Australian regulators weekly wrap — Monday, 16 September 2019



The Australian regulators weekly wrap is a weekly alerter which quickly sets out five noteworthy developments from the past week. It is designed to help you in keeping up to speed with what is happening in Australian financial services regulation.

Follow me here or connect with me on LinkedIn if you would like to receive these alerters or if you would like any further information.

  1. Privilege (ASIC): in a rather interesting reversal, the hunter became the hunted in ASIC -v- Mitchell [2019] FCA 1484 where the First Defendant (the former VP of Tennis Australia) sought to challenge ASIC’s claim to legal professional privilege in relation to communications it had with potential witnesses prior to proceedings being issued. The First Defendant’s argument had two rungs: 1) that ASIC had failed to establish reasonable anticipation of legal proceedings at the time in question i.e. when the documents were created; 2) that ASIC’s evidence failed to establish the documents were created or made for the dominant purpose of litigation. Beach J, after giving an concise run-down of the applicable principles ([54] -[63]), found in favour of ASIC. Citing Ensham Resources Pty ltd v AIOI Insurance Company Ltd (2012) 209 FCR 1 at [55] and [57] per Lander and Jagot JJ, his Honour stated that “a proceeding is “reasonably anticipated” not only if it is more likely than not, but even if it is only at the level of a real prospect as distinct from a mere possibility. And to determine such a question is fact sensitive.” That test did not turn on external counsel’s views as “what was being sought was external counsels’ view as to whether there were such reasonable grounds. That did not deny that reasonable grounds could be held internally within ASIC at the time of briefing or that such was the objective fact, whether so internally expressed or not.” (Emphasis added) An interesting and timely case — and, at 95 short paragraphs, my top pick for your weekly reading!
  2. Parliamentary Joint Committee (ASIC): ASIC’s top brass appeared before the Parliamentary Joint Committee on Friday, 13 September. Chair James Shipton outlined ASIC’s strategic priorities as follows: 1) high deterrence enforcement action (there has been a 24% increase in enforcement investigations from Feb 2018 to August 2019 — that percentage keeps rising…); 2) prioritising work on the referrals from the Commissioner Hayne (see entry 3 below in this regard); 3) delivering as the primary conduct regulator for superannuation i.e. enforcement actions to deter misconduct and increased supervision of super trustees; 4) addressing harms in insurance i.e. taking action against mis-selling, unfair contract terms and addressing concerns in claims handling; 5) improving governance and accountability i.e. ASIC’s American-inspired “Close and Continuous Monitoring” program designed to pick up issues before they become breaches; 6) protecting vulnerable customers through its product intervention powers / design & distribution obligations (no surprises that ASIC wants to use this power more — it has just banned a business model where a short term credit provider and its associate charged fees under separate contracts which added up to about 1,000% of the loan amount); and 7) addressing poor financial advice outcomes, in particular given the industry shift to “general advice” models. While there is nothing arguably new, it is (again) worth noting ASIC’s fixation on enforcement- query whether the pendulum is starting to swing too far here…
  3. Royal Commission update (ASIC): ASIC released its second update on the Royal Commission implementation. Key points include: 1) ASIC is investigating all 13 referrals from Commissioner Hayne; 2) ASIC is also looking into the non-referred matters the subject of case studies before the Commission — there are 29 investigations underway; 3) individuals are also on ASIC’s radar — no surprises here given this is the global shift i.e. achieving regulatory outcomes by looking at individuals (including through new regimes such as BEAR / US “Yates Memo”) — 59 individuals are the subject of investigation; 4) as at 31 July 2019, within the Royal Commission enforcement program there were 88 enforcement investigations and 17 court actions underway. Across the whole of ASIC’s jurisdiction, there were 311 investigations on foot; 4) ASIC is recruiting, as it alluded to in its recent corporate plan. In addition, ASIC is retaining external law firms, legal contract staff and counsel across the majority of the matters to expedite this work. (ASIC hasn’t named the firms, though they are using Johnson Winter & Slattery against GetSwift.); 6) ASIC is seeking to expediate the finalisation of all enforcement matters / accelerating enforcement outcomes. The is largely being done through the Office of Enforcement, Crennan QC’s team in ASIC; finally 7) ASIC is supportive of the breakneck speed of Treasury’s legislative reforms. (The Treasurer recently said that 50 of 54 of the Government’s commitments to implement Commissioner’s Hayne’s legislative recommendations will have been implemented or subject to legislation by mid-2020). Given the scale / complexity of the legislative reforms, my personal view is that implicitly short-circuiting consultation times is an issue. More on that below!
  4. More enforcement powers (Treasury/ASIC): having (somewhat concerning) previously stated in the context of Treasury’s legislative reform project that, “The Royal Commission’s recommendations and the Government’s response are clear, now is the time for action, not more debate(Emphasis added), the Treasurer continues to follow-through and has released a raft of draft legislation increasing ASIC’s powers in relation to Search Warrants, Access to Telecommunications Intercept Material, Licensing and Banning Orders. Focusing just on the banning power here, ASIC will be able to make banning orders where a person is not a “fit and proper person” (as opposed to the previous test of “good fame and character”) and forensically in relation to specified “functions” a person performs (as opposed to financial services as a whole or with specification). Basically, it is a shift from ASIC being able to exercise the power based on an individual’s inherent moral quality to the exercise of the power based on the individual’s professional capacity, suitability, or history of compliance with regulatory requirements. It, with other forthcoming powers e.g. BEAR, will better facilitate ASIC to target individuals in charge of businesses which exhibit “systematic non-compliance with financial services laws or other regulatory requirements”. It is an important shift, and one supported by other practical reforms e.g. AFCA’s power to inform ASIC of “systemic issues” it identifies with businesses brought within its jurisdiction. (The wording “fit and proper person” wording is also being carried through to AFSL and ACL applications.) The consultation period ends on 9 October 2019.
  5. Add-on insurance products (Treasury): Treasury also released a proposal paper with respect to add-in insurance e.g. motor insurance, travel insurance, event insurance, CCI etc. In short, the proposed model introduces an enforced pause in the sales process between the purchase of a primary product and their decision to purchase add-on insurance. (It is a measure already adopted by the UK Financial Conduct Authority for certain types of car dealership insurance — Australia’s proposed model is much broader though.) The reasoning is that it will provide consumers with time to consider the product on its merits, and avoid some of the issues uncovered by the Royal Commission, including pressure-selling, poor value for customers in terms of claims ratios and weak competition / consumer engagement. The proposal will apply industry-wide, across all sales channels for a period of 4 days in most instances (unless shortened by the consumer) and involve a three-tiered approach: Tier 1) ASIC will use its product intervention power for egregious add-on insurance products which have the potential to cause harm; Tier 2) there will be a legislative deferred sales requirement industry-wide which will apply on a default basis to all add-on insurance markets not covered by tier one; 3) ASIC will have an exemptions power to balance the benefits of deferring the sale of add-on insurance with consumer needs and preferences e.g. comprehensive motor insurance. The new regime is proposed to commence by 30 June 2020. Consultation on the proposal will end on 30 September 2019.

