In this update, we examine the latest regulatory and legislative developments in the fintech sector over the past month that are likely to have an ongoing impact on businesses and consumers.
Among other updates, the Australian Government has passed key financial services reforms contained in the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill 2019. The legislation introduces a design and distribution obligation for financial services firms as well as a product intervention power for the Australian Securities and Investments Commission (ASIC). The new obligations will bring accountability for issuers and distributors to design, market and distribute financial and credit products that meet customer needs. The new regime, to be phased in over two years, will require product issuers to ensure products are targeted and offered to the right customers and enable ASIC to intervene when inappropriate products are distributed. Treasurer Josh Frydenberg stated ”these reforms will mean consumers will be better protected from being sold financial and credit products that are not suitable for their circumstances.” The legislation, with the exception of Schedule 1, came into effect 6 April 2019. Schedule 1, which introduces the design and distribution obligations, will commence on 5 April 2021. More than ever, it will be important for financial service providers, including fintechs, to consider the suitability of products and disclosure documents for their own unique customer base.
Fintech businesses should note the following developments:
- Treasury consults on the ending of grandfathered conflicted remuneration to financial advisers: The Treasury has released for consultation draft regulations providing for benefits of previously grandfathered conflicted remuneration remaining in contracts after 1 January 2021 to be passed through to customers and imposing record-keeping obligations on those required to pass through these benefits. The draft regulations follow the Treasury Laws Amendment (Ending Grandfathered Conflicted Remuneration) Bill 2019 which was released on 22 February 2019. Submissions closed on 23 April 2019.
- The Australian Federal Budget announces additional funding for Australian Transaction Reports and Analysis Centre (AUSTRAC) and the Fintel Alliance: The Australian Government will provide a further A$28.4 million over four years to AUSTRAC and the Fintel Alliance. The Fintel Alliance is a public-private partnership that targets the black economy, protects the financial system, disrupts money-laundering, terrorism financing and other serious crime. See our previous update here.
- ASIC (Fees-Complexity Criteria) Amendment Instrument 2019/130 (Instrument) commenced on 1 April 2019: ASIC has released determination criteria for ‘fees for service’ which establish whether certain applications are of low, medium or high complexity. The criteria relate to the circumstances where an application can be lodged by an Australian market licensee or custodial services facility licensee to have its licence conditions imposed, varied or revoked.
- ASIC and United Kingdom Financial Conduct Authority (FCA) agree to strengthen cooperation post-Brexit: ASIC and the FCA have announced they have agreed upon two Memoranda of Understanding covering trade repositories and alternative investment funds. These agreements provide reassurance for cross-border cooperation and support the continuity of existing equivalence of decisions to provide certainty to businesses post-Brexit.
- Australian Competition and Consumer Commission (ACCC) consults on draft rules for the Consumer Data Right (CDR):
- The ACCC has released for consultation draft rules for the CDR. ACCC Commissioner Sarah Court said the draft rules will provide companies in the banking sector with greater detail and guidance as to how the CDR will work and allow them to begin planning for the change. The feedback collected will inform the ACCC’s future development of the rules and the future Privacy Impact Assessment of the rules. Submissions close 10 May 2019.
- APRA employs Vizor Software and Dimension Data Australia for new data collection solution: APRA has replaced its 20-year-old “Direct to APRA” data reporting system with the same technology vendor as the Bank of England. The new system will collect data from banks, super funds and insurers, and forms part of a broader investment program to help its supervisors monitor risks in the financial system.
- International developments in digital currency: There have been many developments in relation to digital currency. Click here to read more.
Fintech fact: New independent research released by ASIC shows a majority of consumers lack an awareness and understanding of the distinction between general and personal financial advice. 53% of individuals surveyed incorrectly identified what constitutes ‘general’ advice and nearly 40% wrongly believed advisers are obliged to take personal circumstances into account.