 on this criterion. ▪ The company's strategy to achieve its carbon reduction targets is clearly outlined ▪ 17% of G250 reports outline the company's strategy to achieve its carbon reduction targets. ▪ The proportion is significantly higher among German companies, with 88% including this information in their reports. ▪ Progress against the targets is clearly communicated – it is clear whether the company is on track to meet its targets ▪ 24% of G250 companies clearly communicate whether the company is on track to meet its carbon reduction targets. ▪ This proportion is significantly higher among French companies, with 67% taking this approach. ▪ The company uses an internal carbon price or 'shadow price' ▪ 11% of G250 companies report using an internal carbon price or 'shadow price'. The proportion is significantly higher among French companies, with 44% including this information in reports. [Sources: KPMG media release 20/11/2020; Full text global report: Towards Net-Zero; Full text report: Australian supplement] Governance News | COVID-19 Special Edition Disclaimer: This update does not constitute legal advice and is not to be relied upon for any purposes MinterEllison | 10 ME_171017618_1 Markets and Exchanges ASIC has launched an investigation into the recent ASX outage, ASX has pledged its full cooperation Context The ASX cash equity market trading platform failed to reopen for trading on 16 November after an outage that occurred during the opening auction. In a statement, ASX said that the outage was linked to the launch of the new ASX Trade System which live the same day. The 'root cause' of the issue was stated to be 'a software issue limited to the trading of multiple securities in a single order (combination trading) created inaccurate market data'. ASIC issued statements (ASIC media releases 16/11/2020; 17/11/2020) following the 16 November outage and the subsequent issue with the ASX Centre Point matching system, confirming that it is 'actively assessing ASX's compliance with its market licence obligations and is considering further actions to ensure the adequacy of ASX's human, financial and technological resources to operate its markets in an orderly manner'. ASX has confirmed that ASIC has launched an investigation The ASX has issued a short statement confirming that ASIC has commenced an investigation into the ASX Trade outage on Monday 16 November and confirming that it will 'cooperate fully' with the investigation. [Source: ASX media release 23/11/2020] Governance News | COVID-19 Special Edition Disclaimer: This update does not constitute legal advice and is not to be relied upon for any purposes MinterEllison | 11 ME_171017618_1 United Kingdom | Review of the UK listings regime launched The UK government has commissioned an independent review to be led by Lord Hill of Oareford to 'gather evidence and make recommendations to the government and UK regulators on how to encourage more high-quality UK equity listings and public offers'. Scope of the review The terms of reference include a non-exhaustive list of the issues the review is expected to consider. These include consideration of: ▪ whether there is a case for relaxing/altering existing rules concerning 'free floats, dual class share structures, and track record requirements' as well as current prospectus requirements ▪ specific actions the government could take to increase the appeal of listing in the UK. For example, the review will consider whether entry requirements could be streamlined for companies that already have a primary equity listing on markets outside the UK that are assessed to have high standards of corporate governance The review is expected to consider both legislative and non-legislative measures and to make recommendations that 'may fall to the Financial Conduct Authority' to consider/implement. Any recommendations relating to FCA rules would be subject to further public consultation by the FCA. The terms of reference are here. The review will report to HM Treasury in 'early in 2021'. Call for evidence Lord Hill has commenced the review by issuing a call for evidence on the appropriateness of current requirements and 'whether, consistent with global standards, we can improve the flexibility and proportionality of our regulatory system so as to support growth and innovation'. In particular, he has asked for feedback on the issues set out in the table below. The deadline for submissions is 5 January 2021. ISSUE COMMENTS Whether the existing 25% free float requirement remains appropriate Currently, in order to a company to list, 25% of a company's shares must be available for the public to purchase (though the FCA has discretion to accept a lower level). The review calls for comment on: ▪ whether the 25% requirement remains appropriate or whether/how it should be changed; ▪ how liquidity risk could be assessed using alternate levels ▪ whether there other changes/alternative measures to the free float requirements that should be considered. Allowing dual class share structures Currently, the Financial Conduct Authority's (FCA) Listing Rules for the LSEMain Market's Premium Segment do not allow for dual class share structures. The review seeks comment on: ▪ whether dual class share structure should be allowed in the Premium listing segment of the London