Do you think I overlooked something or would like more information? If so, please send me a message!

(These views are my own and do not constitute legal advice. Photo credit Tom Wheatley)

Australian regulators weekly wrap — Monday, 9 September 2019



The Australian regulators weekly wrap is a weekly alerter which quickly sets out five noteworthy developments from the past week. It is designed to help you in keeping up to speed with what is happening in Australian financial services regulation.

Follow me here or connect with me on LinkedIn if you would like to receive these alerters or if you would like any further information.

  1. “Unfair conduct”: the ACCC’s Chairman, Rod Sims, has restated that a new “unfair conduct” provision should apply across the economy, replacing “unconscionable conduct” provisions in legislation (and in equitable law), which a number of interest groups and some judges consider too narrowly framed. (To make out an argument of unconscionable conduct, something more than unfairness needs to be proved — the conduct must be against conscience as judged against societal norms. It must be particularly harsh and oppressive.) The comments proceed from his similar statements to the Law Council on 30 August 2019. Following Justice Perram’s recent judgment in ASIC v. Westpac, in which ASIC lost its argument that Westpac had breached responsible lending laws (although ASIC has just appealed), which drew some ire from consumer groups for allusions to consumers cutting down on Wagyu beef and fine shiraz, Mr. Sims stated: “It’s up to the legislature to be clear about what they mean, and if what they mean is unfairness, which I think they do, then we should change the test to that.” (Emphasis added.) I think this would be a tricky legislative undertaking which would take a lot of consultation to get right — and it would occur against the backdrop of some very real regulatory fatigue creeping in…
  2. Cartel immunity: the ACCC will have a new cartel immunity and cooperation policy from 1 October 2019. It will modify the existing 2014 policy, under which firms and individuals can apply for immunity from civil and criminal proceedings for cartel conduct. Key changes to the new policy include the need for firms / individuals to enter into a cooperation agreement with the ACCC, which will set out the relevant conduct (US, and now UK, firms with DPA / NPA experience are likely to be in familiar territory here), and certify their compliance in terms of co-operation with the ACCC’s evidence-gathering phase e.g. making available all relevant witnesses etc. Interestingly, there is a new online portal — protected by some high tech encryption — which facilitates anonymous reporting of potential cartel conduct. Together with the broader legislative reforms, 2019 is definitely a watershed year for Australian whistle-blowing.
  3. Breach reporting: still staying with the ACCC, which has had a busy week, it launched proceedings against Medibank Private over alleged misrepresentations to about 800 customers of its budget brand AHM which rejected claims for things such as joint investigations and reconstruction procedures which should have been paid. The interesting feature is that Medibank Private voluntarily reported the breaches to the ACCC after receiving customer complaints. (Medibank Private also set up a remediation program.) Mr. Sims said to the AFR (4 September) “You don’t want a culture where companies can have a lot of compliance people and when they find out they’ve done something wrong, they know they’ll always get away with it if they self-report. That sort of culture can’t work.”
  4. Unfair contracts terms: ASIC has also been busy — it has sued BoQ and Bendigo & Adelaide bank for having allegedly unfair contract terms in their small business contracts. ASIC contends that some terms, which will be familiar to bankers, lawyers and insolvency practitioners in the distressed banking space — see para 4 of ASIC’s Concise Statement, are unfair as the terms cause significant imbalance in rights as between the banks & small business, are not reasonably necessary to protect the banks’ interests and would cause detriment to the small business if relied upon. ASIC’s thinking on UCT was recently put on display in its updated INFO 211 in August 2019 here. Depending on how these cases pan out, it could spell appreciable redrafting across the banking industry in the future.
  5. Joint Committee: finishing on a forward-looking note, the Parliamentary Joint Committee on Corporations and Financial Services (list of members here) sits this Friday, 13 September 2019. It monitors activities of ASIC, the Takeovers Panel and the Corporations Legislation. It has a full day of hearings booked in with ASIC’s top brass and will therefore be one to watch closely!

