In this edition of our Financial Services Regulation Newsletter, we focus on key legal developments over the last fortnight.
On the pulse
Consumer Data Right rule changes to drive consumer take up – see media release.
ASIC announces new enforcement priorities with a focus on cost of living pressures – see media release.
ASIC: Market Integrity Update Issue 163: November 2024 – see update.
ASIC sues NAB for failing customers facing financial hardship – see media release.
APRA releases survey results assessing management of risks associated with climate change in the financial sector – see media release.
AUSTRAC and Pacific financial intelligence units gather in Brisbane to tackle financial crime in the region – see media release.
Enforcement priorities for 2025 and confronting regulatory complexity – see speech.
End-to-end accountability: Remarks to Association of Superannuation Funds of Australia Conference 2024 – see speech.
APRA Executive Director Carmen Beverley-Smith's remarks at the ASFA Conference 2024 – see speech.
APRA response to Cbus board announcement – see media release.
H.E.S.T. Australia to make payments to members impacted by March 2020 revaluations – see media release.
Opening Statement: Inquiry into improving consumer experiences, choice and outcomes in Australia’s retirement system – see statement.
IOSCO publishes report on climate-related transition plans disclosures – see media release.
G+T Insight - ASIC 2025 enforcement priorities: spotlight on superannuation sector – Luke Barrett and Catherine Kelso (15 November 2024)
ASIC
ASIC announces new enforcement priorities with a focus on cost-of-living pressures
The Australian Securities and Investments Commission (ASIC) has outlined its enforcement priorities for the year 2025, with a strategic focus on safeguarding consumers from financial harm exacerbated by rising cost of living.
At the ASIC Forum on 14 November 2024, Deputy Chair Sarah Court emphasised the commitment to protect Australians and target those exploiting financial vulnerabilities.
In 2025, ASIC’s enforcement priorities are:
misconduct exploiting superannuation savings
unscrupulous property investment schemes
failures by insurers to deal fairly and in good faith with customers
strengthening investigation and prosecution of insider trading
business models designed to avoid consumer credit protections
misconduct impacting small businesses and their creditors
debt management and collection misconduct
licensee failures to have adequate cyber-security protections
greenwashing and misleading conduct involving ESG claims
member services failures in the superannuation sector
auditor misconduct
used car finance sold to vulnerable consumers by finance providers.
ASIC's proactive stance is reflected in the significant increase of 25% in new investigations and a 23% rise in new civil proceedings last year, targeting enforcement outcomes in diverse areas such as greenwashing, cryptocurrency, predatory lending, high-cost credit and insider trading.
See ASIC media release.
ASIC: Market Integrity Update Issue 163: November 2024
ASIC has published ASIC Market Integrity Update: Issue 163 (November 2024), which includes articles about:
ASIC's enforcement priorities for 2025
good practice communication principles in the event of a cyber incident that may help entities minimise any potential harm
ASIC’s inaugural Digital Assets Liaison Meeting, which took place on 11 September 2024
recent ASIC enforcement actions.
See ASIC Market Integrity Update.
ASIC Chair on confronting regulatory complexity
As part of the 27th ASIC Annual Forum held on Thursday 14 November 2024, ASIC announced a major new initiative to confront legislative and regulatory complexity in corporate law and financial services law.
ASIC Chair Joe Longo stated in his keynote address that:
It is time for a renewed national discussion about regulatory complexity and how ASIC implements regulation, particularly following recent reviews by the Australian Law Reform Commission.
Legislative and regulatory complexity in the current state of corporate law makes it difficult, expensive and time-consuming for consumers and investors to understand and exercise their legal rights and obligations, creating burdens for business, restricting access to justice and chilling productivity and innovation.
Complexity is a clear and present danger to ASIC's work as a law enforcement agency.
ASIC supports the principles that:
laws should be as simple as possible, to give effect to policy
legislation should enable those affected to understand how the law applies to them
achieving clearer laws requires designing, instructing, drafting and assessing for clarity.