Stock Exchange and if so, what limitations should apply ▪ whether there are other ways of maintaining high corporate governance standards (while allowing dual class share structures) ▪ views on/evidence about the level of demand for dual class share structures among issuers and the benefits/risks for investors Governance News | COVID-19 Special Edition Disclaimer: This update does not constitute legal advice and is not to be relied upon for any purposes MinterEllison | 12 ME_171017618_1 ISSUE COMMENTS Whether existing 'track record requirements' remain appropriate Currently for a company to be admitted to Premium listing, the FCA's Listings Rules state it must have a 'proven track record' of earning revenue and be underpinned by a business model that is profitable and sustainable, backed up by three years of accounts. The review seeks comment on: ▪ Whether existing track record requirements are a barrier to listing ▪ If so whether the requirements should be made more flexible and how this could be achieved. Whether existing prospectus requirements remain appropriate Broadly, the review seeks feedback on whether existing rules about when prospectuses need to be issued remain appropriate and if not, how existing disclosure triggers should be modified. More particularly the review seeks views on whether: ▪ existing thresholds for a prospectus to be produced are calibrated appropriately to the size/depth of UK markets ▪ how current prospective requirements could be changed 'to better reflect the UK markets and the types of issuers listed on them' ▪ whether the loss of disclosure or liability attached to a prospectus document should be 'replaced by any alternative measures if the general exemptions to a prospectus are widened' Whether dual listing requirements remain appropriate Currently when a company dual lists it must comply with listing requirements for both markets. The review seeks feedback on whether this is a barrier to dual and secondary listing and if so, what measures could be implemented to encourage dual/secondary listings. Views on whether there are other issues the review should consider The review seeks views on whether there are 'any other immediate issues' that should eb considered and whether there are any 'non-regulatory, non-legislative actions that could the UK take to promote the use of public equity markets'. [Source: HM Treasury media release 19/11/2020; Policy paper: Call for evidence 19/11/2020] Governance News | COVID-19 Special Edition Disclaimer: This update does not constitute legal advice and is not to be relied upon for any purposes MinterEllison | 13 ME_171017618_1 Regulators Top Story | 'Regulation as better': ASIC's Acting Chair outlines ASIC's regulatory stance Key Takeouts ▪ In a recent speech, Australian Securities and Investments Commission (ASIC) Acting Chair Karen Chester outlined ASIC's recalibrated, lighter-touch, outcomes-based approach to regulation, explaining that where business 'steps in and steps up' ASIC will be able to 'step back'. ▪ Ms Chester said the regulator now has the range of regulatory tools required to facilitate this approach. ▪ ASIC's 'why not litigate' stance is unchanged – ASIC will continue to take into account the current economic environment/implications of ASIC's regulatory actions, when determining whether proceeding with litigation is in the public interest. ▪ The shift in approach does not mean that ASIC will not take enforcement action (where necessary) and this remains a focus for the regulator. ▪ Forthcoming design and distribution obligations: Ms Chester said that if business complies with the forthcoming design and distribution obligations it should 'provide scope for less enforcement action from ASIC' and may 'also provide an opportunity for deregulatory initiatives over time'. Ms Chester observed, 'it's really up to business to pave the way for such deregulation to ultimately be contemplated by government'. Ms Chester added that ASIC expects to release its final regulatory DDO guidance 'in coming weeks'. Overview In a wide-ranging speech entitled 'Getting on with it' Australian Securities and Investments Commission (ASIC) Acting Chair Karen Chester spoke about ASIC's regulatory stance, the effectiveness of ASIC's actions in responding to the pandemic and executing its core function, and ASIC's role in supporting Australia's economic recovery. A core theme of the speech is that ASIC is committed to taking a lighter-touch, outcomes based approach to regulation - only intervening where business has failed to 'step in, and step up'. 'When we see significant detriment, or poor market outcomes – be it actual or likely significant harm to consumers or investors, or an absence of healthy competition creating fertile ground for potential misconduct. Only then do we need to step in'. 'Regulation as better' – a lighter touch regulatory stance that allows business to 'get on with it' Mr Chester said that the disruption triggered by COVID-19 is an opportunity for the regulator (and for business) to reassess its approach in light of 'the new normal'. 