Do you think I overlooked something or would like more information? If so, please send me a message!

(These views are my own and do not constitute legal advice. Photo credit Tom Wheatley)

Australian regulators weekly wrap — Monday, 2 September 2019



The Australian regulators weekly wrap is a weekly alerter which quickly sets out five noteworthy developments from the past week. It is designed to help you in keeping up to speed with what is happening in Australian financial services regulation.

Follow me here or connect with me on LinkedIn if you would like to receive these alerters or if you would like any further information.

  1. Class actions / consumer protections: starting somewhat tangentially this week, albeit with more regulatory enforcement activity there are inevitably more class actions, Justice Parker of the NSW Supreme Court recently refused to approve a solicitors’ costs and a common fund order (where the Court orders all class action group members to pay a portion of any judgment or settlement sum to the litigation funder) in a class action against KPMG. That in itself is not significant, as common fund orders are rightly being subject to increasing judicial scrutiny-including through the use of independent contradictors to advise the court as to fairness or otherwise of the commission sought — what is significant is this passage at [99]: “It is sufficient to say that the funding agreements contain terms which are (or are arguably) in [the funder’s] favour, and that this gives rise to questions about the application of consumer protection legislation (within which I would include the Contracts Review Act 1980 (NSW))” (Emphasis added) The cited legislation protects against unfair provisions in contracts and is a very interesting and novel approach to approaching common fund orders. An area to watch closely in future…
  2. ASIC’s corporate plan: ASIC released its corporate plan for 2019 to 2023. It is a worthwhile read (my pick of the week), albeit most of the information has already made it to the market e.g. establishment of the Office of Enforcement to centralise decision-making and drive “Why not litigate?”. Some highlights include that ASIC’s №1 priority is “High-deterrence enforcement action” and that it sees poor design and inappropriate sale of investment / protection products and poor governance, culture and lack of accountability as key drivers of unacceptable outcomes. Expect ASIC to continue to wield its new product intervention power, and BEAR when it comes into play, considerably. Also interesting was ASIC’s focus on investment in data and technology tools to conduct its activities more effectively and the scaling-up it continues to undertake in the enforcement space — about 72% of ASIC’s resources will be dedicated to enforcement and supervision in 2019/20.
  3. APRA’s corporate plan: APRA too released its corporate plan for 2019–2023. Again, most of the information has already made it to the market (and it is arguably a more abstract report than ASIC’s one). Of note is that, like ASIC, APRA plans to focus on outcomes for superannuation members, plans to focus on cyber resilience of organisations (a good thing after the recent Glencore v ATO decision!) and “will seek to transform governance, culture, remuneration and accountability (GCRA) across APRA-regulated institutions’ management of non-financial risks. APRA will be ‘constructively tough’ with regulated institutions where practices fall below prudential expectations.”
  4. More on APRA: Wayne Byres, APRA’s Chairman, delivered a speech to the Risk Management Association in which he stated that, among other things: APRA will be acting more forcefully than in the past; climate change risks are a focus, including climate-related disclosures (and these considerations are a necessary part of part of fulfilling directors’ duties); BEAR is a core component of APRA’s regulatory response to lift governance, culture and accountability; APRA is dedicating more supervisory resources to governance (CPS510) and risk management (CPS 220) issues.
  5. Mortgage brokers: on the heels of the Treasurer’s introduction of the exposure draft bill for mortgage brokers’ best interests duty and remuneration reforms (see last week’s update), ASIC has released research (Report 628) which sets out that consumers expect mortgage brokers to find them the “best” loan (Finding 1) and that mortgage brokers can be inconsistent in the way they present options to potential borrowers (Finding 4). One in ten consumers also said they were struggling to meet repayments (Finding 10). In summing up, in what is a now-familiar theme of piling pressure on the broking (and financial advisory) industries, ASIC Commissioner Hughes stated: “ASIC strongly supports the recent Government announcement to enact a best interests duty for mortgage brokers. Importantly, the implementation of such a duty will align the role of brokers to the reasonable expectations of consumers”

Do you think I overlooked something or would like more information? If so, please send me a message!

(These views are my own and do not constitute legal advice. Photo credit Tom Wheatley)

Australian regulators weekly wrap — Monday, 26 August 2019



The Australian regulators weekly wrap is a weekly alerter which quickly sets out five noteworthy developments from the past week. It is designed to help you in keeping up to speed with what is happening in Australian financial services regulation.

Follow me here or connect with me on LinkedIn if you would like to receive these alerters or if you would like any further information.

