Keeping on top of the latest financial services regulatory and 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 the forefront of your practice by quickly setting out the top five developments from the past week, analysis and practical considerations for the future.

  1. CSLR (ASIC): Such an interesting time for updates from the corporate regulator, who has advised that Former clients of Dixon Advisory and Superannuation Services Pty Limited (in administration, ‘Dixon Advisory’) may be eligible for compensation under a potential future Compensation Scheme of Last Resort but they will need to take action as soon as possible.’ ASIC suspended the AFSL of Dixon Advisory & Superannuation Services Pty Limited after the appointment of administrators to Dixon Advisory on 19 January 2022. The Compensation Scheme of Last Resort (CSLR) is a proposed scheme that will provide compensation to eligible victims of financial misconduct who have not been paid, typically because the financial institution involved in the misconduct has become insolvent.What is interesting is the extent to which ASIC is encouraging consumers to access the CSLR, which is yet to be legislated! That bill lapsed when the Albanese Government came into power in May 2022. A calculated gamble by ASIC.
  2. Liquidators (ASIC): ASIC has prosecuted 73 people in the period from 1 January 2022 to 30 June 2022 for failing to assist registered liquidators in their investigations. With $340,000 in fines obtained, that is a staggering amount of litigation for the corporate regulator. And some own goals for those on the other side, as before ASIC commences prosecution action, individuals are given an opportunity to provide registered liquidators access to company books and a records to avoid prosecution action. historically, ASIC didn’t much focus on this area — clearly, that it is in the past and I don’t think that will change moving forward into a recession.
  3. Foreign financial services providers (AFSL): ASIC is extending for a further 12 months the transitional relief for foreign financial services providers from the requirement to hold an AFSL when providing financial services to Australian wholesale clients. The new relief instrument also delays the commencement of the ASIC Corporations (Foreign Financial Services Providers — Funds Management Financial Services) Instrument 2020/199 until 1 April 2024. Under that instrument ASIC gives licensing relief to some FFSPs that provide funds management financial services to certain categories of Australian professional investors. For all the fanfare in 2020 with FFSPs losing their ‘sufficient equivalence’ and ‘limited connection’ relief, which allowed them operate in Australia if they were appropriately regulated in certain jurisdictions or if they engaged in limited activities, that change appears to have taken a long time to materialise. No clues on why either, just speculation.
  4. Climate change (APRA): APRA has published the findings of its latest climate risk self-assessment survey conducted across the banking, insurance and superannuation industries. The responses to the survey from 64 medium to large institutions, and identified that: Four out of five boards oversee climate risk on a regular basis, while just under two-thirds of institutions (63 per cent) have incorporated climate risk into their strategic planning process; almost 40 per cent of institutions said climate-related events could have a material or moderate impact on their direct operations; nearly three-quarters of institutions (73 per cent) said they had one or more climate-related targets in place, however 23 per cent of institutions do not have any metrics to measure and monitor climate risks; and, over two-thirds of institutions (68 per cent) said they have publicly disclosed their approach to measuring and managing climate risks.
  5. Capital adequacy (APRA): APRA has released the finalised prudential practice guides that accompany the final capital adequacy and credit risk capital requirements for authorised deposit-taking institutions. APRA is also publishing an updated version of Prudential Standard APS 113 Capital Adequacy: Internal Ratings-based Approach to Credit Risk (APS 113), and a response paper on the technical issues raised in the submissions received during the November 2021 consultation on the bank capital reforms.

Thought for the future: Prudential Standard APS 110 Capital Adequacy (APS 110), Prudential Standard APS 112 Capital Adequacy: Standardised Approach to Credit Risk (APS 112) and Prudential Standard APS 113 Capital Adequacy: Internal Ratings-based Approach to Credit Risk (APS 113) will commence on 1 January 2023. If you haven’t started your preparations now, as a bank, then it is time to start soon!