'At ASIC we recognise that this is a time of a potential "new better" for regulators and for business – where boards step in early and step up decisively to manage both financial and non-financial risk. And with that "step in and step up" by business, ASIC can step back. To only intervene when the data (early warning signs) of harm and misconduct require us to do so. We need to support the economy, promote market integrity and efficient and competitive markets. We need to protect consumers – be they individual consumers, be they vulnerable, be they retail investors, be they wholesale investors, be they small business'. Ms Chester said that ASIC will focus on its core function: to 'monitor and promote market integrity and consumer protection in relation to the Australian financial system' using the regulatory tools at its disposal, while also supporting the COVID-19 recovery. In saying this, Ms Chester made clear that she considers that ASIC now has the necessary regulatory tools required to carry out this function and to move beyond 'regulation as usual' to 'regulation as better'. 'So ASIC's new age is here. And we are getting on with it. We are better placed to address harm arising from evolving products and practices without compromising the potential for competitive disruption and Governance News | COVID-19 Special Edition Disclaimer: This update does not constitute legal advice and is not to be relied upon for any purposes MinterEllison | 14 ME_171017618_1 innovation. Which means we can limit or avoid the future need for more intervention and more regulation. But we will also maintain our enforcement focus…The easiest way to stay off our radar is by living up to Parliament's and community expectations and following the DDO roadmap. Our new age is about awareness of market realities and placing a competitive market, and consumer outcomes, at the centre of everything we do. Because at the end of the day it's our job. And we are simply getting on with it'. Looking forward: ASIC's product intervention power and the design and distribution obligations Ms Chester described ASIC's product intervention power (PIP) and the forthcoming design and distribution obligations (DDOs) (which commence on 5 October 2021) as 'two bookends' that 'exemplify outcomes based regulation'. She said that in combination, they will enable ASIC to recalibrate its approach to 'firmly' focus on consumer and market outcomes. ▪ PIP: Ms Chester observed that ASIC is already using PIP where it considers it to be necessary observing that 'because PIP is proactive and flexible, ASIC only needs to take enforcement action if there is non-compliance coupled with significant consumer detriment'. ▪ DDO: Ms Chester said that if business complies with the DDO it should 'provide scope for less enforcement action from ASIC' and may 'also provide an opportunity for deregulatory initiatives over time'. Ms Chester observed, 'it's really up to business to pave the way for such deregulation to ultimately be contemplated by government'. Ms Chester added that ASIC expects to release its final regulatory DDO guidance 'in coming weeks'. Ms Chester observed that the combination of these powers will enable ASIC to take a lighter touch approach to regulation, provided that firms 'step up'. 'When we see significant detriment, or poor market outcomes – be it actual or likely significant harm to consumers or investors, or an absence of healthy competition creating fertile ground for potential misconduct. Only then do we need to step in. For today, this should only be when Boards and business have not stepped in and up, to deter misconduct and deliver good consumer outcomes. Design and distribution obligations are the (self-designed) roadmap for them to do so. Product intervention our tool to act when and if they don't. So we have the tools. The software script is written. Now we just need to let the program run, while we watch and act if the program fails to deliver the desired outcomes'. ASIC's 'why not litigate' approach Ms Chester explained that this regulatory stance is not inconsistent with ASIC's 'why not litigate' approach which already requires the regulator make a judgement call about whether litigating is in the public interest before commencing litigation. That is, before proceeding, two tests need to be satisfied: 'have breaches of the law more likely than not occurred – do we have the evidence? And secondly, is pursing the matter in the public interest, is there regulatory value?'. Ms Chester's view is that 'embedded' in the second of these tests, is consideration by the regulator of the 'the real economic impacts of our regulatory decisions and actions. And how that may impact consumer and investor vulnerabilities and harms both in the here and now, and beyond'. Ms Chester said that ASIC's decision not to proceed to seek special leave to appeal the Westpac responsible lending case is one example of this approach. Commenting briefly on ASIC's recent losses and the commentary in the press, Ms Chester said that though proud of its successful actions, it is not to be expected/it is perhaps not desirable that ASIC's actions will always be successful. For example, it could signal that ASIC is pursuing only easy wins. Likewise, Ms Chester observed that insights/lessons learned from losses may help inform ASIC's approach and those of policy makers, and 'importantly a win is not always the single prerequisite for market deterrence'. A data-driven, proportionate approach: How ASIC is already deploying the full