Three financial services compliance lessons from the Royal Commission

Three financial services compliance lessons from the Royal Commission

Financial Services
Today we continue to look at financial services compliance.“It’s not enough, is it… to have those policies and procedures in place? Financial advisers need to comply with them”[1]. So asked assisting counsel last week in the second round of hearings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (the Royal Commission). The fallout from the last week of hearings has been extensive, including the resignation of the AMP CEO and indications of impending law reform.[2]  We discussed some issues that arose in the first round of hearings here https://www.compliancequarter.com.au/royal-commission-round-one-the-home-loan-introducer-program/. [caption id="attachment_4184" align="aligncenter" width="640"] Photo by Rob Potter on Unsplash[/caption] This second round has focused on: charging fees for financial advice that is not provided or not provided in full (fees for no service); provision…
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What is a small, medium or large ADI? Latest BEAR Update

What is a small, medium or large ADI? Latest BEAR Update

Financial Services
The Banking Executive and Accountability Regime (BEAR) was passed into law in February of this year. We have talked about his law change several times before (see https://www.compliancequarter.com.au/1-july-2018-getting-prepared-banking-executive-accountability-regime-bear/). Today we look at the latest consultation from the Treasury consequent to that law change. This consultation looks at how the size of authorised deposit-taking institutions (ADIs) are to be defined for the purposes of BEAR. [caption id="attachment_4024" align="aligncenter" width="640"] Photo by Matthias Goetzke on Unsplash[/caption] By Dr Drew Donnelly, Compliance Quarter. BEAR Update - Legislative Instruments under the BEAR The BEAR, like many Acts of Parliament, sets out a range of matters to be determined by future determination of Ministers or regulatory bodies. The BEAR provides that the relevant Minister (I.e. the Treasurer), as well as the Australian Prudential Regulation Authority…
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ASIC releases updated guidance on client money

ASIC releases updated guidance on client money

Financial Services
ASIC has this week released updated guidance for Australian financial services (AFS) licensees that hold client money for trading in over-the-counter (OTC) derivatives. By Sara Le Breton, Compliance Quarter. ASIC Client Money Guidance Update The release of the updated guidance coincides with the start of ASIC's Client Money Reporting Rules 2017 (client money reporting rules) and other client money reforms on 4 April 2018 enacted under the Treasury Laws Amendment (2016 Measures No. 1) Act 2017 and the Corporations Amendment (Client Money) Regulations 2017. The updates can be found in ASIC Regulatory Guide 212 ‘Client money relating to dealing in OTC derivatives ‘ (RG 212) and INFO Sheet 226 ‘Complying with the ASIC Client Money Reporting Rules 2017’  which have both been updated to reflect the changes to the law.…
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Royal Commission, Round One: The home loan ‘Introducer’ program

Royal Commission, Round One: The home loan ‘Introducer’ program

Financial Services
This week the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (the Royal Commission), began round one of its public hearings (see https://financialservices.royalcommission.gov.au/public-hearings/Pages/transcripts.aspx). In today’s article we look briefly at one case study that has been discussed by the Royal Commission this week; the NAB ‘Introducer’ Program. [caption id="attachment_3706" align="aligncenter" width="640"] Photo by Martin Pegg on Unsplash[/caption] This case shows what can happen when effective compliance controls are not in place within an organisation. Background The Royal Commission was established on 14 December 2017, on the advice of the Commonwealth Government. It was initiated on the back of growing pressure for an independent and wider-ranging inquiry with full investigative powers. Following the release of background papers, submissions from the public and public hearings focused on specific…
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Restrictions on payday loans and rent-to-buy schemes? New private members Bill

Restrictions on payday loans and rent-to-buy schemes? New private members Bill

Financial Services
Restrictions on payday loans and rent-to-buy schemes? On the 26 February, legislation was introduced to the Commonwealth House of Representatives with the aim of amending the National Consumer Credit Protection Act 2009; the National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2018 (henceforth, ‘the Bill’). Photo by Olu Eletu on Unsplash The stated goal of the Bill is to help “Australians get a better deal from Small Amount Credit Contracts (commonly known as payday loans) and consumer leases (known as rent-to-buy schemes)”.[1] Today we summarise the provisions contained in the Bill. Background In light of growing concern with exploitative lending practices, and recommendations from the Independent Review of the Small Amount Credit Contract (SACC) Laws (2015), the Commonwealth Government committed to passing legislative reform of payday loans…
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ASIC oversight of the Australian Financial Complaints Authority (AFCA): Consultation Open

ASIC oversight of the Australian Financial Complaints Authority (AFCA): Consultation Open

