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Financial Services Thinking – Issue 21

In this edition of Financial Services Thinking we showcase the latest news from the corporate regulators.

We also share a ‘Hot Tip’ about ASIC closely scrutinising funds' advertising and promotional material. You need to act promptly if you have concerns about your advertising or receive correspondence from ASIC.

Please share Financial Services Thinking with your friends and colleagues, and we value your feedback.


ASIC ready to test its DDO intervention powers

ASIC is at the ready to test its intervention powers under the Design and Distribution Obligations following criticism it failed to do enough in the Sterling case. The Senate said ASIC acted with a ‘lack of concern’ for Sterling investors by failing to act promptly or proactively.

Acknowledging this criticism, ASIC chair John Longo said ASIC was changing its processes around communication of potential issues.

Longo said, "The fundamental principle is that Australians have the right to invest in these registered managed investment schemes."

"We should be encouraging people to get proper advice from licenced advisers before they enter into investments of this nature, particularly where the practical effect of the investment means they are putting their eggs in one basket."

"With DDO, we are in the early stage of using those powers and these powers are going to be tested, we will be looking for opportunities to test them."

Contact our Funds Management team for help understanding your ongoing Design and Distribution Obligations and practical tips for compliance or click here for our latest article by consultant Jeunesse Meldrum and lawyer Joe Fleming.

ASIC quarterly update now available

ASIC’s latest quarterly update report details the work ASIC undertook between 1 October and 31 December 2021, including—

  • investigations into matters arising from the Financial Services Royal Commission
  • commencing six proceedings against Westpac and its directors for compliance failures
  • proceedings against ANZ for breaching the Credit Act through its home lending ‘introducer program’ where ANZ accepted customer information and documents from unlicensed referrers, such as cleaners and real estate agents
  • producing guidance for companies on new and continuing corporate governance obligations, including whistleblowing and illegal phoenix activity.

The report is a useful resource in determining ASIC’s focus areas.  If you would like to discuss this further, then contact one of our Funds Management team members.

Findings from review of responsible entity governance

ASIC recently undertook a high-level review of the governance practices of 10 large responsible entities (REs) – who collectively operated 35.2 percent of all registered schemes as at 30 June 2021.

ASIC collected information about the REs’ business models, board composition, compliance committees, performance, and governance as well as service provider oversight by reference to the financial year ended 30 June 2020.

Click here for details of ASIC’s findings.

REs are encouraged to consider the review findings and proactively take steps to evaluate whether their own governance practices are adequate. It is critical REs effectively manage both financial and non-financial risks, continuously improve compliance, and deliver better investor outcomes.

ASIC prosecutes for failure to hold AGM and lodge financial reports

During the six months leading up to 31 December 2021, ASIC prosecuted seven companies for not complying with their obligations to hold annual general meetings (AGMs) and lodge financial reports within the required timeframes. A company was also fined for failing to meet the minimum officeholder requirements. Fines totalled $429,000, with one company also entering a three-year good behaviour bond.

ASIC will continue to prosecute companies that systemically fail to comply with their financial reporting obligations. Compliance is important to ensure shareholders, creditors, and the public are provided with timely and accurate information to enable them to make informed decisions about the company.

Get in touch with our Funds Management and Litigation lawyers if you have concerns about meeting your financial reporting obligations.

Remaking ASIC relief on financial services disclosure requirements

ASIC Consultation Paper 358 Remaking ASIC relief on PDSs, superannuation dashboards and FSGs (CP 358) seeks industry feedback on proposals to remake, as three new instruments, relief contained within class orders relating to: 

  • PDS in-use notices for employer-sponsored superannuation and product dashboard disclosure 
  • shorter PDSs and PDS obligations for superannuation trustees, investor directed portfolio services (IDPS) operators and responsible entities of IDPS-like schemes
  • Financial Services Guides in time critical situations.  

Most of the existing instruments will automatically repeal or cease in the next two years if not remade. CP 358 outlines ASIC’s proposal to consolidate seven instruments into three new instruments without substantive changes, and giving effect to the new instruments until 1 October 2027. The proposed changes are designed to assist industry in complying with disclosure obligations by providing regulatory certainty.

