Read our CCIV Guide for the latest insights on the new regime

11.08.2022

Publication

Financial Services Thinking – Issue 26

Welcome to the August edition of Financial Services Thinking showcasing the latest news from the corporate regulators.

We also share a ‘hot tip’ about the need for wholesale fund managers to have experienced and sufficient responsible managers. Reach out to our Funds Management team for help understanding your AFS licence compliance obligations.

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


ASIC

ASIC uses its DDO stop order powers for the first time

In a timely reminder for retail product issuers to review their Target Market Determinations (TMDs), ASIC has just issued its first design and distribution obligations (DDO) stop orders. You can read more about ASIC policing DDO obligations in our recent article.

It is important you get your DDO compliance right. We can help you with—

  • preparing for and conducting the first mandatory review of your TMDs, which is due soon (likely by 5 October 2022 – please check your TMDs for the date)
  • engaging with your compliance plan auditor about how they intend to approach DDO in your schemes’ next compliance plan audits
  • regularly reviewing your product governance policy and assisting you to conduct regular desktop audits of your financial products having regard to the review triggers in your TMDs and any dealings that are not consistent with the TMDs. 

If you need help or have any questions, please reach out to a member of our Funds Management team.

ASIC releases guidance on Financial Services Guide and Credit Panel (FSCP)

On 3 August 2022 ASIC released an updated Regulatory Guide 263: Financial Services and Credit Panel (RG 263).

The FSCP is a pool of industry participants appointed by the ASIC Commissioner to be included on sitting panels which consider suspected misconduct by a financial adviser.

ASIC must convene a sitting panel in prescribed circumstances outlined in RG 263 and may make a variety of orders, ranging from giving a warning or reprimand to the adviser to prohibiting the registration of a financial adviser.

For those affected by a FSCP decision, ASIC Information Sheet 273 has also been updated to outline the rights for financial advisers affected and the process to apply to vary or revoke a FSCP decision.

Reach out to our specialist Litigation team if you are affected by a FSCP decision.

ASIC’s approach to breach reporting: implementation of reportable situations regime

ASIC has released further information about what will be contained in its first report about the new breach reporting regime. It has confirmed the report will include high-level insights into observable trends from the reports lodged by licensees between 1 October 2021 to 30 June 2022. The industry will take a collective sigh of relief to know this first report will not name or detail the nature or number of reports lodged by specific licensees. ASIC will consider its approach to the 2023 report early next year (including providing detail about specific licensees) and continue to work with stakeholders on implementing the new regime.

Foreign financial services providers (FFSPs) licensing relief extended

ASIC has extended the transitional arrangements for the sufficient equivalence relief and limited connection relief applying to FFSPs providing financial services to wholesale clients for another year, expiring on 31 March 2024. The licensing relief that was to commence for FFSPs under ASIC Corporations (Foreign Financial Services Providers—Funds Management Financial Services) Instrument 2020/199 has been delayed to commence on 1 April 2024, allowing sufficient time for those who cannot rely on the relief to apply for standard or foreign AFS licences.

Contact our Funds Management team for help understanding the requirements for FFSPs.

ASIC implements financial requirements for CCIV corporate directors

On 4 July ASIC introduced financial requirements for corporate directors of corporate collective investment vehicles (CCIVs) akin to those currently in place for responsible entities of registered managed investment schemes.

Read our CCIV Guide for all the latest insights on the new regime and reach out to partner Elliott Stumm or a member of our Funds Management team for help.

ASIC releases its regulatory update to June 2022

ASIC has released its enforcement and regulatory update for the period 1 April to 30 June 2022. ASIC has taken a strong stance against misleading consumers and compliance misconduct, with Westpac being fined a total of $113 million for incorrectly charging consumers due to inadequate compliance procedures. During this time, ASIC successfully charged 25 individuals and companies in criminal proceedings and the courts imposed $145.8 million in civil penalties.

Also, in an Australian first, ASIC took successful action in the Federal Court against an entity for failing to adequately manage cyber risk. Cyber risk remains one of ASIC’s core priorities.

The pursuit of investigations and enforcement by the corporate regulator sends a clear message that financial services providers need to ensure their house is in order. Contact our Funds Management team or Litigation team if you need help getting your house in order.

Extended deadlines for unlisted entities

ASIC has extended the deadline for unlisted entities to lodge financial reports by one month for balance dates from 24 June 2022 to 7 July 2022. ASIC implemented this extension following industry engagement and in recognition that many companies are experiencing staff shortages and resignations.

ASIC will consider relief for other entities and balance dates on a case-by-case basis.


AUSTRAC

Updated reporting threshold reports for AML

AUSTRAC has released updated guidance on reporting threshold transaction reports (TTRs). AUSTRAC is providing a 12 month transition period from 1 July 2022 for businesses to comply.

AUSTRAC’s updated guidance position means reporting entities must submit a TTR to AUSTRAC for each individual cash transaction of AU$10,000 or more. When a customer makes multiple cash transactions, each individual transaction is a separate and distinct designated service. There is no longer a requirement to combine multiple transactions and submit a TTR, even if the transactions occurred closely together.


Treasury

Feedback on conflicted remuneration

Treasury has recently released a consultation paper seeking further feedback on the extension of the ban on conflicted remuneration to listed investment companies and trusts. The changes to the treatment of stamping fees from 1 July 2020 was intended to remove the incentive for AFS licensees or their representatives to mis-sell products to retail clients to increase their remuneration, which would result in poorer consumer outcomes.


Hot tip!

ASIC focuses on licensees for hire

ASIC’s recent decision to pursue Lanterne Fund Services (Lanterne) for breach of its AFS obligations is a timely reminder about the importance of having experienced and sufficient responsible managers.

ASIC contends Lanterne had inadequate risk management systems and failed to ensure compliance of its representatives. Lanterne authorised more than 60 corporate representatives and more than 130 individual representatives under its AFS licence. During this time, Lanterne had only one fulltime employee and two part-time administrative employees.

ASIC expects wholesale fund managers to have in place adequate compliance arrangements, competence, and resources to carry out their licence functions and adhere to their licence conditions.

Reach out to partner Elliott Stumm or a member of our Funds Management team for help understanding your AFS licence compliance obligations.


Authors

Emma Donaghue

Emma Donaghue

Partner

Elliott Stumm

Elliott Stumm

Partner

Contact McMahon Clarke

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