  1. Binary options / CFDs: ASIC is having fun wielding its new product intervention power again. This time ASIC is aiming to address significant detriment to retail clients resulting from binary options (one of the more exotic options where the payoff is a liquidated sum or nothing) and contracts for difference (CFDs are a contract between two parties whereby the seller pays to the buyer the difference between the present value of an asset compared to what it will be at a defined point in the future). It has released consultation paper (CP 322) on its proposal to address these products, the main concern of which is the high losses sustained by retail clients trading these instruments and high leverage ratios — many international jurisdictions already have leverage ratios for CFDs, which in some jurisdictions can be up to 500-to-1. ASIC proposes to ban the issue / distribution of binary options to retail clients and impose conditions on the issue / distribution of CFDs. One of the conditions is leverage limits e.g. 5:1 for CFDs over shares. While I see the driver for the use of this power, to my mind this use appears to be bolder than ASIC’s previous use in relation to short term credit (CP 316). Comments close by 1 October 2019.
  2. ASIC v. NAB: another case stemming from the Royal Commission, ASIC has commenced Federal Court proceedings against NAB for allegedly accepting information in support of consumer loan applications from third party introducers who were not licensed to engage in credit activity e.g. gym owners between 13 September 2016 and 29 July 2016. In short, NAB had a large program running whereby referrers could obtain commission if a referred person- just their name and contact details were to be provided -entered into a loan with NAB. ASIC alleges that the referrers went further in some cases in breach of the National Consumer Credit Protection Act 2009 (Cth) by providing information and documents which NAB accepted, some of which were falsified. A key test for ASIC’s “Why not litigate?” approach, the Concise Statement can be read here.
  3. Mortgage brokers: Commissioner Hayne recommended that mortgage brokers be subject to a “best interests” duty to their client, and that a breach of this duty should be subject to a civil penalty (Recommendation 1.2). He also recommended that the borrowers instead of lenders should pay broker’s fees and the banning of trail commissions (Recommendation 1.3). The Morrison Government has released exposure draft legislation to give effect to these recommendations. In relation to the new duty, the explanatory memorandum (EM) stresses that it is a principle-based standard of conduct and provides several examples of actions which would fall foul of these duty e.g. providing recommendations where the broker does not have critical information about the customer (1.21). The new law also requires mortgage brokers to resolve conflicts of interest in their client’s favour and not accept conflict remuneration (which is broadly framed for flexibility and deals with Recommendation 1.3) There is a civil penalty of 5,000 penalty units ($1.05M) for engaging in each of these actions, together with closely related others e.g. failure by licensee to take reasonable steps to ensure that the credit representative acts in the best interests of the consumer. (See 1.35 of the EM.) Broad tangential obligations of this nature , which mirror other principles-based legislation recently introduced e.g. BEAR, will no doubt add to the governance / compliance pressures steadily being piled on-top of financial services firms. Consultation closes on 4 October 2019.
  4. AML / CTF: AUSTRAC has said that it has seen a 70% increase in self reporting since since CBA’s incident involving its smart ATMs (in relation to which CBA agreed to pay a $700M fine for breach of AML/ CTF laws in June 2018 — you can read the background here). AUSTRAC has also stated that it plans to take more enforcement action in the next 6 months including “warnings through to civil penalty” as a result of the increased intelligence it has been receiving. Otherwise, it plans to focus on unregistered money transfer operators in the immediate future who it says are particularly vulnerable to nefarious actors.
  5. AFCA: The Australian Financial Complaints Authority will henceforth be able to name financial services firms in published determinations — to date these names have not been published (though the decisions have). In a move which ratchets up the risk for firms dealing with a much stronger entity in AFCA than its predecessor the Financial Ombudsman Service, both with regard to jurisdictional limits and new powers e.g. to identify systemic issues and report them to ASIC, ASIC’s approval was given on the basis that “naming firms in determinations can help identify conduct or market problems within firms or affecting specific products or services, as well as highlighting where firms have done the right thing. It will also enhance transparency and accountability of firms’ performance in complaints handling and of AFCA’s own decision-making” (Emphasis added)

Do you think I overlooked something or would like more information? If so, please send me a message!

(These views are my own and do not constitute legal advice. Photo credit Tom Wheatley)

Australian regulators weekly wrap — Monday, 19 August 2019



The Australian regulators weekly wrap is a weekly alerter which quickly sets out five noteworthy developments from the past week. It is designed to help you in keeping up to speed with what is happening in Australian financial services regulation.

Follow me here or connect with me on LinkedIn if you would like to receive these alerters or if you would like any further information.

