This edition of Financial Services Thinking highlights the latest developments from ASIC, Treasury and APRA, as well as the recent High Court decision in the Westpac case.  We also share a Hot Tip about electronic communications.

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ASIC

Imposter bond scam warning 

ASIC has released a warning to investors about the rise in imposter bond investment offers where scammers pretend to be associated with well-known domestic and international financial service firms and offer high yield bonds to investors. ASIC is aware of two such scams currently operating in Australia and numerous instances overseas.

Reduced sunset period for litigation funding instrument

ASIC Corporations (Litigation Funding Schemes) Instrument 2020/787 was originally due to sunset on 1 October 2030 but will now end on 22 August 2025. ASIC’s decision to reduce the term was driven by concerns raised by a Senate Committee and the overlap between matters addressed by the instrument and the recommendations in the final report of the Parliamentary Joint Committee inquiry into litigation funding and the regulation of the class action industry.

Contact Elliott Stumm or another member of our Funds Management team to learn more about the application of the financial services regime to litigation funders. You can also click here to view our recent Alert about the final report of the Parliamentary Joint Committee.

Immunity policy for certain offences

ASIC has just released an immunity policy for certain contraventions of the Corporations Act, including serious offences such as market manipulation, insider trading, and dishonest conduct in the course of carrying on a financial services business. Under the new policy, an individual who thinks they may have engaged in contravening conduct with others can apply for immunity from both civil penalty and criminal proceedings. Applications for immunity under ASIC’s policy are only available to individuals, not companies. ASIC will assess whether an individual is eligible for immunity based on several factors, including:

• Whether the applicant coerced others to be involved in the misconduct and whether the applicant instigated the misconduct.
• Whether ASIC has already commenced an investigation into the misconduct.
• Whether the applicant continues to be involved in the misconduct.

Treasury

AFCA Review

Treasury is currently undertaking a public consultation process into the effectiveness of AFCA (the “one-stop shop for financial complaints”) in delivering against its statutory objectives. The information received during the consultation process will assist Treasury in undertaking its review of AFCA. The public consultation process closes on 26 March 2021.

Click here for our recent article about dealing with AFCA complaints or contact partner Selina Nutley from our Litigation team who can help with your queries.

APRA

Priorities for 2021

APRA has released a statement outlining its policy and supervision priorities for 2021.

APRA’s policy priorities for 2021 include:

• Finalising and implementing a revised prudential standard on remuneration, a key Royal Commission recommendation that remains outstanding.
• Strengthening crisis preparedness, including the development of a new prudential standard on resolution and recovery planning, taking into account the lessons and learnings of the past 12 months.
• Updating prudential standards on operational risk, governance and risk management, and consulting with industry on guidance for climate change financial risk.
• Completing the ongoing review of the capital framework for authorised deposit-taking institutions to fully implement ‘unquestionably strong’ capital ratios and the Basel III reforms.

APRA’s supervisory priorities include:

• Maintaining financial system resilience through increased action on crisis readiness, including recovery and resolution planning and stress testing.
• Increased scrutiny of entities’ cyber security capabilities.
• Embedding the new remuneration standard, conducting a risk culture survey, undertaking a range of GCRA-related supervisory reviews and deep dives, and working to close risk governance issues currently requiring capital overlays.
• Addressing areas of MySuper underperformance, taking enforcement action where appropriate, and providing greater transparency through the expansion of the heatmaps to include Choice products.

Cases and legislation

Westpac v ASIC

In a recent decision, the High Court said Westpac had provided personal advice during an advertising campaign where individuals were encouraged to ‘roll-up’ their existing superannuation products into a single product issued by Westpac. Some of the Court’s key findings include:

• The fact a disclaimer had been given (‘everything discussed today is general in nature’) and the advice was free was not enough to characterise the advice as general advice.
• Personal objectives of a client do not cease to be personal objectives merely because they are generally applicable to all or most persons in the position of the client.
• Each customer might reasonably have expected that, given the nature of Westpac’s business and its experience and expertise in financial matters like superannuation, Westpac had taken the objectives it had elicited into account in recommending the roll-over service.
• Section 766B(3)(b) of the Corporations Act contemplates consideration of at least one aspect of the client’s objectives, financial situation, or needs, and is readily applicable to situations where the decision by the client is focused upon one aspect of his or her financial affairs.

You can read more about the Westpac case in our recent article about the implications for licensees and how it impacts the soon to commence design and distribution obligations.  You can contact partner Selina Nutley from our Litigation team or a member of our Funds Management team to learn more about the decision and the implications it may have for your business.

Hot tip!

In late 2020, a new deeming provision was added to the Corporations Act providing electronic communications are taken to have been received when they become capable of being retrieved by the recipient. This became relevant to one of our clients where an electronic communication was sent but not received due to the file size of the correspondence. As the communication could not be retrieved, the communication was deemed not to have been received.