Read the latest edition of Financial Services Thinking where you’ll find a ‘hot tip’ about the new internal dispute resolution reporting requirements as well as all the latest news from the corporate regulators.
ASIC has announced its first interim stop order for contravention of the reasonable steps obligations regarding a financial product since the design and distribution obligations (DDO) took effect in October 2021. ASIC issued the order against Mitrade Global (Mitrade) as it was concerned Mitrade was relying on a retail investor questionnaire with significant flaws as a key step for compliance with its obligations. Under DDO, issuers of financial products must take reasonable steps that will, or are reasonably likely to, result in distribution conduct to retail investors consistent with the product’s target market determination. [Postscript: ASIC subsequently revoked the stop order against Mitrade on 26 July 2023]
We offer a full spectrum of DDO services, from advice on documents you prepare to a comprehensive in-house review of the implementation of DDO into the operations of your business.
We have prepared this DDO Health Check to help you assess your target market determinations and product governance arrangements against ASIC’s current view of DDO good practice.
Contact Sean McMahon, Jeunesse Meldrum, or a member of our Funds Management team to understand what you need to do next.
ASIC is urging superannuation trustees to ensure they meet their legal obligations for dealing with incoming money from consumers if a new or increased interest in a super product cannot be issued by the next business day. It is important to be aware that the requirements under section 1017E of the Corporations Act also apply to product providers who issue interests in a managed investment scheme.
Under section 1017E, product providers which receive money to acquire or increase an interest in a financial product and do not immediately do so must hold application money in a trust account which meets certain requirements until—
The money must be returned or the product issued before the end of one month starting on the day on which the money was received, unless it is not reasonably practicable to do so, in which case a longer period that is reasonable in the circumstances will apply.
There are also specific disclosure obligations that apply to interest earned on money while it is subject to section 1017E.
The announcement by ASIC follows a review of a sample of 12 superannuation trustees to understand how they met requirements for dealing with money received for a financial product. ASIC noted all but one trustee failed to ensure their practices aligned with their obligations. ASIC identified four main issues among the trustees:
If you have any questions about your compliance obligations or need assistance to review your current practices, please contact a member of our Funds Management team.
ASIC proposes to remake the following managed investment scheme unit pricing class orders which are due to sunset on 1 October 2023:
ASIC believes the class orders are operating effectively and, subject to feedback, intends to issue the new legislative instrument as drafted.
ASIC-regulated entities are invited to take part in the cyber pulse survey to measure cyber resilience in Australia’s corporate and financial markets. It will measure entities’ current cyber security and controls, governance arrangements, and incident preparedness.
Participation in the survey is voluntary and can be accessed via the ASIC Regulatory Portal. If you need help with your cyber security protocols, then please contact our Funds Management team.
The first round of consultation on proposed reforms to the current anti-money laundering and counter-terrorism financing (AML/CTF) regime has drawn to a close. The consultation sought feedback on proposed changes affecting current reporting entities as well as certain higher-risk professions. These reforms aim to—
Are you meeting your AML/CTF obligations? Reach out to a member of our Funds Management team to understand more about AML/CTF compliance and how we can help.
APRA announced it took action against Medibank Private following its review of the major cyber incident in October 2022.
Following APRA’s examination of the matters relating to the incident, APRA will impose an increase in Medibank’s capital adequacy requirement of $250 million, reflecting weaknesses identified in Medibank’s information security environment. It will remain in place until an agreed remediation program of work is completed by Medibank to APRA’s satisfaction. APRA will also conduct a targeted technology review of Medibank, with a particular focus on governance and risk culture.
Where appropriate, APRA will take further action to ensure entities address gaps and weakness in controls.
On 26 June 2023, the Albanese government released the Final Report on the Review of the ASIC Industry Funding Model (IFM). The review was led by Treasury in consultation with ASIC, the Department of Finance, and the Department of the Prime Minister and Cabinet to ensure the ASIC IFM settings remain appropriate in the long term.
Key recommendations directed to ASIC include:
In total, the Review makes 10 recommendations. The Review found that the settings of the ASIC IFM remain broadly appropriate but refinements can be made within the existing framework to improve the way regulatory costs are recovered and to communicate IFM settings to industry more effectively.
Legislative changes introduced in response to the Ramsay Review 2017 have significantly reshaped the AFS dispute resolution framework, including higher standards for financial firms dealing with consumer and small business complaints under their internal dispute resolution (IDR) procedures. The enhanced standards include a mandatory and ongoing IDR data reporting obligation for ‘in-scope’ financial firms.
All AFS licensees who provide financial services to retail clients and all Australian credit licensees are ‘in-scope’ and must lodge an IDR compliant report to ASIC every six months (regardless of any IDR complaints or not). The relevant reporting timeframes are:
Second tranche firms will first report in the submission window from 1 July to 31 August 2023, covering the six-month reporting period 1 January to 30 June 2023.
Third tranche firms will first report in the submission window from 1 January to 29 February 2024, covering the six-month reporting period 1 July to 31 December 2023.
IDR compliant reports have very stringent requirements. Contact our Funds Management team for help with your lodgements.
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