Financial services monthly wrap-up: September 2024

01 ASIC and APRA host Superannuation CEO Roundtables

On 2 September 2024, ASIC and APRA released the public notes from the latest Superannuation CEO Roundtables, held on 18 June and 16 July 2024. Twelve superannuation trustee CEOs and executives attended the Roundtables, representing a broad cross-section of the industry.

The Roundtable discussions highlighted the ongoing importance of investment governance, integrity, and robust risk culture in the superannuation industry.

ASIC’s media release can be accessed here. The public notes can be accessed here.

02 ASIC to target misconduct in banking and superannuation sectors

ASIC released REP 794 ASIC enforcement and regulatory update: January to June 2024 (REP 794) on 9 September 2024, setting out recent outcomes in enforcement and regulation. REP 794 outlined key ASIC activities between 1 January and 30 June 2024, including:

• ASIC succeeding in 95% of its civil and criminal prosecutions, securing $32.2 million in civil penalties and nine criminal convictions;
• The launch of 63 new investigations, commencement of 12 new civil proceedings and completion of 550 surveillances.
• Completion of ASIC’s review of 15 banks (outside the four major banks) on their scam prevention, detection and response activities.

ASIC emphasised that it will continue to focus on enforcement and regulatory activities relating to crypto-assets and blockchain technology, financial hardship, scams, greenwashing, banking, unconscionable conduct, and superannuation cold-calling.

ASIC’s media release can be accessed here.

03 ASIC updates superannuation forecasts relief instrument

ASIC has updated the default rate of nominal wage inflation in ASIC (Superannuation Calculators and Retirement Estimates) Instrument 2022/603 and Regulatory Guide 276 Superannuation forecasts: Calculators and retirement estimates (RG 276). This follows industry feedback on consultation CS 7 Proposed update to superannuation forecasts relief instrument.

ASIC decreased the default rate from 4% p.a. to 3.7% p.a. to align with the revised long-term wage growth forecast in the 2023 Intergenerational Report. The revised rate of 3.7% p.a. applies from 1 January 2025.

Providers of superannuation calculators and retirement estimates must update the default inflation rate used in their economic assumptions by 31 December 2024.

ASIC’s media release can be accessed here.

04 ASIC calls on product issuers to review distribution practices for DDO compliance

On 10 September 2024, ASIC released REP 795 Design and distribution obligations: Compliance with the reasonable steps obligation (REP 795). This Report outlines ASIC’s findings from its surveillance of 19 issuers of high-risk investment, insurance and credit products between October 2023 and August 2024.

Design and distribution obligations require product issuers to take reasonable steps to support ap

propriate distribution of their products to ensure that the products meet consumers’ needs.

In REP 795, ASIC shared key observations about, and recommendations for:

• selection and supervision of distributors;
• training staff;
• marketing and promotional materials;
• use of questionnaires; and
• use of information and monitoring outcomes.

ASIC also released minor updates to Regulatory Guide 274 Product design and distribution obligations (RG 274) to clarify its guidance on the appropriateness requirement for target market determinations. 

ASIC’s media release can be accessed here.

05 ASIC urges businesses to prepare for mandatory climate reporting

The Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 (Cth) (Bill) passed Parliament on 9 September 2024 and received Royal Assent on 17 September 2024.

The Bill amends the Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth) to, among other things, introduce mandatory climate reporting. From 1 January 2025, many large Australian businesses and financial institutions must prepare annual sustainability reports with climate-related financial disclosures. Smaller entities will be required to start reporting on or after 1 July 2026 and 1 July 2027.

ASIC plans to engage with stakeholders and industry participants before issuing or updating regulatory guidance on complying with the mandatory sustainability reporting obligations. ASIC has provided information on the new regime in its sustainability reporting web page.

ASIC’s media release can be accessed here.

06 ASIC reissues Regulatory Guide 121 on doing financial services business in Australia

ASIC reissued Regulatory Guide 121 Doing financial services business in Australia (RG 121), which it last updated in June 2013.

RG 121 provides guidance about the financial services regime for individuals and companies outside Australia. This guidance includes information on when an AFS licence is needed, available exemptions from holding an AFS licence, and AFS licensee obligations.

RG 121 was reissued to:

• Clarify the available licensing exemptions and relief.
• Remove references to expired or repealed AFS licencing relief, including class relief granted to foreign financial services providers and foreign collective investment schemes.
• Update the description of “carrying on a business in Australia” to align with judicial guidance, including general indicators, and when a one-off transaction may constitute carrying on a business.
• Reflect general developments in the legal and regulatory framework.

ASIC’s media release can be accessed here.

07 ASIC extends reportable situations relief and personal advice record keeping requirements

ASIC has made two legislative instruments, ASIC Corporations and Credit (Breach Reporting–Reportable Situations) Instrument 2024/620 and ASIC Corporations Record-Keeping Requirements for Australian Financial Services Licensees when Giving Personal Advice) Instrument 2024/508, to extend reportable situations relief and personal advice record keeping requirements.

The relief and requirements are set out in instruments that are due to expire in October 2024. ASIC has extended the instruments for five years (until October 2029), as they are operating efficiently and effectively and continue to form a necessary and useful part of the legislative framework

This decision follows a public consultation in which six submissions were received. The submissions were generally supportive of the proposal to extend the operation of the relief and requirements. However, the submissions advocated for wider relief from the reportable situations regime, and migration of the relief and requirements to primary law.

ASIC’s media release can be accessed here.

08 ASIC's Vanguard greenwashing action results in record $12.9 million penalty

On 25 September 2024, the Federal Court ordered Vanguard to pay a $12.9 million penalty for making misleading claims about ESG exclusionary investment screens.

