The Brief | 8 May 2019

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The Brief is your monthly financial services update. To help you save time, each month we'll give you a quick run-down of what happened in financial services from experts across our firm.

A Powerful Month

In April, Marvel's Avengers weren't the only ones wielding power. ASIC and APRA were also showing off their powers, both new and old. The regulators are unlikely to set the box-office alight any time soon and, for the financial services sector, any 'Endgame' is still a long way off. Here's what was showing on our screens last month.

The power to punish

ASIC published its latest enforcement report, covering the last six months of 2018. In that time, ASIC resolved 56 matters involving misconduct in relation to financial services. A further 81 financial services matters were ongoing at the start of 2019, 15 of which were criminal matters. Looking ahead, ASIC will be focusing its enforcement activities on addressing:

  • potential harm caused by technology;
  • poor culture and a lack of professionalism when providing consumer credit or financial advice;
  • harmful culture, governance and incentives;
  • the targeting of financially vulnerable consumers; and
  • retail products not being designed and distribution so that they align with consumer needs.

The power to weed out underperformers

APRA celebrated the passage of new legislation which gave it the power to take preventative or corrective action where it has prudential concerns about a superannuation fund or where it perceives that the fund is not acting in the best interests of members. APRA's power over trustees and directors will be enhanced by new civil and criminal penalties also contained in the new law.

The power to approve acquisitions

APRA invited comments on proposed new rules that will streamline the process for acquiring an interest in smaller banks and insurance companies. The rules will replace the national interest test with a checklist of matters relating to the fitness and propriety of proposed stakeholders. Consultation ends on 27 May.

The power to intervene

ASIC trumpeted the passage of legislation giving effect to design and distribution obligations, which will be phased in over two years. It was even more excited about its new gauntlet: a product intervention power, which applies immediately. With a snap of its fingers, ASIC can order that a person refrain from conduct in relation to a financial product where it is satisfied that the product will, or likely will, result in significant detriment to retail clients.

The power to name and shame

AFCA has warned that, from 1 July, it will start naming the financial firms involved in its decisions. In its six-monthly reports, it will provide tables comparing the outcome of complaints made against specific firms. AFCA will also identify those firms that it says have 'definite systemic issues'. We think the use of the term 'definite' is controversial, as AFCA sometimes identifies issues it thinks are systemic but where we think a court would take a different view.

The power of the Royal Commission

A quiet month for Royal Commission followers.

The Federal Government:

  • made regulations which will compensate consumers and small businesses harmed by the misconduct of financial firms that have since ceased trading; and
  • made regulations that require financial services licensees to co-operate with AFCA in resolving disputes.


  • issued a joint letter, reminding trustees of their obligation to provide effective oversight of fees and charges deducted from members' superannuation accounts to pay third parties such as financial advisers. The regulators also warned that trustees who decide not to pursue advisers for compensation may themselves be pursued for potential breaches of their duties.

Want to know more about how these issues affect your business? Reach out to a member of our team.

Other power plays

APRA consulted on the kinds of remuneration that will be considered not to be variable remuneration for the purposes of the Banking Executive Accountability Regime, which commences on 1 July. This will be of interest to executives who hold multiple positions within a corporate group.

APRA released the implementation plan for its 'Data Collection Solution' which will replace the Direct to APRA system from March 2020. APRA warns that it will not grant extensions to entities that are not prepared for transition — you have been warned!

Are you a health insurer that's thinking of transferring your policies to another insurer's health fund? You're in luck. APRA has produced a handy instruction guide, together with new forms to submit. Please include your cheque for $11,000.

The Business Council of Co-operatives and Mutuals welcomed the passage of legislation, just prior to the election being called, that will enable member-owned mutual companies to raise funds through new 'mutual capital instruments'. This will provide smaller entities with a new source of capital that can be used to fund projects to compete more effectively with larger financial services companies.

ASIC shared the results of two recent surveys on fintech businesses, which showed that:

  • the marketplace (a.k.a. 'peer-to-peer') lending industry is maturing: it continues to grow but at a slower rate than previously and its loan default rates are increasing moderately; and
  • the crowd-sourced funding industry seems to have more players than it needs to service its retail investor base and the participation of wholesale investors appears determinative of the success of crowd-sourced funding offers.

APRA completed its review of the prudential framework for superannuation that was put in place in 2013. It concluded that the prudential and reporting standards remain fit for purpose, for the most part, but it has flagged 11 areas where the standards could be enhanced over the next 12 to 18 months.

APRA commenced consultation on revisions to a prudential standard to reflect new superannuation laws passed in April. Trustees must assess, on an annual basis, whether the outcomes that are being delivered by MySuper products are promoting the financial interests of MySuper members. The prudential standard will require trustees to produce their first 'business performance review' by 31 December 2010. Consultation ends on 29 May.

All information on this site is of a general nature only and is not intended to be relied upon as, nor to be a substitute for, specific legal professional advice. No responsibility for the loss occasioned to any person acting on or refraining from action as a result of any material published can be accepted.