On 14 March 2024, APRA and ASIC (the Regulators) released an information package for accountable entities under the new Financial Accountability Regime (FAR), established by the Financial Accountability Regime Act 2023 (Cth) . FAR imposes a strengthened responsibility and accountability framework to improve the risk governance cultures of APRA-regulated entities and their directors and senior executives. FAR applies to:
The information package consists of:
The consultation will close on 19 April 2024 .
The Regulators have also announced a series of webinars to engage with and support insurance and superannuation entities leading up to commencement, to be held on:
Tuesday 9 April 2024 for superannuation entities.
Wednesday 10 April 2024 for general and life insurance entities.
Thursday 11 April 2024 for private health insurers.
See ASIC and APRA media release .
ASIC reaffirms ongoing registration obligation for financial advisers
Following the commencement of the registration requirement on 16 February 2024, most financial advisers (known as relevant providers) have been registered with ASIC and can legally provide personal advice to retail clients in relation to relevant financial products.
Australian Financial Services (AFS) licensees and relevant providers need to be aware of their ongoing registration obligations, ensuring that they understand when an individual needs to be registered and the circumstances that may lead to a relevant provider being unregistered.
While most relevant providers are currently registered, ASIC reminds AFS licensees and relevant providers of the importance of complying with the registration obligation on an ongoing basis.
AFS licensees must register their relevant providers:
after they authorise and appoint an adviser to the Financial Advisers Register;
when they appoint an adviser who has moved from another AFS licensee;
when an adviser changes roles from a ‘provisional relevant provider’ to a ‘relevant provider’; and
when an adviser is dually authorised, and the adviser’s authorisation with their registering AFS licensee ceases.
From 16 February 2024, unregistered relevant providers who provide personal advice to retail clients about relevant financial products, together with their AFS licensee(s), will be in breach of the law and face potential regulatory action.
For further information, see Information Sheet 276 FAQs: Registration for relevant providers; Information Sheet 277 Registration of relevant providers: Guidance on making declarations; and Registering a relevant provider .
See ASIC media release .
Keynote address by ASIC Chair Joe Longo at AICD Governance Summit: Being a director isn’t meant to be easy
In his keynote speech at the Australian Governance Summit, ASIC Chair Joe Longo outlined the challenging landscape of corporate directorship. Longo acknowledges the increasing complexity directors face, including; AI advancements, cybersecurity threats, and evolving environmental, social, and governance (ESG) standards. Despite these challenges, Longo emphasises that compliance with directors’ duties is not impossible but rather demanding, requiring directors to continually question their actions, prioritise company interests, and seek professional advice.
Longo discussed the historical evolution of directors’ obligations, highlighting the shift from relatively lax responsibilities to the heightened expectations of today. He stressed the importance of judgment and curiosity in meeting compliance challenges, asserting that while the breadth of directors’ duties may seem daunting, a principles-based approach offers guidance in navigating complex business environments.
Longo encouraged directors to ask critical questions about honesty, prioritising company interests, understanding business risks, and challenging management, emphasising the role of continuous inquiry in effective governance.
See the full speech .
ASIC registers new instrument for exchange traded funds
ASIC has registered:
- ] for responsible entities and corporate directors (issuers), ongoing disclosure relief, relevant interest relief, and substantial holding and beneficial trading relief for issuers. [CO 13/721] was due to sunset on 1 April 2024; and
extends the relief to a broader class of exchange traded funds, including all types of quoted managed investment schemes and sub-funds of a corporate collective investment vehicle (CCIV).
These instruments were registered on 15 March 2024, following ASIC's consultation in November 2023 (see ASIC Consultation Paper 374: Remaking ASIC class order on exchange traded funds: [CO 13/721]).
For more information, see ASIC: ASIC issues new legislative instrument for exchange traded funds and Legal update, Regulatory matters: 24 November 2023 to 30 November 2023: ASIC consultation opens: CP 374 Remaking ASIC class order on exchange traded funds .
