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Nature Positive Summit 2024
The world’s first Global Nature Positive Summit was held in Sydney, Australia from 8 to 10 October 2024.
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Australia | Publication | August 2020
As the COVID-19 pandemic continues to provide uncertainty and challenges for all industry sectors, the funds and financial industry has remained in the spotlight for August 2020. In particular, ASIC has reminded responsible entities of their requirements with respect to valuing managed fund assets and APRA has assessed the management of superannuation fund liquidity due to the impacts of COVID-19. ASIC has also provided guidance on the Government’s enhanced regulatory sandbox, replacing ASIC’s FinTech regulatory sandbox, as well as revised Corporate Plans for both APRA and ASIC.
On 11 August 2020, ASIC published an article reminding responsible entities (REs) of their requirements to ensure regular and current valuations of their managed fund assets, having regard to the nature of the assets. The regulator is conscious that the valuation of illiquid assets has been difficult due to the financial and economic uncertainties as a result of the COVID-19 pandemic.
With respect to fund assets, and in particular illiquid assets, an accurate valuation is required for an RE to determine the:
Furthermore, ASIC has reminded REs to ensure that:
A copy of the article is available on ASIC’s website.
As part of APRA’s Insight publication, the regulator highlighted a number of challenges faced by superannuation trustees as they continue to address both financial and non-financial risks on behalf of their members due to the impact of COVID-19. APRA noted that while the Government’s superannuation Early Release Scheme was a significant measure to assist people experiencing loss of income and financial hardship, it also raised concerns with respect to liquidity challenges, market volatility and difficulties in estimating short-term cash requirements.
APRA identified the challenges of maintaining actual asset allocations which are consistent with the strategic asset allocations in trustees’ investment strategies as well as the need for improvement in the management of liquidity risk. The regulator emphasised that trustees must:
APRA will continue to observe how superannuation trustees are managing fund liquidity and ensure appropriate outcomes are provided for members. Further information on superannuation fund liquidity during COVID-19 is available in APRA’s Insight – Issue 3 2020.
ASIC announced on 26 August 2020 relief measures for operators of managed funds to facilitate withdrawals by members who are facing financial hardship due to COVID-19. ASIC Corporations (Hardship Withdrawals Relief) Instrument 2020/778 provides conditional relief to REs of registered managed investment schemes that have had their funds frozen by easing statutory restrictions on REs and improving member access to investments where they satisfy specific hardship criteria. Excluded are IDPS-like schemes, mortgage investment schemes, registered litigation funding schemes and time sharing schemes.
Where a fund is frozen, the RE has paused or cancelled redemptions in order to preclude withdrawals from destabilising the fund, whereby members will not be able to access their investments for a period of time. This hardship relief intends to make it easier for REs of frozen funds to enable investors to withdraw who are suffering financial hardship, however REs must be acting in the best interests of members. Information on the requirements for REs as well as hardship eligibility criteria are available in ASIC’s Media Release.
APRA has continued to issue data at both an industry and fund level on the temporary superannuation Early Release Scheme. As at 31 August 2020, the Early Release Scheme has made approximately $32.2 billion in payments, with the average payment of $7,683 being made within 3.3 business days. The fund-level data shows that the ten superannuation funds with the highest number of applications received from the Australian Tax Office have made 2.8 million payments, totalling $21.2 billion. More information on the Early Release Scheme is available on APRA’s website.
ASIC has reiterated its expectations of lenders in order to provide fair and appropriate outcomes to consumers where their 6 month loan repayments due to COVID-19 are expiring over the next few months. Lenders must ensure that their credit activities are provided efficiently, honestly and fairly and that they have processes in place to ensure an orderly transition for consumers. Some of the key expectations of ASIC include that:
This update adds to the regulator’s earlier expectations addressed on 29 April 2020. Further details on ASIC’s expectations is available in ASIC’s Media Release.
The Government’s enhanced regulatory sandbox (ERS) is scheduled to commence on 1 September 2020, providing FinTechs and InsurTechs a class waiver from licensing for certain financial services and credit activities. ASIC released guidance on 25 August 2020 to assist innovative financial businesses to test their products and services under the ERS, which replaces ASIC’s sandbox created in December 2016.
ASIC Information Sheet 248 Enhanced regulatory sandbox (INFO 248) provides information on the types of financial services and products and credit activities an eligible person can provide for up to 24 months. INFO 248 also provides a comparison between ASIC’s sandbox and the new ERS, including information on the new eligibility criteria, the requirements to satisfy the net public benefit test and innovation test as well as ongoing conditions to rely upon the ERS exemption. Further background on the ERS, including ASIC’s INFO 248 and regulations are accessible on ASIC’s website.