  1. ASIC v. Westpac: Justice Perram of the Federal Court handed down his decision in relation to proceedings ASIC commenced against Westpac connected with the responsible lending provisions of the National Consumer Credit Protection Act 2009 (Cth). The decision went against ASIC; Justice Perram found that Westpac did not fail to assess the unsuitability of loan products given various macro strategies it deployed to assess suitability (70 % Ratio Rule, Application Score Rule, the Aligned Risk Grade Rule) as opposed to a more granular view of consumers’ financials. In a judgment replete with excellent examples, his Honour stated “Whilst I accept that the Act requires a credit provider to ask the consumer about their financial situation … I do not accept that this has the further consequence that the credit provider must use the consumer’s declared living expenses in doing so” . ASIC is currently updating its guidance on responsible lending, so no doubt the judgment will be reflected there.
  2. Glencore v ATO: the High Court has dismissed Glencore’s attempt to block the ATO from utilising the Paradise Papers documents which contain details of its offshore financial arrangements. (The Paradise Papers were publicly leaked following a hacking incident on law firm Appleby which primarily has its office locations in minimal tax jurisdictions e.g. Cayman Islands.) There was no dispute that the documents were subject to legal privilege or suggestion of any wrongdoing by Glencore. The High Court was asked whether legal privilege is a right after the fact i.e. once the documents are in the authorities’ possession — it ruled in the negative. Legal privilege is only a protection against compulsion. In effect, it is a shield and not a sword. The ruling will not doubt escalate concerns around cyber attacks. In particular, those on law firms and corporate legal divisions. The ATO stated after its victory that taxpayers were “only one data leak away from their entire affairs being exposed.”
  3. Contagion risk: APRA has released a strengthened prudential standard aimed at mitigating contagion risk within banking groups. The idea is that instability in one corporate group, most likely those based overseas, should not disproportionately affect the capital stability of an ADI. APRA will require ADIs to regularly assess and report on their exposure to step-in risk — the likelihood that they may need to “step in” to support an entity to which they are not directly related. The new standard will come into effect from 1 January 2021.
  4. “Why not litigate”: The Australian Financial Review (19 August 2019) reports that ASIC plans to put up to 50 matters in courts in the coming months. (Senate Estimates hearings are held in October 2019, so expect a number could be in the court lists by then.) Deputy Commissioner Crennan is quoted as follows: “There are a very large number of investigations on foot and there will be cases being issued in coming weeks, which are the result of those investigations…Those matters will culminate in proceedings being issued before Christmas, and over the next few months…If ASIC does not pursue a case that is either referred to us or related to the royal commission we will be in a position to explain why.”
  5. ASIC enforcement report: ASIC has released its biannual enforcement report from January 2019 to June 2019. In addition to the strong language about ASIC’s enforcement resolve in the foreword (“Why not litigate” etc), and plans to continue its current recruitment drive with the extra $400M it has received from the Government, the report contains the following noteworthy statistics between July 2018 and June 2019:
  • the number of ASIC enforcement investigations increased by 20%
  • enforcement investigations involving the big six (or their officers or subsidiary companies) by 51%
  • wealth management investigations by 216%.

Do you think I overlooked something or would like more information? If so, please send me a message!

(These views are my own and do not constitute legal advice. Photo credit Tom Wheatley)

Australian regulators weekly wrap — Monday, 12 August 2019



The Australian regulators weekly wrap is a weekly alerter which quickly sets out five noteworthy developments from the past week. It is designed to help you in keeping up to speed with what is happening in Australian financial services regulation.

Follow me here or connect with me on LinkedIn if you would like to receive these alerters or if you would like any further information.

  1. Responsible lending: ASIC’s unusual public hearing into responsible lending standards – which essentially requires lenders to determine whether credit sought is suitable for a particular consumer – kicked off in Sydney today. The hearings follow ASIC’s receipt of written submissions (and a court case against Westpac in relation to its reliance on the HEM benchmark, which is used to estimate living expenses) and is designed to assist the regulator in revamping its guidance in this area. Commissioner Hayne declined to recommend a ban on lenders from using the HEM benchmark, though he did opine that the current legislation requires more than reliance on it alone. BOQ appeared to agree today, stating that the existing rules were too subjective. Westpac favoured more principles-based regulatory guidance, rather than prescriptive rules. A hybrid approach, with a “safe harbour” of prescriptive rules i.e. do this and the firm will be compliant, but an overarching principles-based component i.e. if the firm thinks it can reasonably justify operating outside the prescriptive rules then it can do so, was another option put forward in the written submissions. There is a balance between protecting consumers’ interests while not unnecessarily impeding lending (including through the increased costs of compliance which may be passed on); ASIC’s guidance will be greatly anticipated. The hearing resumes on 19 August 2019.
  2. Whistleblowing: the Treasury Laws Amendment (Enhancing Whistleblower Protections) Act 2019 (Cth) received assent in March 2019 and vastly expands existing protections / remedies for eligible whistleblowers, no longer requires that whistleblowers need to act in “good faith” to receive protection, permits anonymous disclosures and requires public companies and “large proprietary companies” to have mandatory whistleblower policies in place by January 2020. The impact of the legislation may be significant, and will affect regulatory practice in this area e.g. given firms are now prohibited from disclosing identifying information about an whistleblower’s identity (now criminal offence) how do they effectively investigate, report and punish wrongdoing? ASIC has just released a consultation paper (CP 321) and draft Regulatory Guide seeking feedback on whistleblowing policies. It is understandably broad in nature, which underscores the scale of work that affected firms have ahead of them and the time / expertise that will be required in getting it right. For e.g., the draft Regulatory Guide states: [ASIC] encourage[s] entities to follow best practice in investigations. The investigation should be thorough, objective, fair and independent, while preserving the confidentiality of the investigation [and whistleblower]”. While challenging, there are lessons to be had from US investigatory practice which is more advanced than Australia’s in this area. Submissions are required by 18 September 2019.
  3. UK Serious Fraud Office / corporate cooperation: not an Australian regulatory issue per se, though a development perhaps worth mentioning given the increasingly sharp tone of Australia’s regulators regarding legal professional privilege (and as they watch the UK closely); the UK SFO has released guidance on what it expects firms to do so as to receive co-operation credit. Waiving privilege over investigatory materials, updating the SFO on key developments regarding witnesses e.g. disciplinary proceedings and providing information on third parties will be all be deemed cooperative in the SFO’s eyes. The guidance also sets out how to gather, hold and produce evidence so that the “crime-scene isn’t trampled” (a common regulatory complaint of lawyers’ internal investigations.) No doubt a copy of the guidance, which is actually quite readable, is sitting on several Australian regulators’ desks.
  4. APRA fines: the prudential regulator has fined Westpac and two subsidiaries for historical delays in data reporting (in one case up to 37 days); a cumulative penalty of $1,501,500. It is the largest fine possible. The data falls within APRA’s new Economic and Financial Statistics Collection Program. Consistent with industry predictions of a greater focus on timely and accurate information being provided to regulators (itself a focus of the Royal Commission), APRA deputy chair John Lonsdale stated “By issuing these infringement notices, APRA wants to send a strong message to industry that compliance with our reporting standards is mandatory, and cannot be considered secondary to other business priorities.”
  5. Climate change reporting: a hot topic during AGM season, ASIC has clarified its existing regulatory guidance with respect to the disclosure of climate change related matters. ASIC Commissioner John Price has stated “While disclosure is critical, it is but one aspect of prudent corporate governance practices in connection with the mitigation of legal risks. Directors should be able to demonstrate that they have met their legal obligations in considering, managing and disclosing all material risks that may affect their companies. This includes any risks arising from climate change, be they physical or transitional risks.” (Emphasis retained.) It is interesting wording, given the “stepping stones” approach ASIC was successful with in ASIC v Vocation i.e. breach of continuous disclosure = breach of directors’ duties ≠ reliance on business judgment rule. (Here is an earlier article I contributed to on the topic of climate changes and directors’ duties, but not continuous disclosure per se.) Of perhaps greater note is ASIC’s statement that it will conduct surveillance of climate change related disclosure practices by selected listed companies in the coming year…