ASIC key actions and proceedings
APRA
APRA Executive Director of Insurance - speech to Future of Insurance 2024
On 18 March, the APRA Executive Director of Insurance gave a speech on the critical role of the insurance industry in the Australian market and APRA’s essential role as the prudential regulator of the industry. APRA sets and enforces prudential requirements to safeguard that insurers are financially strong, with the capacity to pay legitimate claims to policyholders. It is in all our interests to see a future in which general, life and private health insurers can continue to offer protection as a stable pillar supporting our communities. The speech discusses the current state of the industry and the challenges in sustaining the industry’s long-term sustainability by developing a range of product solutions.
See the full speech .
AUSTRAC
There is no news from AUSTRAC to report on this week.
Other regulations
The Cyber and Infrastructure Security Centre (CISC) announces changes to its 2024 security of critical infrastructure compliance regulatory posture
The CISC has announced that it is changing its Security of Critical Infrastructure Act 2018 (Cth) (SOCI Act) compliance regulatory posture this year. The CISC's regulatory compliance focus for 2023-24 is on education and awareness raising, except for any detected egregious non-compliance. The CISC has announced that:
During the third and fourth quarters of 2023-24, it will undertake a limited series of trial audits testing industry compliance with obligations under the SOCI Act. These trial audits will inform and guide the CISC's compliance audit activities in 2024-25.
In 2024-25, its regulatory posture will aim to balance education and awareness-raising activities, with compliance activities to drive an uplift in regulated entity compliance.
For more information about the CISC's compliance regulatory posture, see CISC: SOCI Compliance Regulatory Posture 2024 and beyond (6 March 2024).
ASX opens public consultation on its proposed approach to deliver CHESS replacement solution
On 14 March 2024, the ASX released the first public consultation paper calling for feedback on its proposed two-stage implementation strategy for the CHESS replacement solution, and the proposed design, scope, schedule and testing approach for the first stage, being the replacement of CHESS's clearing service component.
ASX had previously announced in November 2023 that it would proceed with a product-based solution design for the CHESS replacement that would be delivered by TATA Consultancy Services. The proposed solution includes two stages, under which:
The first stage (Release 1) will replace CHESS's clearing component and introduce Financial Information eXchange messaging for trade registration for all Approved Market Operators.
The second stage (Release 2) will enhance settlement and subregister functionality and messaging interfaces for participants, registries and payment providers. ASX indicates that the proposed implementation approach for Release 2 will be subject to public consultation later in 2024.
For more information, see the ASX media release (14 March 2023) . For the full text of the consultation paper, see ASX: CHESS Replacement: Consultation Paper on Staged Implementation Approach and Implementation of Release 1 (Clearing Services) (14 March 2023) .
ASX amends guidance notes on admission as a participant for various operating rules
The ASX has confirmed a range of amendments to the respective series of guidance notes, each titled Guidance Note 01: Admission as a Participant in respect of each of the ASX Operating Rules, ASX 24 Operating Rules, ASX Clear Operating Rules, ASX Clear (Futures) Operating Rules and ASX Settlement Operating Rules to:
Provide additional information and clarity on key matters relating to a participant's admission to the relevant market or clearing and settlement facility.
Delete redundant references (including removing aspects that are no longer offered).
The changes are effective as of 4 March 2024.
The marked-up changes to each of the Guidance Notes can be accessed at ASX: Notice: Amendments to ASX Operating Rules, ASX 24 Operating Rules, ASX Clear Operating Rules, ASX Clear Futures Operating Rules and ASX Settlement Operating Rules - Guidance Note 01 - Admission as a Participant .
ASX Listings
There are no entities being listed this week.
Legislation and proposed legislation
Treasury announces financial sector regulatory initiatives grid
On 11 March 2024, the federal Treasurer announced that the Government will introduce a financial sector regulatory initiatives grid to improve the coordination of financial services regulation, modelled on a similar program currently in place in the United Kingdom.