To that end, ASIC has announced the formation of a Simplification Consultative Group, to be composed of key consumer advocates, business leaders and directors and industry groups. The group's purpose is to:
listen to consumers, investors and industry
challenge ASIC to simplify and streamline its processes
leverage the existing consultative panels ASIC runs, with the additional participation of other groups.
maintain an urgent focus on establishing the key priorities that ASIC can help address with a mandate to "make the most difference as quickly as possible".
See the full speech by the ASIC Chair.
End-to-end accountability: Remarks to Association of Superannuation Funds of Australia Conference 2024
ASIC Commissioner Simone Constant made the following key remarks at the Association of Superannuation Funds of Australia Conference 2024 in Sydney on 20 November 2024:
ASIC is prioritising the improvement of retirement outcomes and services for members, with a keen eye on making sure superannuation trustees are responsible and accountable.
The CEOs of superannuation funds have received a notice from ASIC to enhance the way they oversee death benefits, highlighting concerns that current tracking methods for claims are insufficient for proper accountability (see Open letter to CEOs of superannuation trustees).
Senior executives in the superannuation industry have been reminded by ASIC that they will be held to higher standards of accountability as accountable persons under the Financial Accountability Regime starting from next March, ensuring leadership responsibility.
Read the full speech here.
ASIC key actions and proceedings
ASIC sues NAB for failing customers facing financial hardship
ASIC has filed court documents alleging that, between 2018 and 2023, NAB and its subsidiary AFSH Nominees Pty Ltd did not respond to 345 hardship applications within the 21-day timeframe required by law. See ASIC media release. ASIC has similarly commenced proceedings against Westpac for failing to respond to customers’ hardship notices within required timeframe. A hearing for the proceedings brought against Westpac is listed for 27 May 2025.
ASIC sues Cbus alleging systemic claims handling failures
ASIC has alleged that, from September 2022 to November 2024, the Construction and Building Unions Superannuation Fund (Cbus) failed to act efficiently, honestly and fairly in the handling of claims for death benefits and TPD insurance, taking more than 90 days to process claims. By late 2022, more than half of Cbus claimants had been delayed payment by more than a year. ASIC also alleged that the response of Cbus to the issue was inadequate and that it failed to report issues to ASIC as required within 30 days. Once the issues were reported to ASIC, ASIC alleges that Cbus failed to take all reasonable steps to ensure that those reports were not materially misleading when they reported that the contravention was not ongoing. See ASIC media release.
Small foreign controlled company pays $187,800 penalty for failing to lodge financial reports
Optix Australasia Pty Ltd, a small proprietary company ultimately controlled by a South African listed company, has paid $187,800 to comply with an infringement notice issued by ASIC. The infringement notice was issued for a failure to lodge financial reports within the specified period. See ASIC media release.
Former investment manager Brett Trevillian sentenced to three years imprisonment for forging reports for investors
Metal Alpha Pty Ltd director Brett Paul Trevillian has been sentenced to three years imprisonment for forging reports about the performance of his trading strategy ‘The Gold Method’, when he was the investment manager of AlphaThorn Pty Ltd. The forged reports falsely claimed a history of successful investment returns. See ASIC media release.
Former Director and CEO of Credit Union, Lyndon Kingston found guilty of dishonest conduct
Former Director and CEO of Bananacoast Community Credit Union Limited (BCU), Lyndon Allen Kingston, has been found guilty of two counts of dishonestly using his position with the intention of gaining an advantage and two counts of providing misleading information to the auditor of BCU. See ASIC media release.
Financial Services and Credit Panel issues registration suspension order
The Financial Services and Credit Panel has suspended the registration of financial adviser Ian Reid for three months. The FCSP found that Mr Reid had not complied with his obligations when providing advice to three clients because he used outdated statements of advice that had been given to the clients up to seven years ago. See ASIC media release.
Kristofer Ridgway charged with dishonest conduct
Former Brisbane-based financial adviser Kristofer Ridgway has been charged with 26 counts of dishonest conduct in relation to his failure to disclose commission payments to clients. See ASIC media release.
APRA
APRA publishes new and updated FAQs on capital for ADIs and insurers
On 14 November 2024, the Australian Prudential Regulation Authority (APRA) updated its FAQs on measurement of capital for Authorised Deposit-Taking Institutions (ADIs) and insurers.
