Publication
Keeping your dawn raid guidance current
Unannounced inspections or ‘dawn raids’ are used by antitrust authorities to obtain evidence when there are suspicions that individuals or businesses have infringed the antitrust rules.
Australia | Publication | September 2021
This article was co-authored with Remy Michelson and Melanie Lo.
The month of August 2021 saw a release of anticipated updates to the upcoming changes in the funds management, superannuation and insurance sectors. Notably, Treasury has released the draft updated Corporate Collective Investment Vehicle fund legislation and tax framework, the release of the first Your Future Your Super performance test results and APRA and ASIC released their Corporate Plans for 2021-2025. APRA and ASIC have stated their strategic focus is on protecting and strengthening deposit-holders, insurance policyholders and superannuation members during the current period of disruption. APRA and ASIC have also released their approach to various anticipated changes including licensing of new banks, the reforms from the Royal Commission and the annual performance test for MySuper.
Treasury has released an updated exposure draft of the proposed tax framework for CCIVs. Key updates are intended to:
The new corporate structure will ensure that CCIVs are recognisable to offshore investors and fund managers.
Further information about the key changes in the exposure draft of the CCIV tax framework is available here.
On 26 August 2021, ASIC released its Corporate Plan for 2021-2025. ASIC’s four external strategic priorities target the most significant threats and harms in the regulatory environment:
ASIC’s internal policies focuses on strengthening its operational capabilities and include the following:
For the full report and further details, please visit the ASIC website here.
On 26 August 2021, APRA published its updated Corporate Plan for 2021-25 based on the theme of “protected today, prepared tomorrow”. The plan sets out APRA’s strategic priorities for protecting deposit-holders, insurance policyholders and superannuation members during the current period of disruption whilst also focusing on preparing for future challenges. APRA intends to:
The Corporate Plan outlines APRA’s aim of:
For the full report, please visit the APRA website here.
On 12 August 2021, ASIC published its approach to the six reforms resulting from the recommendations from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Royal Commission) and other inquiries, which will commence in October 2021. The relevant laws which will commence in October 2021 are:
ASIC claims the new laws will provide the Regulator with increased visibility of issues in the marketplace, through breach reports, complaints data and data available under design and distribution obligations. Further, the reforms will aim to assist ASIC in identifying problems sooner and address them more efficiently, with less reliance on disclosure to address consumer harms. ASIC also notes that the laws outlined above will offer consumers with sustained protection from the harms raised by the Royal Commission, whilst reducing regulatory gaps.
ASIC states that while these reforms have been in the pipeline for some time, ASIC recognises they require significant changes to businesses’ systems and processes and take effect at the same time industry is facing other challenges, including from COVID-19 and renewed lockdowns. ASIC therefore recognise there will be a period of transition as industry finalises implementation of additional compliance measures, and ASIC will take a reasonable approach in the early stages of these reforms provided industry participants are using their best efforts to comply. However, where firms are not acting in good faith or where ASIC detect conduct causing actual harm, ASIC will not hesitate to enforce the law.
Further details on the different reforms and ASIC’s approach can be found here.
On 31 August 2021, APRA released the results of the first performance assessment under the new Your Future, Your Super legislation performance test.
APRA assessed 80 MySuper products under the new rules of which 13 products were identified as underperforming. The Trustees of each of the underperforming funds must communicate the performance test failure to their members. Additionally APRA expects the Trustees of each fund to:
The results of the Your Future, Your Super performance test can be found here.
These assessments will now be conducted annually. In conjunction with this the ATO has released its MySuper comparison tool to compare MySuper products. A personalised version is available to individuals via MyGov, a non-personalised version is available here.
On 3 August 2021, APRA released its results from stress-testing insurers during 2020. APRA’s stress test were designed to assess insurers’ resilience to further deteriorations in macroeconomic conditions, and the actions they would take in response, both individually and collectively.
The results of the stress test indicated that life insurers (LIs) and lenders mortgage insurers (LMIs) were generally well positioned to withstand a very severe economic downturn, specifically demonstrating that they were able to remain above the minimum capital requirements. Most insurers were able to demonstrate good management action and credibly recovery options.
The stress test provided valuable assurance of insurer’s resilience during economic downturn. For further information, please visit the APRA website here.
On 6 August 2021, ASIC released findings on superannuation funds’ annual members’ meetings. The results are based on observation of the inaugural meetings held by trustees for certain superannuation funds between October 2020 and March 2021. ASIC’s observation involved reviewing annual members’ meetings held by 24 superannuation funds, comprising of industry, retail, corporate and public sector funds, and centred on whether the trustees:
Although ASIC did not identify major failures by the various funds to comply with obligations that were in the ambit of the surveillance, ASIC did identify room for improvement in terms of how trustees’ communicate to members and the way they afford members the opportunity to ask questions at meetings. Further, through the findings, ASIC has recognised examples of good practice that could improve member experience, and encourages superannuation trustees to consider these practices and take action to enhance their meetings as appropriate. These good practices including providing clear information to members on how to submit questions prior to and during the meeting, as well as sharing Q&A with the broader membership of the fund.