ASIC commenced proceedings against Vanguard in July 2023, alleging greenwashing in relation to the Vanguard Ethically Conscious Global Aggregate Bond Index Fund (Fund). The Court found that approximately 74% of the securities in the Fund were not researched or screened against applicable ESG criteria, and that Vanguard had misrepresented the “ethical” characteristics of the Fund.

Greenwashing continues to be an enforcement priority for ASIC, and recent regulatory interventions are outlined in Report 791 ASIC’s recent greenwashing interventions.

ASIC’s media release can be accessed here. The full judgment can be accessed here.

09 ASIC to allow instrument for primary production managed investment schemes to expire

ASIC will allow the ASIC Corporations (Land Holding for Primary Production Schemes) Instrument 2024/15 to expire on 1 October 2024, as the instrument is no longer necessary.

The instrument imposed minimum standards that a responsible entity must meet regarding the holding of certain interests in land for primary production managed investment schemes.

ASIC’s media release can be accessed here.

10 ASIC updates guidance for participants in the carbon market following Safeguard Mechanism reforms

On 30 September 2024, ASIC released an updated version of Regulatory Guide 236 Do I need an AFS licence to participate in carbon markets? (RG 236) to:

• Address the safeguard mechanism reforms which commenced on 1 July 2023, as introduced under the Safeguard Mechanism (Crediting) Amendment Act 2023 and National Greenhouse and Energy Reporting (Safeguard Mechanism) Rule 2015.
• Eeflect developments in the Australian Carbon Credit Units Scheme since RG 236 was last updated in May 2015.

ASIC consulted with stakeholders earlier this year by releasing Consultation Paper 378 Safeguard mechanism reforms: Updates to RG 236. ASIC received 19 submissions, including one from Norton Rose Fulbright Australia. See our submission here.

ASIC’s media release can be accessed here.

11 ASIC extends relief for employee redundancy funds

After receiving mixed feedback from stakeholders, ASIC has extended the operation of ASIC Corporations (Employee redundancy funds relief) Instrument 2015/1150 for a transitional period of 18 months. This will allow for further consultation on the appropriateness and form of the relief.

The transitional relief is provided under ASIC Corporations (Amendment) Instrument 2024/618. The Employee Redundancy Funds instrument, which was due to expire on 1 October 2024, grants relief to operators and promoters of employee redundancy funds from the AFS licensing and managed investment provisions of the Corporations Act. Entities relying on the relief must notify ASIC by 31 October 2024.

Further consultation is intended for early 2025.

ASIC’s media release can be accessed here.

12 APRA releases response to consultation on enhancements to superannuation data collections

On 20 September 2024, APRA released a response to its recent consultation on enhancements to superannuation data collections relating to indirect investment costs and trustee financial statements reporting.

In the consultation, APRA sought feedback on ways to improve the breadth, depth and quality of APRA’s superannuation data collection. Submissions were largely supportive of APRA’s proposals. However, some submissions raised concerns about:

• Inconsistencies between registrable superannuation entity (RSE) reporting requirements under ASIC’s Regulatory Guide 97 Disclosing fees and costs in PDSs and periodic statements (RG 97) and SRS 332.0 Expenses and Investment and Transaction Fees and Costs.
• Data completion under different trustee business structures.
• The definition of ‘Related Party’.

APRA’s response clarified the following:

• APRA will refine the reporting standard to capture total investment fees and costs and transaction costs for each investment manager and internally incurred, aligning with RG 97 requirements.
• APRA will update instructions and guidance for different entity types.
• The related party disclosures required to be reported are aligned to AASB 124 Related Party Disclosures.

APRA intends to release a second response by the end of 2024, addressing proposed enhancements for the collection of data on investments and RSE, and RSE licensee, profile.

APRA’s media release can be accessed here. APRA’s response can be accessed here.

13 APRA releases performance metrics and insights package to improve transparency in superannuation

On 24 September 2024, APRA released the Comprehensive Product Performance Package (CPPP), which sets out product performance metrics and insights in relation to 876 MySuper and choice products. The data derives from the legislated performance test and APRA’s superannuation heatmaps.

The CPPP is intended to increase transparency and improve member outcomes in the superannuation industry.

APRA’s media release can be accessed here. The CPPP can be accessed here.

14 APRA releases intermediated general insurance statistics for June 2024

On 26 September 2024, APRA released its bi-annual intermediated general insurance statistics for June 2024. This publication outlines key statistics on intermediated general insurance placed with APRA-authorised general insurers, Lloyd's underwriters and unauthorised foreign insurers.

APRA’s media release can be accessed here. The statistics can be accessed here.

15 AUSTRAC releases update on the introduction of the AML/CTF Amendment Bill in Parliament

On 11 September 2024, the Commonwealth Attorney-General introduced the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024 to Parliament.

The Bill aims to modernise the AML/CTF regime and better protect the community from financially-enabled crimes. The Bill also aims to strengthen and update the existing regime to improve its effectiveness.

The Bill has three key objectives:

• Extend the AML/CTF regime to additional services provided by real estate professionals, lawyers, accountants, trust and company service providers, and dealers in precious metals and stones (Tranche 2 entities).
• Improve the effectiveness of the AML/CTF regime, and make it simpler and clearer.
• Modernise the regime to reflect changes in business structures, technologies and illicit financing methodologies.

The Attorney-General’s Department and AUSTRAC consulted on the proposed reforms and received over 270 submissions over 2023-2024.

AUSTRAC’s media release can be accessed here. More information about the Bill can be accessed here. To stay updated, you can access the Norton Rose Fulbright AML/CTF hub: here.