range of available regulatory tools available Ms Chester said that ASIC's approach is data driven - ASIC uses data from reports of misconduct, recurrent data, market intel to competition analytics to identify issues, to inform the appropriate regulatory response and to ensure the response is proportionate. ASIC then uses the right tool or combination of tools to address the issue. The importance that data plays in ASIC decision making is reflected in ASIC's recent investment in its 'data foundations' and in ASIC's recalibrated data strategy. Governance News | COVID-19 Special Edition Disclaimer: This update does not constitute legal advice and is not to be relied upon for any purposes MinterEllison | 15 ME_171017618_1 Ms Chester said that ASIC has implemented new systems to enable better use to be made of existing data and is now working on 'scaling up' its analytics and data collection capability. This will enable the regulator to better 'detect early warning signs of harm and unhealthy competition in markets'. Ms Chester said that ASIC already has some pilot projects underway. Ms Chester then outlined a number of examples of the way in which ASIC has deployed the range of regulatory tools available to address specific issues. These included: ▪ ASIC's recent work in consumer credit insurance which entailed use of multiple 'tools': surveillance, transparency (ASIC's report), (ongoing) investigative work, remediation to consumers, guidance to industry on product design and sales practices, and intervention (banning unsolicited outbound telephone sales). ▪ ASIC's recent review of the Buy Now Pay Later sector which Ms Chester described as an example of a 'powerful yet simple use of regulatory transparency'. Ms Chester observed, 'Our report highlights the ability of recent regulatory reforms and new tools to deal with any consumer harm. By embracing their design and distribution obligations and own self-regulatory code, the industry can go a long way to addressing consumer harm. To step in and step up'. ▪ ASIC's 'true to label' project – where ASIC used a combination of surveillances, transparency (media releases), investigation, intervention (sending letters of concern to regulated entities) and enforcement action to identify investment fund products with 'inappropriate or confusing product labels'. Ms Chester said that 13 responsible entities were asked to take corrective action and that to date, 'most' have done so. ASIC has commenced proceedings against one group and may take further enforcement action. Ms Chester flagged lack of sufficient data on investment management and small amount credit contracts as areas of concern for the regulator, stating that ASIC has particular concerns about managed funds. Ms Chester said that ASIC is currently working with Treasury to ensure ASIC has the data it needs/and is able to publicly share it. ASIC's response to COVID-19 Ms Chester said that ASIC's new regulatory powers, coupled with ASIC's 'new and better use of data' have already enabled ASIC to make positive changes and ensured ASIC was in a position to step 'in an up' to help business and consumers through the disruption caused by the COVID-19 pandemic. Ms Chester then outlined how ASIC had deployed new 'safety valve' powers – eg powers to provide relief and/or to issue waivers – as 'regulatory shock absorbers' during the pandemic, to rapidly and efficiently provide relief to business. For example, ASIC provided relief facilitate virtual shareholder meetings and extended the period for lodging financial reports as well as providing temporary relief to facilitate capital raisings. ASIC also recalibrated its regulatory priorities and moved immediately, in line with the government's actions, to defer commencement of certain Hayne reforms - ASIC deferred commencement of the mortgage broker best interests duty and the design and distribution obligations. ASIC also acted to 'disrupt emerging misconduct' and escalating harms for example through reviewing superannuation trustee websites/other communications about the early release of superannuation scheme and secure 'corrective action' where needed and through lending a 'very public voice for consumer awareness about those who prey on the vulnerable'. Reminder to banks/insurers to ensure consumer 'safeguards' are in place Ms Chester said that though ASIC 'commends' the way in which insurers and banks have responded to the various challenges throughout 2020 (including the 'escalated natural disasters' and the pandemic), it remains important for firms to ensure that 'safeguards are in place to make it easy for consumers to navigate themselves to better outcomes'. For example Ms Chester said that: a) complaints processes should be straightforward; b) application and switching processes should be streamlined as much as possible; and c) products/services should not contain 'surprise'/hidden fees. Ms Chester said that ASIC will also continue to support government legislative reform. 