Financial Services Thinking
Issue 2, April 2020
Here's our monthly round-up of the most important developments impacting the financial services sector, including the fallout from the COVID-19 crisis, from our Funds Management team.
Financial Services Thinking includes news items from the regulators, such as ASIC and APRA, as well as updates to legislation and recent cases.
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We hope you find Financial Services Thinking helpful and informative. Please don't hesitate to contact us if you have any questions or need advice.
- To facilitate emergency capital raising, ASIC has announced temporary relief extending the availability of the 'low doc' approach. The low doc approach allows the raising entity to reduce the number of documents that must be provided to investors during a capital raise. It is available for all quoted securities, including managed investment products. Prior to the introduction of the temporary relief, an entity could not use the low doc approach if the relevant security was suspended from trading for more than five days over the previous year. The temporary relief allows for up to 10 days suspension. For more information click here.
- Together with the Council of Financial Regulators, ASIC is refocusing its regulatory efforts on challenges arising from the COVID-19 pandemic. This refocus involves the immediate suspension of several non-critical activities undertaken by ASIC and ASIC's on-site supervisory work. Although the focus has shifted, ASIC has made it clear it will continue to undertake enforcement activity where the public interest warrants it. For more information click here.
- ASIC has confirmed it will not take steps against listed and unlisted public companies required to hold annual general meetings by 31 May 2020. The companies can postpone their AGMs for up to two months (to 31 July 2020), and ASIC has encouraged the use of technology, such as video conferencing, to hold the meetings. ASIC is also closely monitoring the potential impacts of the COVID-19 pandemic on a company's ability to meet their financial reporting obligations. However, at this stage, ASIC says there is no indication reporting deadlines require extension. For more information click here.
- ASIC has released a letter to real estate institutions in response to concern real estate agents may have provided unlicensed financial advice to tenants by telling them to access their superannuation to meet their rental obligations. The letter confirms that advice of this nature should only be provided by qualified and licensed financial advisers. Providing financial product advice without a licence may breach the Corporations Act and result in fines of up to $126,000 for an individual and $1.26 million for a corporation. For more information click here.
- ASIC has written to responsible entities (REs) of registered managed investment schemes reminding them of their obligations to the members of their schemes. ASIC has also set out their expectations for REs in relation to scheme liquidity, including:
- Withdrawals and applications are being actively monitored.
- The value of scheme property is being monitored and is following through to unit prices.
- The RE is carrying out its obligations under Regulatory Guide 259 Risk management systems of responsible entities.
- The RE is meeting their continuous disclosure obligations.
- To facilitate affordable and timely financial advice, ASIC has provided relief extending the time for when a statement of advice (SOA) must be given and temporary relief from the need to give a SOA when advice is given about early access to superannuation. For more information click here.
To help you navigate these and other issues in the fallout from the COVID-19 crisis, our Funds Management team has put together practical answers to the critical questions every fund manager, responsible entity and trustee should ask now. Click here to visit our special edition FAQs.
AUSTRAC has released guidance on alternative processes which AML/CTF reporting entities can rely on to meet their customer verification obligations. The guidance encourages a flexible approach to verifying identity, including using technology (such as Skype) to meet with customers and accepting electronic copies of identification documents. AUSTRAC also reinforced the importance of vigilance and reliable verification in the current environment. For more information click here.
- Together with ASIC, APRA has announced it is refocusing its regulatory priorities in response to the COVID-19 pandemic. APRA has suspended most of its planned policy and supervisory initiatives, including public consultation and revisions to the prudential framework. This refocus is intended to allow APRA-regulated entities to direct their full attention and resources to supporting customers. The suspension of initiatives will be periodically reviewed, and APRA does not expect the suspension to end before 30 September 2020. For more information click here.
- APRA has announced a temporary change to the reporting obligations of authorised deposit-taking institutions (ADIs) and registered financial corporations (RFCs), including:
- Temporary extension of the notification period for changes relating to the Bank Executive Accountability Regime.
- A new reporting standard for ADIs and RFCs regarding lending to small and medium enterprises.
- Deferring the introduction of some new reporting standards for ADIs and RFCs until March 2021.
A full list of the changes is available here.
Legislation and cases
- Amendments to the Corporations Act (Act) by the Coronavirus Economic Response Package Omnibus Act establish a temporary mechanism to provide relief to businesses that are unable to meet some of their obligations under the Act and regulations due to the COVID-19 pandemic. The mechanism, and any relief granted under it, is effective for a maximum of six months. Click here for an article about what this legislation means for the funds management industry. Our Funds Management team can explain how the new legislation impacts your business and what it means for your decision.
- ASIC has commenced proceedings in the Federal Court against Mayfair 101 and Mayfair Platinum alleging the advertisement and promotion of Mayfair's products is misleading and deceptive. The allegations focus on Mayfair's assertions their products are alternatives to term deposits and provide potential investors with 'certainty' and 'confidence'. For more information click here.
- We are aware ASIC has increased its focus on advertising and promotions, with several clients receiving a letter from ASIC on this point. If you receive a letter from ASIC or require any assistance with your advertising or promotions, then contact a member of our Funds Management team. We can help you.
- The Full Federal Court has confirmed the directors of Storm Financial breached their duties as directors. ASIC commenced proceedings against the directors after it became aware of Storm Financial encouraging its clients to invest using a one-size-fits-all approach involving a complicated process and requiring a significant investment in index funds. The focus of ASIC's case was that the one-size-fits-all approach did not consider investors' individual circumstances and was inappropriate in the majority of cases.
- The High Court of Australia has extended the statutory definition of 'officer' in the context of the Corporations Act to include any person who has the 'capacity to affect significantly the corporation's financial standing' (Australian Securities and Investments Commission v King).
In the news
All proposed investment, regardless of amount, into Australia which is subject to the Foreign Acquisitions and Takeover Act must be reviewed and approved by the Foreign Investment Review Board following an announcement by the Treasurer on 29 March. The review and approval process is intended to protect Australian businesses and assets in distress. The timeframe for reviewing existing and new applications has also been extended from 30 days to up to six months. The changes will last for the length of the pandemic. Click here for a recent article by partner Nicholas Stevens explaining the significant changes to the foreign investment review regime. Our lawyers can advise on the appropriate strategy for approaching these transactions and assist with all aspects of this rapidly changing landscape.
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