The Australian Banking Association has been calling on the Government to adopt the concept. In June 2023, Anna Bligh (CEO of the Australian Banking Association) told The Australian Financial Review that “Australia should adopt this proven model to allow efficient sequencing of reforms, enhanced coordination between our regulators, and accelerated productivity growth”.
Responding to the news, Anna Bligh stated “with almost 1200 pages of new laws and regulations placed on the banking sector in the past four years, any initiatives that will allow banks to better plan and coordinate future regulation is welcome”.
The grid will consist of a rolling, 24-month forward program of regulatory initiatives that will materially affect the financial sector, including banking, credit, insurance, superannuation, investment, payments, and capital market entities, to be updated twice a year.
The stated aims of the regulatory grid are to:
Help financial services businesses engage with the government and regulators more effectively.
Allow regulators to avoid duplication, build shared strategic priorities, and focus on how to best implement reform.
Reduce regulatory compliance burdens and costs.
Give financial services providers, particularly medium-sized and smaller providers, clear visibility of regulations that might impact their businesses and support engagement with proposed reforms and their implementation.
The grid will be administered by Treasury and will include:
Proposed legislation, rules, regulations, standards, consultation processes, and data collection processes; and
Initiatives of agencies including ASIC, APRA, ACCC, RBA and the ATO.
No timeframe for the launch of the Regulatory Initiatives Grid has been given by Treasury. Treasury states that it will continue to engage with financial sector stakeholders in the development of the grid.
For more information, see Treasury: Better coordinated financial sector regulation .
Further Financial Accountability Regime rules registered
The Assistant Treasurer has announced the release of further rules relating to the operation of the Financial Accountability Regime (FAR).
The FAR applies to:
Banks (which are currently subject to the BEAR) - from 15 March 2024.
Insurance and APRA-regulated superannuation entities - from 15 March 2025.
The Government registered the Financial Accountability Regime (Minister) Rules 2024 on 6 March 2024. These rules prescribe a range of matters in support of the FAR, in particular:
Responsibilities and positions of accountable entities in each sector which make someone an "accountable person" subject to the FAR.
The threshold (based on total asset size) above which an entity is required to provide the regulators with additional accountability statements and maps.
ASIC and APRA have issued a joint media release stating that other materials released include the following:
See Treasury media release .
Parliamentary Joint Committee on Corporations and Financial Services inquiry into wholesale investor and wholesale client tests
On 20 March 2023, the Parliamentary Joint Committee on Corporations and Financial Services (Committee) commenced an inquiry into:
The wholesale client test for financial products and services (sections 761G and 761GA of Chapter 7 of the CA 2001).
The Committee has called for written submissions by 15 May 2024 and intends to report to Parliament by the end of 2024.
For more information see, Parliament of Australia: Wholesale investor and wholesale client tests .
Treasury: Standard definitions and standard cover for insurance
In the 2022-23 October Budget, the Government announced its intention to improve consumer understanding of insurance products as part of a package of reforms designed to:
reduce the cost of insurance in communities at risk of natural disasters;
enhance mitigation measures; and
promote better outcomes for consumers.
Treasury has been tasked with exploring possible natural hazards terms to standardise for insurance contracts and to review the standard cover regime.
Standard definitions in insurance refer to the process of mandating that all insurers use the same definition for a particular event in their insurance contracts. Currently, the only natural hazard definition that is standardised is ‘flood’.
The standard cover regime in the Insurance Contracts Act 1984 requires insurers to offer a baseline level of cover unless:
before the contract was entered into, the insurer ‘clearly informed’ the insured in writing or
the insured knew, or a reasonable person in the circumstances could be expected to have known, that the insurance contract provided less than the standard cover, or no cover.
This consultation paper seeks feedback on potential natural hazard terms for standardisation, as well as possible reform to the standard cover regime. Interested stakeholders are invited to provide a response by 4 April 2024.
See consultation paper , Treasury media release and Minister media release .