The updates remove duplication of commentary now reflected in the updated Prudential Standards and incorporate updates to the general insurance, life insurance and private health insurance Prudential Standards.
The capital FAQs are available on the APRA website: Measurement of capital - frequently asked questions.
See APRA media release.
APRA releases survey results assessing management of risks associated with climate change in the financial sector
APRA has released the results of its climate risk self-assessment survey, offering insights into the financial sector's management of climate-related risks and alignment with the Prudential Practice Guide CPG 229 Climate Change Financial Risks. The survey, which extends upon a previous one in 2022, saw participation from over half of all APRA-regulated banks, insurers and superannuation trustees.
Key takeaways from the survey include:
Alignment with APRA's expectations: The self-assessed climate risk maturity of entities generally meets APRA's standards, with larger entities showing continued improvement.
Variability in maturity levels: Despite overall progress, there is notable variation in climate risk maturity, with smaller entities lagging.
Governance and strategy: Entities scored well in governance and strategy, indicating robust frameworks where climate risk is integrated into risk management.
Disclosure and metrics: Performance in disclosure and setting metrics and targets was identified as an area needing enhancement.
Emerging risks: Institutions are beginning to address related risks, such as nature risk and transition planning.
APRA is advocating for all regulated entities to reflect on the survey findings and adopt leading practices.
Looking ahead, APRA's 2024-25 Corporate Plan includes plans to raise the bar for climate risk consideration in decision-making processes. The authority intends to integrate climate risk into the Prudential Standards CPS 220 and SPS 220 Risk Management by 2025.
See APRA media release.
APRA Executive Director Carmen Beverley-Smith's remarks to the ASFA Conference 2024
The speech highlights the growing scrutiny on the superannuation industry, emphasising the need for robust, member-focused and well-managed funds to ensure positive financial outcomes for retirees. APRA is prioritising strengthening financial and operational resilience across the industry, including introducing new standards and conducting stress tests to assess risks in a systemic crisis.
Ms Beverley-Smith stressed the importance of investment governance and prudent asset valuations, noting APRA's focus on improving fund expenditure transparency and scrutinising underperforming products. Finally, Beverley-Smith emphasised the need for trustees to enhance retirement planning support and deliver improved outcomes for members transitioning to retirement, with ongoing collaboration between APRA and ASIC to drive these reforms.
For the full speech, see here.
APRA response to Cbus board announcement
APRA has acknowledged new board appointments made by United Super, the trustee for Cbus. While board appointments are managed by the trustee, APRA's role is to ensure trustees meet certain standards.
APRA has previously set licence conditions for Cbus, which include a mandate for an independent review assessing the trustee's adherence to Prudential Standard SPS 520 Fit and Proper. This standard requires trustees to act in the best financial interests of their members when making expenditure decisions.
The review will evaluate the policies, practices and decisions concerning the fitness and propriety of both current and new board members. APRA has indicated that it is not fully satisfied with Cbus's compliance with these conditions and is awaiting the independent review report. Depending on the findings, APRA may take further action.
This development underscores APRA's commitment to maintaining high standards of governance within superannuation funds, ensuring trustees act in the best interests of their members.
See APRA media release.
H.E.S.T. Australia to make payments to members impacted by March 2020 revaluations
On 19 November, H.E.S.T. Australia Ltd (HESTA) agreed to make payments to two cohorts of members affected by certain valuation decisions made in the early stages of the COVID-19 pandemic.
In March 2020, HESTA adjusted the valuations of five single sector Choice options with unlisted assets, but delayed similar adjustments to other options, including the MySuper option, for a week. This discrepancy raised concerns regarding the adequacy of HESTA's decision-making processes and the fairness to members who switched between these options during that period.
After extensive engagement and a formal investigation by APRA, HESTA has agreed to make payments to two groups of members who were disadvantaged by these valuation decisions. This move, along with improvements to HESTA's valuation policies and procedures, has led APRA to conclude its investigation without further action.
See APRA media release.
Opening statement: Inquiry into improving consumer experiences, choice and outcomes in Australia’s retirement system
APRA appeared before the Senate Economics References Committee inquiry into improving consumer experiences, choice and outcomes in Australia’s retirement system on 14 November 2024.
