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30.03.2022

Publication

Financial Services Thinking – Issue 22

Welcome to Financial Services Thinking where we showcase the latest news from the corporate regulators.

We also share a ‘hot tip’ about the extension for companies and registered schemes to hold their virtual-only meetings.

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


ASIC

ASIC consults on AFSL requirements for CCIVs

ASIC Consultation Paper 360 Corporate collective investment vehicles: Preparing for the commencement of the new regime seeks industry feedback from fund managers and industry stakeholders on the proposed corporate collective investment vehicle (CCIV) licensing requirements which come into effect on 1 July 2022. 

The Consultation Paper addresses how ASIC will assess AFSL applications from directors and persons seeking to provide CCIV securities or operate a CCIV. Submissions close on 14 April 2022.

Contact us if you have queries about making a submission or if you need to understand more about how CCIVs will be used, the regulatory and policy requirements of the new framework, or for assistance with preparing a CCIV product. 


ASIC scrutinises marketing of managed fund performance and risks

As outlined in our recent Alert, ASIC has commenced its examination of the marketing of managed funds to identify the use and prevalence of misleading performance and risk representations in promotional material. 

ASIC is focusing on traditional and digital media methods of marketing funds to target retail and unsophisticated investors. ASIC notes it will particularly target funds advertising to retirees and focus on the likes of:

•    risk disclosures being clear and prominent
•    balanced messages about returns and fees 
•    ensuring marketing material is not misleading or deliberately confusing. 

Get in touch with our Funds Management team who can conduct an audit of your advertising material or help you respond to any notices or correspondence received from ASIC.


ASIC’s corporate governance priorities and the year ahead

ASIC Chairman Joe Longo’s speech at the recent AICD Governance Summit provided deep insights into what the business sector can expect ASIC to focus on in 2022. 

ASIC highlighted its intention to focus on good corporate governance. Mr Longo reminded businesses that where directors and companies fail to conduct good governance and fail to continually deal with foreseeable risks and compliance issues, ASIC will not hesitate to take action. Specifically, ASIC will concentrate on harm caused to investors and consumers caused through non-financial risks, inadequate cyber governance, and company misconduct. 

Other areas on ASIC’s watchlist for 2022 are cyber risk, climate change disclosure for listed companies, whistleblower and good governance regimes, and ASIC’s digital transformation and regulatory efficiency. 

ASIC warns social media ‘finfluencers’ and AFS licensees

ASIC has published an information sheet (Info 269) about discussing financial products and services online which sets out how the financial services laws apply to ‘finfluencers’ and AFS licensees who use them. ‘Finfluencer’ is the common term for someone engaged to promote financial products through social media platforms such as Facebook, YouTube, Instagram, and TikTok.

AFS licensees who use finfluencers may be liable for their misconduct and need to take precautions as outlined in our article here

The Act imposes significant penalties, including up to five years’ imprisonment for an individual and financial penalties into the millions of dollars for a corporation.

Contact our team if you are unsure of your obligations.


Worldwide consultation on evolving retail trading markets

ASIC and the Central Bank of Ireland lead a Retail Market Conduct Task Force (Task Force) for the International Organisation of Securities Commissions (IOSCO) in reviewing evolving retail markets, including investor trends and market conduct. The Task Force reported observing common types of harmful market misconduct such as mislabelling, mis-selling, and misleading disclosure. 

The Task Force is seeking stakeholders to engage with the IOSCO consultation and assist with the development of a regulatory toolkit for jurisdictions to consider. Retail investors, financial consumers, academics, and market participants are encouraged to provide their feedback before submissions close on 23 May 2022. 


ASIC enforcement update: July to December 2021

ASIC’s latest enforcement update for the period July to December 2021 reveals: 

  • 99 people or companies were prosecuted for strict liability offences.
  • $84.3 million in civil penalties were imposed by the Courts.
  • ASIC pursued 21 civil penalty proceedings.
  • 21 people or companies were removed or restricted from providing financial services or credit. 

This period also marked the filing of ASIC’s final civil proceeding coming out of the Hayne Royal Commission. 


AFCA

AFCA consults on proposed funding model

The Australian Financial Complaints Authority (AFCA) is currently consulting with financial firms and industry groups on a proposed ‘user-pays’ funding model. 

AFCA says the user-pays model aims to reward good performance and early resolution and will ease the burden on smaller, less frequent users of the service. It is anticipated that under the proposed model, 66 percent of fees would be recovered from the 2.5 percent of members that represent 66 percent of all complaints – and 95 percent of licensed financial firm members would only pay their annual registration fee each year (estimated to be $376 for the coming year).

Consultation closes 22 April 2022.  The model will be put to AFCA’s independent Board in May, with any changes taking effect from 1 July 2022.  


TREASURY  

Consultation on crypto asset regulation 

On 21 March 2022, Treasury released a consultation paper on licensing and custody requirements for crypto asset secondary service providers. Treasury says the regulation of financial products and crypto assets are distinct, and seeks feedback from industry on the perceived and actual regulatory gaps in the crypto asset market, including:

  • challenges classifying crypto assets as financial products or non-financial products
  • counterparty risks associated with using crypto as a store of value or investment
  • perceptions the digital currency markets are subject to the same regulatory oversight as regulated financial markets 
  • the proper vetting of owners, directors, and managers of crypto asset secondary service providers.

Submissions are due on 27 May 2022.  Click here for Elliott Stumm’s latest article about good practice guidelines for responsible entities of crypto schemes. 


Quality of Advice Review – Terms of Reference

The Government has released the terms of reference for its review into the legislative and regulatory framework for financial advice. The review will consider: 

  • streamlining regulatory compliance to reduce the costs of quality advice
  • simplifying disclosure requirements to remove unnecessary complexity for consumers
  • key concepts, including ‘financial product advice’, ‘general advice’ and ‘personal advice’, and whether they should be simplified.

The review will be led by an independent reviewer with a report due to by 16 December 2022. 


HOT TIP!

ASIC allows additional time for holding virtual-only meetings

On 3 March 2022, ASIC extended the timeframe for certain companies and registered schemes to hold virtual-only meetings, providing flexibility when preparing for AGMs or other meetings of members. Listed companies, together with listed and unlisted registered schemes, continue to have the option to hold virtual-only meetings until 31 May 2022 (an additional two months). For unlisted companies, the extension is until 30 June 2022.


Authors

Emma Donaghue

Emma Donaghue

Partner

Elliott Stumm

Elliott Stumm

Partner

Contact McMahon Clarke

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A Level 7, 100 Creek Street, Brisbane Qld 4000

Melbourne
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