'We will intervene in a targeted way where needed, and (in response to industry demand) we will issue guidance to help business meet the challenges of the COVID economy and legislative reform'. Governance News | COVID-19 Special Edition Disclaimer: This update does not constitute legal advice and is not to be relied upon for any purposes MinterEllison | 16 ME_171017618_1 ASIC's competition mandate Touching briefly on ASIC's competition mandate, Ms Chester said that ASIC is currently undertaking an assessment/review of competition in the Australian funds management industry to 'identify where competition is effective, where it is not, and if not why not' and is supporting Treasury as it 'clears the way for business to operate efficiently and competitively'. Consumer remediation ▪ ASIC is currently monitoring 'over 100 remediations' which Ms Chester said could see a return of at least that could see a return of at least $4.6 billion to consumers. ▪ Ms Chester said that ASIC will initiate consultation on proposed regulatory guidance for remediation shortly. The guidance will outline ASIC's understanding of 'what the law requires of licensees'. ▪ ASIC will also release, in response to industry demand a 'field guide' called: Making it Right: how to run a consumer-centred remediation. This guide will draw on ASIC's experience 'with remediations and behavioural science to help licensees with the "day-to-day" design and execution of consumer-centred remediations. Licensees have been asking us for just those sort of practical tips'. Enforcement update – ASIC remains focused on enforcement (where necessary) ▪ Hayne 'legacy pipeline': – Ms Chester said that of the 13 Hayne referrals to ASIC, five are the subject of civil litigation, two remain under investigation and one matter has been resolved through court action. Five referrals have been concluded with no further action. – Currently ASIC has 16 Hayne Commission case study matters underway. Six are currently before the courts; three are being considered by the Commonwealth Department of Public Prosecutions (CDPP) and seven are under investigation. A further five case study matters have been finalised: three resulted collective civil penalties of over $20 million and two others resulted in criminal convictions and fines. ▪ COVID-19 related misconduct: Ms Chester said that ASIC is also focused on addressing: predatory lending practices; mis‑selling of products; poor claims handling; scams; unlicensed conduct; and misleading and deceptive advertising. Ms Chester said that ASIC has 13 investigations underway that fall into this category and has commenced court proceedings in connection with a number of them. ▪ Other investigations: By the end of December 2020, ASIC plans to file approximately15 civil cases, refer 'around 20 briefs' to the CDPP relating to approximately 25 individuals or companies, and refer 'around 10' individuals or entities for administrative action. ▪ Six other focus areas: ASIC is also focussed on addressing: misconduct in superannuation and insurance; illegal phoenix activity; auditor misconduct; 'new and emerging types of misconduct' using new technologies; significant market misconduct (eg such as insider trading, market manipulation); and continuous disclosure matters. Increased accountability is welcome Ms Chester said that ASIC accepts the need for increased accountability. ▪ ASIC fully supports the independent review currently being undertaken by Treasury being undertaken by Treasury and is committed to making the necessary changes to ensure there is no repeat of the issues that led to it. ▪ Ms Chester also welcomed oversight of ASIC's regulatory work by the parliamentary joint committee, and in future by the proposed new Financial Regulator Assessment Authority. [Source: Keynote address by ASIC Acting Chair Karen Chester at the AFR Banking & Wealth Summit 18/11/2020] Governance News | COVID-19 Special Edition Disclaimer: This update does not constitute legal advice and is not to be relied upon for any purposes MinterEllison | 17 ME_171017618_1 Financial Services Top Story | Business Interruption Insurance for COVID-19 – expert overview of the recent test case On 18 November, the NSW Court of Appeal handed down its decision in HDI Global Specialty SE v Wonkana No. 3 Pty Ltd  NSWCA 296. The case was brought as a test case by the Insurance Council of Australia, on behalf of insurers selling commercial property policies with business interruption cover, to provide a measure of clarity around the treatment of pandemic-related claims. The key issue in the case was whether reference to the (repealed) Quarantine Act 1908 (Cth) in exclusion clauses should be read to encompass the Biosecurity Act 2015 (Cth) (which replaced it). The Court unanimously rejected the insurers' arguments and found that the references to the Quarantine Act 1908 (Cth) could not be construed as references to a replacement statute. The MinterEllison team have prepared a detailed case note summarising the decision. This can be accessed here. The ICA plans to bring a second BI test case Following the decision in HDI Global Specialty SE v Wonkana No. 3 Pty Ltd  NSWCA 296 (you can find our case note here) the Insurance Council of Australia (ICA) has flagged its intention to bring a second business interruption insurance test case on a separate issue. The case will 'explore outstanding policy matters, including proximity and prevention of access, relating to the pandemic and business interruption insurance'. The ICA says it seeks to progress 'a court resolution of these matters quickly'. An update is expected in the 'coming weeks'.