Financial services licensees, superannuation trustees, platform operators, responsible entities, consumer groups and other interested stakeholders are encouraged to provide feedback by 12 April 2022.

Our Funds Management lawyers can assist with all your financial services queries.

Relief extended for credit hardship short-term arrangements

ASIC has extended Class Order [CO 14/41] for a further two years until 1 April 2024 providing relief to credit providers and lessors from the obligation to give written notice to consumers about hardship contract variations of 90 days or less.

ASIC considers this relief remains appropriate given the financial consequences of COVID, giving credit providers the flexibility to quickly offer temporary assistance to consumers.  This extension also gives the Government time to consider whether the relief should be permanently incorporated into the National Credit Code.

Reach out to our Real Estate and Litigation lawyers for assistance.


ASX takes steps to enable CCIV sub-fund listings

ASX recently released a consultation paper seeking feedback on proposed amendments to the ASX Listing Rules to facilitate the listing of corporate collective investment vehicle (CCIV) sub-funds.

A CCIV is required to have one or more registered sub-funds. A CCIV’s initial sub-fund or sub-funds are registered by ASIC as part of the registration process for the CCIV. Further sub-funds may be registered with ASIC after the CCIV has been registered. Each sub-fund must have its own name and is given its own Australian registered fund number (or ARFN).

On 10 February 2022, the Federal Government passed legislation to implement the CCIV regime. The legislation permits a CCIV to be included in the official list of a prescribed market (including ASX) if it is a retail CCIV with only one sub-fund or a sub-fund of a retail CCIV with a single sub-fund.

ASX has invited written feedback by 18 March 2022, with the aim of allowing CCIV sub-funds to list on the ASX from 1 July 2022.

Contact our Funds Management team if you need to learn more about CCIVs. Here partner Langton Clarke explains the features of the CCIV regime and highlights some of its benefits and drawbacks.


Changes ahead for foreign financial services providers

If the Treasury Laws Amendment (Streamlining and Improving Economic Outcomes for Australians) Bill 2022 (Bill) is approved then reforms and exemptions for foreign financial service providers (FFSPs) from the need to hold an AFSL will include— 

  • replacing the ‘limited connection exemption’ with the new ‘professional investor exemption’ 
  • replacing the passporting exemptions the new 'comparable regulator exemption' 
  • introducing an exemption from the fit and proper person test for FFSPs which make an application for a wholesale AFSL allowing for faster application times.

The Bill has also clarifies that FFSPs will be subject to a breach reporting regime, as well as expanding the ASIC notification period for FFSPs.

Click here for our latest article on the regulation of FFSPs and reach out to our Funds Management team for more.

2022 Foreign Investment Reforms

Treasury recently released a Discussion Paper on the 2022 Foreign Investment Reforms and an exposure draft of the Foreign Acquisition and Takeovers Amendment Regulations 2022.  The proposed amendments include— 

  • raising the control threshold from 5 percent to 10 percent for foreign investors who acquire interests in unlisted Australian land entities, aligning with the thresholds for listed Australian land entities and more sensitive investments 
  • allowing foreign custodians to undertake acquisitions without approval in the course of providing custodian services on behalf of an Australian person.  

Treasury intends to pursue further reforms in late 2022, with the aim of reducing the burden on foreign investment. Suggested reforms include increasing the scope and financial limits of exemption certificates, expanding the types of transactions that can be voluntarily notified, and providing an exemption for ‘interfunding’ activities between two registered managed investment schemes with the same responsible entity.

Treasury is accepting submissions on the proposed reforms until 11 March 2022.

Hot Tip!

ASIC scrutinises fund advertising

A recent Federal Court case has confirmed a statement in advertising which is literally true can still mislead or deceive investors if its broader context allows other interpretations.

Click here for partner Selina Nutley’s recent article about ASIC’s close watch on funds’ advertising and promotional material where she explains what you need to know.

Our Litigation and Funds Management teams are monitoring these developments closely.  If you have concerns about your advertising or have received correspondence from ASIC, it is important you act promptly.  Contact us for assistance.


Emma Donaghue

Emma Donaghue


Elliott Stumm

Elliott Stumm


Contact McMahon Clarke

T +61 7 3239 2900
A Level 7, 100 Creek Street, Brisbane Qld 4000