This edition of Financial Services Thinking wraps-up the latest news for the financial services sector to help you navigate the volume and complexity of regulatory change.
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ASIC has released guidance on the focus areas for the financial year ending 30 June 2020. Given the current environment, ASIC advises that directors, preparers, and auditors of financial reports should focus on:
ASIC has announced it will amend the transitional arrangements for the new fee disclosure regime for PDSs to allow entities to opt into the new disclosure regime from 30 September 2020. The new disclosure regime concerns the disclosure of fees and costs in PDSs and is set out primarily in ASIC Regulatory Guide 97: Disclosing fees and costs in PDSs and periodic statements. Any PDS issued after 30 September 2022 must comply with the new disclosure regime.
ASIC has released Regulatory Guide 272: Product intervention power which provides guidance to industry operators about when and how the regulator may use the new power. The product intervention power is a broad power which allows ASIC to temporarily intervene, using a range of methods, where it is satisfied particular financial or credit products present a significant risk of consumer detriment.
ASIC has also released Consultation Paper 330 on the proposed use of its product intervention power to address significant detriment it has identified in the continuing credit industry. It follows the product intervention order made in September 2019 which banned the provision of short-term credit product unless specified conditions were complied with in relation to fees and charges. For further information, please click here.
On 15 June 2020, ASIC released a statement to all responsible entities of managed investment schemes putting them 'on notice' to ensure advertisements about their funds provide clear, balanced and accurate information. Some of the key issues ASIC highlighted include unbalanced comparisons, safety and stability representations, and withdrawal representations. ASIC has already raised specific concerns with seven responsible entities about the advertisement of 13 investment funds.
The Federal Court of Australia has dismissed ASIC's allegations that Westpac failed to adequately assess whether borrowers could meet their repayment obligations under their home loan arrangements. The Court said the National Consumer Credit Protection Act does not require a lender to consider the total figure for declared living expenses to assess unsuitability.
A letter from APRA to Australian authorised deposit-taking institutions (ADIs) reveals more than $250 billion in loans are the subject of repayment deferral arrangements, representing approximately 10 percent of housing and small business loans. APRA cautions ADIs to take a prudent and responsible approach to the assessment and management of loans with repayment deferrals.
For the period March to May 2020, reported instances of investment related scams and misconduct have increased by 20 percent compared to the same period in 2019, according to a report from ASIC. ASIC has linked the increase in scams and misconduct to the COVID-19 pandemic and states that the uncertain economic conditions make consumers and retail investors more vulnerable.
As a result of the findings of the Hayne Royal Commission, the Australian Financial Complaints Authority (AFCA) was given jurisdiction until 30 June 2020 to receive complaints relating to conduct dating back to 1 January 2008. There are reports of AFCA receiving significant numbers of complaints in the days before 30 June. As set out in a recent article by partner Selina Nutley, the consequences of an adverse finding by AFCA can be wide ranging and difficult to challenge. If you have received a complaint, we recommend seeking early advice.
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