In her opening statement, Carmen Beverley-Smith from APRA outlined the agency's focus on improving retirement outcomes for Australians through the Retirement Income Covenant, emphasising the need for better support from superannuation trustees. She noted insufficient progress in tracking the success of retirement income strategies and highlighted the challenges in using superannuation to facilitate homeownership in retirement, which falls outside APRA’s mandate.
For the full statement, see here.
Other bodies and regulators
AUSTRAC and Pacific financial intelligence units gather in Brisbane to tackle financial crime in the region
Representatives from 13 Pacific nations have gathered for the Pacific Financial Intelligence Community (PFIC) plenary, which is hosted by AUSTRAC.
The three-day event, which began on 12 November 2024, provides an opportunity for financial intelligence units to explore initiatives to fight financial crime. These include joint operations, intelligence sharing, capacity-building activities and region-wide technological enhancements.
See AUSTRAC media release.
IOSCO publishes report on climate-related transition plans disclosures
On Wednesday 13 November 2024, the International Organisation of Securities Commissions (IOSCO) published its IOSCO Report on Transition Plans (Report). Developed by IOSCO’s Sustainable Finance Taskforce, the Report sets out how transition plans disclosures can support the objectives of investor protection and market integrity and shares challenges and key findings that point towards a series of coordinated actions for IOSCO and other stakeholders to consider in the future.
For more information, see IOSCO media release: IOSCO Publishes Report on Transition Plans Disclosures.
Legislation and proposed legislation
Consumer Data Right rule changes to drive consumer take up
On 12 November 2024, the government announced changes to make it easier for consumers to use the Consumer Data Right (CDR). The government is removing friction within the CDR to improve cost effectiveness by amending the CDR rules to make consent and operational enhancements.
Changes include removing barriers for banks by simplifying requirements that apply when an accredited bank seeks data from a consumer. The previous process was complex and confusing for consumers, often resulting in them dropping out.
Treasury will undertake further consultation with stakeholders on proposed amendments to improve business consumer participation in the CDR. The new rules have commenced on 12 November 2024.
See Treasury media release.
G+T Insights
G+T Insight – Government introduces legislation to regulate Buy Now Pay Later (BNPL) – discusses the latest legislation that brings BNPL products – which to date have not been regulated under Australian consumer credit laws – in line with the way other credit products are regulated. This article examines the new legislative definition of ‘low cost credit contracts’ as well as the option for providers to elect to opt-in to complying with a modified version of responsible lending obligations under the Credit Act that is scaled down to only the risks associated with low cost credit contracts – Silvana Wood, Chris Whittaker, Lilian Wan and Dan Press (4 December 2024).
G+T Insight – Regulatory intel – the banking scorecard on FAR – discusses the letter from ASIC and APRA to all APRA-regulated entities with the regulators’ observations on the registration and notification lodgements made by authorised deposit taking institutions since the commencement of the Financial Accountability Regime (FAR). The regulators have indicated that accountable entities should have robust frameworks in place to ensure registration and notification submissions are complete and comply with FAR. The regulators have also stated that each accountable entity’s board is expected to demonstrate appropriate oversight and be prepared to attest to the adequacy of the entity’s FAR framework and its compliance with FAR– Silvana Wood and Janina Del Rosario (4 December 2024).
G+T Insight – ASIC 2025 enforcement priorities: spotlight on superannuation sector – discusses ASIC's enforcement priorities for 2025, highlighting a focus on protecting consumers, especially in the superannuation sector, from financial misconduct, with key areas including superannuation savings exploitation, greenwashing, and inadequate cyber-security protections, alongside ongoing scrutiny of governance and market integrity issues – Luke Barrett and Catherine Kelso (15 November 2024).
Calendar
1 December 2024 – Second round of consultation on Australian sustainable finance taxonomy to commence
19 December 2024 – Deadline for feedback to ASIC consultation on sustainability reporting guidance
1 January 2025 – Mandatory climate-related financial disclosures for Group 1 entities proposed to apply in respect of financial years starting on or after this date
28 February 2025 – Updated Banking Code of Practice (2025 version) comes into effect
15 March 2025 – Financial Accountability Regime takes effect for superannuation and insurance bodies