Do you think I overlooked something or would like more information? If so, please send me a message!

(These views are my own and do not constitute legal advice. Photo credit Tom Wheatley)

Australian regulators weekly wrap — Monday, 5 August 2019



The Australian regulators weekly wrap is a weekly alerter which quickly sets out five noteworthy developments from the past week. It is designed to help you in keeping up to speed with what is happening in Australian financial services regulation.

Follow me here or on LinkedIn if you would like to receive these alerters or if you would like any further information.

  1. Unfair contracts terms: another week, another big development — this week it is Treasury’s release of the exposure draft of the Treasury Laws Amendment (Unfair Terms in Insurance Contracts) Bill 2019 (Bill) which extends the unfair contract terms protections to insurance agreements. (In certain settings, a term in a financial agreement is unfair and void if it causes significant imbalance in rights, is not reasonably necessary to protect legitimate interests and it would cause detriment — see the helpful page 7 of the EM.) There are two components to the Bill: first, amendments to the Insurance Contracts Act 1984 (Cth) to enable the regime; second, amendments to the ASIC Act 2001 (Cth) to tailor the regime. At present, the “main subject matter” of a finance agreement is exempt from the UCT regime — here the main subject matter will be limited by the description in the insurance policy (which will prove trickier than it sounds). Premiums will be exempt, provided they are transparent. Finally, third party beneficiaries of insurance contracts will be able to bring actions against insurers under the UCT regime. Long expected, nevertheless there is a lot for insurers to take in — and against the backdrop of the Design and Distribution / Product Intervention Powers (and BEAR down the line) as well!
  2. Digital platforms inquiry: the ACCC published its final report on the digital platforms inquiry which sets out its views on the impact of online search engines, social media and digital content aggregators on competition in the media and advertising services markets. In addition to making findings about concentration in those markets i.e. Google and Facebook, the report contains a number of recommendations. The most noteworthy ones include: an increase in focus on investigations and enforcement (continuing the current regulatory trend); strengthening of privacy laws; a tort for the serious invasion of privacy; prohibitions for certain unfair contract terms (not just making them voidable) & practices; IDRS frameworks for digital platforms. It is a interesting read, and will have far-reaching effects. The executive summary is here and I highly recommend it as weekly reading — public submissions close on 12 September 2019.
  3. Legal privilege: the Law Council of Australia has stated that it is working with the Australia Taxation Office to develop a new protocol to mitigate disputes around legal professional privilege. The announcement follows reporting in the Australian Financial Review (26 June 2019) which recorded that ATO Deputy Commissioner Mark Konza had said that taxpayers and businesses claiming privilege unreasonably should expect the ATO seek resolutions through the courts but that the ATO had “no plans to criminally prosecute lawyers over legal professional privilege claim”.
  4. Boardroom psychologists: ASIC’s trial of placing psychologists into boardrooms will now be looked at by a Parliamentary Committee. Liberal Senator James Paterson, the new chairman of the Parliamentary Joint Committee on Corporations and Financial Services, is quoted in the Australian Financial Review (30 July 2019) as stating “Their focus on culture and sending psychologists into boardrooms doesn’t seem consistent to me with what the royal commission asked them to do… regulating conduct and behaviour to enforce the law seems more like a direct route to address the problems”. The Senator is focused on reducing red tape in the sector.
  5. APRA biennial survey: APRA released its biennial survey from regulated entities and knowledgeable observers. Both groups “strongly believe that APRA’s supervision and enforcement of prudential requirements is benefiting the Australian community, strengthening their entity and positively impacting on their industry”. But almost all changes observed from the last survey in 2017 are downward, which is perhaps unsurprising in the wake of the Hayne Royal Commission.