From 22 August 2020, litigation funders are regulated under the Corporations Act 2001 (Cth) (Corporations Act), requiring operators of litigation funding schemes to hold an Australian financial services licence and to comply with the managed investment scheme regime in Chapter 5C of the Corporations Act. As part of the transition to the new regime, ASIC Corporations (Litigation Funding Schemes) Instrument 2020/787 provides exemptions from:
A no-action position has also been released by the regulator with respect to the obligation under Chapter 2C of the Corporations Act to establish and maintain a register of members of a registered litigation funding scheme. More information is available in our previous update as well as ASIC’s website.
APRA issued new frequently asked questions (FAQs) on 21 August 2020 with respect to its MySuper Product Heatmap. The FAQs highlight that a new 2020 MySuper Product Heatmap will be released in December 2020 covering investment performance as well as fees and costs with respect to MySuper products. Data on sustainability of member outcomes and investment performance will be current until 30 June 2020, with data on fees and costs based on Product Disclosure Statements as at 1 October 2020. APRA’s revised FAQs are available on its website.
On 31 August 2020, ASIC published its Corporate Plan for 2020-24 highlighting its strategic priorities and actions in addressing the impact of COVID-19 as well as long term regulatory issues. In particular, the regulator has highlighted the following priorities responding to the COVID-19 pandemic:
The regulator’s long term priorities include preventing misconduct, improving management of key risks, encouraging confident financial system participation, addressing consumer harm, reducing misconduct by professional service providers and directors, reducing poor product design, and delivering as a conduct regulator for the superannuation industry. ASIC’s Corporate Plan for 2020-24 is available on ASIC’s website.
APRA published its revised 2020-24 Corporate Plan on 31 August 2020 to account for the substantial impact of the COVID-19 pandemic. The regulator addressed that it is committed to delivering 4 key community outcomes, including financial sector resilience, improving superannuation member outcomes, transforming governance, culture, remuneration and accountability, as well as improving cyber resilience. With respect to its internal capabilities, APRA’s priorities including improve its risk-based supervision, its resolution capacity and external engagement, as well as transforming data-enabled decision-making, as well as culture and leadership. More information as well as a copy of the Corporate Plan is available on APRA’s website.
In March 2020, APRA announced due to the impact of COVID-19 it would suspend its planned policy and supervision initiatives, following by suspending the issuance of new licences in April 2020. APRA reported on 10 August 2020 that it will resume public consultations on select policy reforms as well as a staged resumption of the issuing of new licences. In particular, the policy reforms that will recommence through public consultation include the cross-industry prudential standard on remuneration, insurance capital reforms to incorporate changes in the accounting framework, prudential standard for insurance in superannuation, guidance on the superannuation ‘sole purpose’ test, as well as ADI capital reforms. Details on the revised policy program and recommencement of issuing new licences is available in APRA’s Media Release.
On 5 August 2020, ASIC announced that it is seeking industry feedback on the proposed use of the product intervention orders to address consumer detriment arising from the sale of add-on insurance and warranties by card yard intermediaries. The proposals affect insurance products and warranties. If a product intervention order is issued, these products will be subject to a deferred sales model and specific reporting obligations to ASIC will apply.
The proposed changes, as addressed in the draft ASIC Corporations (Product Intervention – Add-on Motor Vehicle Financial Risk Products) Instrument 2020, take into consideration feedback from ASIC’s earlier consultation in October 2019 in ASIC Consultation Paper 324 Product intervention: The sale of add-on financial products through caryard intermediaries. In particular, the proposed amendments provide for a general transition period, a number of revised definitions, general and specific prohibitions applying to intermediaries and product issuers as well as conditions relating to the terms of mechanical risk products. The consultation closed on 19 August 2020. The proposed measures are in addition to the proposed deferred sales model for add-on insurance products generally which is yet to be passed by Parliament. Further information is available in ASIC’s Media Release as well as our recent article.
APRA issued a consultation letter to authorised deposit-taking institutions (ADIs) on 13 August 2020 on the reporting requirements and capital measures with respect to loans affected by COVID-19. The regulator provided a draft ‘Attachment E’ to APS 220 Credit Quality on the temporary capital treatment which was subject to a consultation period until 21 August 2020. APRA also provided a draft ‘Attachment B’ to Reporting Standard ARS 923.2 Repayment Deferrals which addresses the entity-level data APRA intends to collection and publish with respect to loans impacted by COVID-19. A copy of the consultation letter as well as further information is available on APRA’s website.
The regulator announced that as at 30 June 2020, six of Australia’s largest authorised deposit taking institutions and financial services institutions have offered a total of $1.05 billion in compensation to customers that have suffered loss or detriment due to non-compliant advice or ‘fees for no service’ misconduct. Since 2015, ASIC has commenced two major reviews to:
Further details including a breakdown of the compensation payments offered or paid by institutions is available in ASIC’s Media Release.
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The world’s first Global Nature Positive Summit was held in Sydney, Australia from 8 to 10 October 2024.
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