Financial Services
ASIC oversight of the Australian Financial Complaints Authority (AFCA): Consultation Open - On March 5 the Australian Securities & Investments Commission (ASIC) released a draft updated Regulatory Guide 139, Oversight of AFCA (updated RG139) for public consultation (see http://download.asic.gov.au/regulatory-resources/find-a-document/consultation-papers/cp-298-oversight-of-the-australian-financial-complaints-authority-update-to-rg-139/). Photo by rawpixel.com on Unsplash By Dr Drew Donnelly, Compliance Quarter.  In this update, we set out the key elements proposed to be included in the Regulatory Guide (the Guide) in connection with the establishment of the Australian Financial Complaints Authority (AFCA). ASIC invites submissions on the draft Guide by 6 April 2018. Background We last discussed the establishment of AFCA last year (https://www.compliancequarter.com.au/changes-australian-financial-complaints-authority/). Since then the legislation establishing AFCA has passed through the Commonwealth Parliament, becoming law on 14 February 2018. AFCA will be the new dispute resolution body for the financial sector.…
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ASIC’s New Product Intervention Power

ASIC’s New Product Intervention Power

Financial Services
Last time we talked about the Government’s introduction of design and distribution obligations for financial products in a draft Bill currently undergoing consultation. In today’s article, part two on the draft Bill, we discuss the Australian Securities & Investments Commission’s proposed new product intervention power, also contained in the draft Bill. [caption id="attachment_2821" align="aligncenter" width="640"] Photo by Victoria Heath on Unsplash[/caption] By Dr Drew Donnelly, Compliance Quarter. Background As mentioned in our previous piece, the existing regulatory framework for financial products relies extensively on disclosure for customer protection. This limitation is compounded by the fact that the Australian Securities & Investments Commission (ASIC) is only empowered to intervene where there has been a breach or suspected breach of the law. This has meant that, in various cases in the past,…
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1 July 2018: Are you getting prepared for the Banking Executive Accountability Regime (BEAR)?

Financial Services
The Banking Executive Accountability Regime (BEAR) is shaping up to be the most significant piece of business-related legislation hitting this year. We have discussed the details of these reforms on a few occasions: Budget 2017 and financial services: an opening for the minnows and a warning for the sharks (https://compliancequarter.com.au/budget-2017/); The Banking Executive Accountability Regime (BEAR) Exposure Draft- Part One (https://compliancequarter.com.au/bear_part_1/); Banking Executive Accountability Regime Exposure Draft – Part Two (https://compliancequarter.com.au/banking-executive-accountability-regime-exposure-draft-part-two/). Photo by Scott Webb on Unsplash By Dr Drew Donnelly, Compliance Quarter. Since we discussed it last, the Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 (the Bill) has been introduced to Parliament, passed through its initial stages in the House of Representatives, and been referred to the Senate Economics Legislation Committee (the Committee). The Committee has received public…
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AUSTRAC’s regulatory approach in 2017

AUSTRAC’s regulatory approach in 2017

Financial Services
On November 13, the Australian Transaction Reports & Analysis Centre (AUSTRAC) commented on the civil proceedings that it successfully brought against Tabcorp under Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) legislation (see here). In those statements, AUSTRAC CEO, Nicole Rose, summed up AUSTRAC’s approach to compliance succinctly: AUSTRAC will continue to collaborate with industry to strengthen the financial sector against serious financial crime and reduce regulatory burden where possible, but we will continue to take strong action against those companies who break the law where appropriate In today’s article, we look at how AUSTRAC’s risk-based approach to compliance has informed its regulatory and enforcement program over the 2016-2017 year, as evidenced in its 2017 Annual Report. This provides a good indication as to AUSTRAC’s future focus. Risk-based compliance A risk-based approach…
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ASIC Enforcement Review: Strengthening Penalties for Corporate and Financial Sector Misconduct

ASIC Enforcement Review: Strengthening Penalties for Corporate and Financial Sector Misconduct

Financial Services
The Australian Securities & Investments Commission ASIC Enforcement Review Taskforce (the taskforce) recently released a positions paper 'Strengthening Penalties for Corporate and Financial Sector Misconduct' (the positions paper) which it seeks public comment on. Today we summarise that report, setting out the positions that ASIC seeks feedback on. [caption id="attachment_2522" align="alignnone" width="640"] ASIC Corporate & Financial Misconduct[/caption] Background to ASIC Enforcement Concerns have been raised in a number of quarters that the penalties regime in legislation administered by ASIC is not fit-for-purpose, does not reflect the seriousness of some offending, and is inconsistent with the penalties for offending of similar seriousness in other financial contexts (such as penalties for insider trading). For further elaboration on these concerns see our previous piece Financial crime doesn’t pay – three ways in which…
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