Do you think I overlooked something or would like more information? If so, please send me a message!

(These views are my own and do not constitute legal advice. Photo credit Tom Wheatley)

Australian regulators weekly wrap — Monday, 29 July 2019



The Australian regulators weekly wrap is a weekly alerter which quickly sets out five noteworthy developments from the past week. It is designed to help you in keeping up to speed with what is happening in Australian financial services regulation.

Follow me here or connect with me on LinkedIn if you would like to receive these alerters or if you would like any further information.

  1. Remuneration: APRA released draft prudential standard CPS 511 Remuneration (with an accompanying discussion paper) which proposes to introduce heightened requirements on firm’s remuneration and accountability arrangements. A response to the Hayne Royal Commission recommendations, it contains some very significant reforms including: 1) financial performance measures must not comprise more than 50 % of performance criteria; 2) minimum deferral periods for variable remuneration of up to seven years in large ADIs (which would bring Australia closer to the UK’s position); and 3) boards must approve and actively oversee remuneration policies for all employees. The new standards are designed to complement the BEAR, and in the words of APRA Deputy Chair John Lonsdale: “Limiting the influence of financial performance metrics in determining variable remuneration will encourage executives to put greater focus on non-financial risks, such as culture and governance”. The consultation period will close on 22 October 2019.
  2. Why not litigate”: ASIC Commissioner Hughes has told the Australian Financial Review (28 July 2019) that more cases are in the works and the public should brace itself as they come to light. There are already around 25 active investigations flowing from the Hayne Royal Commission. Expect ASIC’s separate “Office of Enforcement” to focus on executives and company directors as it continues its more aggressive approach. And hopefully the pendulum does not swing so far in favour of punitive enforcement that ASIC’s overarching regulatory aims are compromised (for more detail there, see a paper I delivered last week at the Australian Centre for Financial Studies’ annual conference.)
  3. ASIC v. ANZ : ASIC commenced proceedings in the Federal Court against ANZ for charging periodic fees between August 2003 and 23 February 2016 which ASIC alleges ANZ was not entitled to charge. It also alleges ANZ first became aware there was a risk it was not entitled to charge these fees in July 2011. ASIC claims ANZ breached s 912A of the Corporations Act 2001 by failing to provide its services “efficiently, honestly and fairly” including as it provided incomplete or misleading information when it reported the issue to ASIC in February 2014. And that ANZ breached the ASIC Act 2001 (ASIC Act), by engaging in misleading or deceptive conduct, made false or misleading representations and engaged in unconscionable conduct in circumstances connected with its charging of the fees and subsequent remediation exercise. Some interesting legal subject matter, in particular connected with qualitative reporting obligations — ASIC’s Concise Statement can be accessed here.
  4. Securities lending: ASIC has released a consultation paper (CP 319) on securities agents’ disclosure obligations. Where an owner of securities transfers them to a borrower, who has an obligation to return the securities or equivalent securities, often the transaction is facilitated by a securities agent. Sometimes these agents are caught by s 671B of the Corporations Act 2001 (Cth), which requires disclosure of a substantial holding in a listed firm. As they act on instructions, this can be an onerous obligation; ASIC’s consultation is geared towards proposed legislative relief. Submissions close on 9 September 2019.
  5. Psychologists in the boardroom: The Australian Psychologist Society has defended ASIC’s move to placed psychologists in the boardroom, noting that organisational psychologists have been ranked the fastest growing profession in the United States (Australian Financial Review, 23 July 2019). The President of Society writes “Typically, organisational psychologists use data, benchmarking and a rigorous understanding of human nature and ecosystems to improve workplace performance, wellbeing and sustainability, and prevent organisational dysfunction or failure”. Regardless of which side of that argument individuals fall on, arguably the first considerations should be structural i.e. clarification of reporting lines, confidentiality and legal professional privilege.

Do you think I overlooked something or would like more information? If so, please send me a message!

(These views are my own and do not constitute legal advice. Photo credit Tom Wheatley)

Australian regulators weekly wrap — Monday, 22 July 2019



The Australian regulators weekly wrap is a weekly alerter which quickly sets out five noteworthy developments from the past week. It is designed to help you in keeping up to speed with what is happening in Australian financial services regulation.

Follow me here or connect with me on LinkedIn if you would like to receive these alerters or if you would like any further information.