Further details on the findings and good practices to improve transparency at annual members’ meetings can be found here.
Leading up to the October 2021 commencement of the DDO regime, Treasury received feedback from stakeholders and has released a statement on its intent to make a number of amendments. The proposed changes will seek to:
Treasury will consult on these changes with stakeholders in due course. For further information, please visit the Treasury’s website here.
On 2 August 2021, ASIC released a report on how nine life insurers are addressing consumer harms in the product design and claims handling space. The report outlined the key changes primarily related to the use of restrictive TPD definitions and onerous claims handling practices. The report found that all nine insurers:
The report also highlighted the residual gaps and areas where improvements are still needed, with particular focus on the ability of trustees and insurers to use data to improve both product data and claims handling. For the full report, please visit the ASIC website here.
On 10 August 2021, ASIC released findings from its review of managed funds’ illiquid-assets valuation practices throughout the early stages of the pandemic. The Regulator collected data between March and November 2020 when the industry was challenged with significant economic uncertainties due to COVID-19. The purpose of the review was to determine whether the current regulatory parameters for the valuation of illiquid assets are appropriate to protect members’ interest in times of heightened market volatility.
The review examined how ten fund managers valued various typed of illiquid assets as well as the governance frameworks, policies and procedures they used to perform the valuations. Amongst the findings, the fund managers were found to be responsive to the increased valuation risks during the review period, and had adequate arrangements to manage conflicts of interest linked with valuations, and appropriately revalued illiquid assets when needed.
Further details on how ASIC undertook the review and its findings can be found here.
On 12 August 2021, the government released for consultation a draft Bill which sets out the financial reporting and auditing obligations of RSEs. The draft Bill requires RSEs to:
Submissions are opened until 8 September 2021.
APRA has published additional FAQs and worked examples to provide further guidance on RSE licensees on reporting standards for Phase 1 of the Superannuation Transformation Project. The FAQs provide an update on the staged implementation approach, including an extension to the timeframe for the initial submission of 30 June 2021 data related to trustee-directed products. The new FAQs and worked examples are available on the APRA website here.
On 16 August 2021, APRA released its information paper on its approach to administering the annual performance test for superannuation products. According to the paper, the performance test is a two-part test and involves:
APRA has also developed a methodology to administer the performance test where there have been within-product changes or across-product changes. The key principles are:
The information paper can be viewed here.
On 17 August 2021, APRA released its quarterly private health insurance (PHI) publications for the June 2021 quarter. The publication found the following:
To view the quarterly private health insurance statistics, please visit the APRA website here.
On 17 August 2021, Treasury conducted a further consultation on the regulations for portfolio holding disclosure by superannuation funds. Following initial feedback from stakeholders, the draft regulations and explanatory memorandum have been amended to:
Consultation is open until 31 August 2021.
On 24 August 2021, APRA released its quarterly superannuation publication for the June 2021 quarter. The key statistics were as follows:
The statistics are to be released on 31 August 2021. For a summary of the statistics, please visit the APRA website here.
On 26 August 2021, APRA released its June 2021 statistics for general and life insurance. For the general insurance industry, the report found the following:
The life insurance industry saw positive results with significant improvement to net profit after tax than the previous year. Notably however, risk products still reported a combined net loss after tax of $18.8 million with particular focus on Individual Disability Income Insurance.
Please view the following APRA websites for the general insurance statistics and the life insurance statistics.
On 25 August 2021, ASIC released Consultation Paper 347 Proposed amendments to the prohibition on order incentives in the ASIC market integrity rules (CP 347). ASIC noted that its rules currently do not deal with certain payment-for-order flow scenarios (such as arrangements between non-market participant intermediaries).
Although payment for order flow is not prevalent in the Australian equity market, ASIC has identified its continuing growth in other markets and has recognised that it has the potential to create conflicts of interests and negatively impact market liquidity and pricing. ASIC is now considering the application of the existing prohibition on payment for order flow.
ASIC is seeking feedback on its proposal to amend its current prohibition. The consultation will end on 3 November 2021, pending pandemic shutdowns.
The Treasury has released draft legislation which will make unfair contract terms unlawful under the Australian Securities and Investments Commission Act 2001 (Cth). These laws have been foreshadowed for some time. Currently no pecuniary penalties apply once a contract term is declared void but this is set to change.
Under the proposed laws:
The new laws also apply to standard form contracts not the subject of the proceeding but which have the same or similar unfair terms. In those circumstances:
It will become even more important for financial institutions to ensure their standard form contracts do not contain unfair terms.
For more details, see our update.
Publication
Unannounced inspections or ‘dawn raids’ are used by antitrust authorities to obtain evidence when there are suspicions that individuals or businesses have infringed the antitrust rules.
Publication
In the recent decision of Baldoo Dharamdav Parbanath v The Incorporated Management Committee of Aberdeen Technical School [2024] HKCFI 1276, the Hong Kong courts considered the legality of the summary dismissal of a teacher who failed to return to Hong Kong during the pandemic.
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