Treasury: Annual Superannuation Performance Test - design options
The Annual Superannuation Performance Test (the test) was introduced as one of four Your Future, Your Super measures to protect Australians’ retirement savings by holding trustees accountable for the investment performance they deliver and the fees they charge to members.
The test has applied to MySuper products since 1 July 2021 and to Trustee-Directed Products (TDPs), a subset of the choice accumulation sector, since 1 July 2023.
The test has improved member returns by holding trustees to account for investment performance and encouraging continual improvement or exit of poor performing products. However, there is evidence that the test may be influencing investment decisions to the detriment of member outcomes, including discouraging investment in asset classes that may otherwise be in the best financial interests of members.
The purpose of this paper is to canvass a range of options for reforming the test, should the government decide to do so in the future. In considering improvements to the performance test, the government is focused on ensuring the test holds trustees to account for delivering the best financial outcomes for members.
All interested parties are encouraged to provide input on the consultation paper by 19 April 2024.
See consultation paper , Treasury media release and Treasurer media release .
Treasury: Buy Now Pay Later (BNPL) regulatory reforms
Following previous consultation on the proposed regulation of BNPL arrangements, the government has released an exposure draft legislative package for public comment.
The package comprises a draft bill accompanied by an explanatory memorandum and draft regulations accompanied by an explanatory statement.
The draft legislation amends the National Consumer Credit Protection Act 2009 and the National Consumer Credit Protection Regulations 2010 to bring BNPL into the existing regulatory framework for other credit products.
The amendments are intended to ensure that BNPL is regulated in a way that is:
flexible
adaptable
proportionate to the risk of consumer harm.
Certain technical and operational provisions (including those dealing with the application, commencement and technological neutrality of the reforms) have been omitted for consultation.
The government welcomes interested parties to provide feedback on the effectiveness of the draft legislation.
See exposure draft bill and media release .
G+T Insights
Testing the test: Government consults on APRA performance test - discusses the Australian Government's request for feedback on improving the APRA performance test for superannuation products, highlighting concerns over its design, potential consequences for failing the test, and the encouragement of short-term investment strategies to avoid failing - Luke Barrett (21 March 2024)
Boardroom Brief: Week commencing 18 March 2024 - discusses the analysis released by the AICD on board diversity data, further guidance published by ASIC and the APRA on the recently commenced FAR, the Treasurer’s announcement to introduce a financial sector regulatory initiatives grid and a consultation paper published by the ASX in relation to the proposed replacement to CHESS. Also examines an application received by the Takeovers Panel from various applicants in relation to the affairs of Pact Group Holdings Limited. Risk Radar, considers the risk of litigation presented by Australia’s proposed mandatory climate-related disclosure regime, as opined by the AICD - Justin Mannolini, Cassandra Lee and Adam Sibum (18 March 2024)
FAR rules finalised and FAR Information Package for superannuation and insurance industries released - discusses ASIC and APRA releasing a Financial Accountability Regime (FAR) information package for the insurance and superannuation industries on 14 March 2024, ahead of FAR's application to these industries on 15 March 2025, following its commencement for authorised deposit-taking institutions on 15 March 2024, and outlines key takeaways and requirements for ADIs, insurance, and superannuation entities under this new regime - Silvana Wood, Chris Whittaker and Janina Del Rosario (15 March 2024)
ACCC announces its 2024-25 Compliance and Enforcement Priorities - The ACCC’s 2024-25 compliance and enforcement priorities focus on sustainability, cost-of-living pressures, and the digital economy. - Elizabeth Avery, Simon Muys and Matt Rubinstein (8 March 2024).
Calendar Dates
15 March 2024 - Financial Accountability Regime Bill first begins to apply to the banking industry
28 March 2024 - Submissions deadline for third consultation on amendments to the ASIC Derivative Transaction Rules (Reporting) 2024
28 June 2024 - Final report due in the Senate inquiry into greenwashing