  1. APRA capability report: Graeme Samuel’s external review of APRA was released and contained some sharp observations, the sum of which was that APRA’s internal culture and regulatory approach need to change (and it needed to have a more forceful supervision and enforcement approach). It also made bold recommendations. The eye-catching ones were that APRA should engage in more in-depth governance and culture reviews (like it did for CBA), have powers to veto the appointment of directors and executives of regulated firms and that its penalties framework should be revisited. APRA has supported all 19 recommendations — if you read one regulatory development this week, make it this one. It will be with us for some time…
  2. Life insurance / CCI: ASIC has proposed to ban unsolicited telephone sales of life insurance and consumer credit insurance stating that “such a ban would prevent the sale of complex insurance products which consumers do not need, want or understand.” It has released a consultation paper (CP 317), which is directed to insurers and ASFLs who sell these products without providing personal advice (within the statutory meaning). This move should be no surprise given the Hayne Royal Commission’s legislative recommendations to this effect and ASIC’s recent research report (REP 622), which you can read about in last week’s update; still, it shows that ASIC is not prepared to waste any time getting things done. The consultation period ends on 29 August 2019.
  3. Hayne Royal Commission: according to the Australian Financial Review (18 July 2019) the Federal Government says that there only a chance at best that all the relevant 76 recommendations from the Hayne Royal Commission will be legislated by the end of the year. The Morrison Government has already legislated some of the recommendations, most notably to increase penalties for corporate misconduct. But there are many yet to come through, which is perhaps understandable given the inherent complexity i.e. BEAR was effected through a change to the Banking Act 1959 (Cth); how will it be efficiently transposed to all AFSL’s as promised? Labor’s exhortations to get on with the process aside, rushed lawmaking rarely ends well (and the consultation periods seem to be getting shorter), so my personal view is that taking time to get things right is fine.
  4. Ratings downgrades: following APRA’s move to increase the capital requirements on Westpac, ANZ and NAB due to improvements required in the management of their non-financial risks, Fitch Ratings downgraded its outlook for both Westpac and ANZ. It moved them from “stable” to “negative” stating APRA’s decision “indicates material shortcomings in operational risk management…’, however, noted that these outlooks may revert if operations and compliance risks could be resolved without a substantial negative impact to earnings.
  5. AUSTRAC: Australia’s anti-money laundering and counter-terrorism financing regulator has a significant part of its activities financed through an industry contribution levy (IC levy). The IC levy is supposed to raise revenue equivalent to AUSTRAC’s appropriation whilst minimising the regulatory impact on small business; there is a $100 million domestic earnings threshold. AUSTRAC has just released a review of its financing activities, which noted that many stakeholders had complained the current arrangement was inequitable and that the threshold should be lowered. AUSTRAC’s position was that there was no strong argument to change the status on equitable grounds, however, it will collect earnings data from smaller firms to better consider the issue at a later point in time.

Do you think I overlooked something or would like more information? If so, please send me a message!

(These views are my own and do not constitute legal advice. Photo credit Tom Wheatley)

Australian regulators weekly wrap — Monday, 15 July 2019



The Australian regulators weekly wrap is a weekly alerter which quickly sets out five noteworthy developments from the past week. It is designed to help you in keeping up to speed with what is happening in Australian financial services regulation.

Follow me here or connect with me on LinkedIn if you would like to receive these alerters or if you would like any further information.

  1. Production intervention: ASIC is not wasting any time — hot off the heels of its recent consultation paper as to how it should best use its new product invention power (read more about that in the 1 July 2019 alerter here) ASIC has released a consultation paper (CP 316)on its first proposed use of the power. It is looking at the short term credit industry; specifically, where fees are charged under separate contracts which ultimately add up to well over 100% of the loan value. Submissions close by 30 July 2019.
  2. Culture capital: APRA has increased NAB, ANZ and Westpac’s minimum capital requirements by $500M each (following a $1B capital add-on to CBA last year) citing the “ need to strengthen non-financial risk management, ensure accountabilities are clear, cascaded and enforced, address long-standing weaknesses and enhance risk culture”. This move follows APRA’s release of its information paper on 22 May 2019 on the financial services industry’s self-assessments of governance, culture and accountability. A useful read, that information paper effectively set out that irrespective of size, complexity or industry many institution are having a difficult time identifying, managing and mitigating non-financial risk.
  3. Consumer credit insurance: ASIC has released a report (REP 622) which found that the design / sale of consumer credit insurance has consistently failed consumers (this may not surprise the many UK practitioners who have had experience with mis-sold PPI products). In particular, the report states that CCI is extremely poor value for money; associated with sales practices which cause harm e.g. CCI was sold to ineligible customers; consumers were charged for deductions where their loan had expired; hardship claims under CCI policies are made without appropriate consumer-focused processes for many lenders. ASIC is undertaking investigations, monitoring remediation schemes and is considering completely banning the sale of CCI by telephone. But further, according to ASIC Commissioner Sean Hughes “If we do not see early, significant and sustained improvement in the design and sale of consumer credit insurance, our next steps may involve the deployment of our new product intervention power where we see a risk of significant consumer detriment”
  4. AFCA: 58 AFSLs and 217 ACLs who had previously held external membership with an external dispute resolution scheme had not obtained AFCA membership since it commenced operations on 1 November 2018. Following ASIC’s involvement, 35% of those entitles either cancelled their licences voluntarily or had ASIC cancel or suspend it for them. All ASFLs and ACLs are required to obtain AFCA membership; critically, it has a lot more powers than its predecessors e.g. FOS. It has a higher monetary jurisdiction than FOS, a broad and new directions power in respect of “systemic issues” (and is expected to work closely with ASIC here) and expects to be more involved in remediation programs. Watch this space…
  5. Licence scrutiny: judging by the number of media releases each week, ASIC is doing more work cancelling licences or banning individuals. (Example here.) This appears to fit in with its more hawkish enforcement outlook, as encapsulated in ASIC Chair James Shipton’s statement at this year’s annual forum in May 2019 “… we are looking to use the full extent of our new penalties and powers through the prism of ‘why not litigate’”.

Do you think I overlooked something or would like more information? If so, please send me a message!

(These views are my own and do not constitute legal advice. Photo credit Tom Wheatley)