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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 | July 2021
This article was co-authored with Caterina Presutti.
June 2021 has seen the release of ASIC consultation on the much anticipated topic of exchange-traded products (ETPs) and other investment products that provide retail investors with exposure to crypto-assets. ASIC has also extended licensing relief to trustees of registrable superannuation entities and foreign financial service providers (FFSPs). In the insurance space, the High Court of Australia has denied leave to appeal the decision of the first business interruption test case launched in Australia.
ASIC has extended existing licensing relief for public offer trustees to include all registrable superannuation entities to ensure that non-public offer trustees are regulated consistently with public offer trustees under the Corporations Act 2001.
From 1 July 2021, all registrable superannuation trustees will be required to hold an Australian Financial Services (AFS) licence with authorisations to deal in superannuation interests and to provide a superannuation trustee service.
However, the prior relief instrument confirmed that a dealing authorisation under an AFS licence is not required by public offer trustees in order to deal in a financial product (other than an interest in the fund) in the ordinary course of operating the superannuation fund. ASIC Corporations (Amendment) Instrument 2021/550 has extended the exemption to non-public offer trustees, having regard to law reform that requires these trustees to hold an AFS licence.
The relief applies to all superannuation trustees for a period of 18 months, ending 31 December 2022. No immediate action is required by trustees who currently rely on the relief or wish to do so in the future.
Prior to its expiry, ASIC will consult on the operation of the instrument with industry and reconsider the appropriateness of the relief following the introduction of the new financial service – ‘provide a superannuation trustee service’.
ASIC has stated that it will give sufficient notice to industry before any further change is implemented.
Further information and access to the relief instrument can be found here.
ASIC has updated Class Order 13/721 [CO 13/721] (Class Order) on exchange traded funds (ETF) to allow ETF issuers to use overseas market makers.
The Class Order has been amended by ASIC Corporations (Amendment) Instrument 2021/299 (Amending Instrument) which removes the requirement in the Class Order that an authorised participant must be an Australian resident for tax purposes.
ASIC notes that authorised participants perform an essential function in the ETF market and made the Amending Instrument after reviewing the local authorised participant requirement and consulting interested stakeholders. ASIC found that the local authorised participant requirement does not support competition or market efficiency in the ETF market making sector. As such, the Amending Instrument removes a regulatory barrier to entry for offshore market-making entities seeking to participate in the Australian ETF market and, as a result, may encourage new entrants to the ETF market making sector.
Further information and a copy of the Amending Instrument can be found here.
ASIC has released Consultation Paper 343 Crypto-assets as underlying asset for ETPs and other investment products (CP 343).
The release of CP 343 aligns with the current interest in, and demand for, domestic crypto-asset ETPs. However, ASIC considers that crypto-asset ETPs have novel and unique features that require consideration of whether such products can support fair, orderly and transparent markets and comply with our regulatory framework. Similar issues have been, or are being, actively considered by other jurisdictions in the context of their regulatory frameworks.
Accordingly, CP 343 is designed to assist ASIC finalise its positions on good practices for market operators and product issuers. Key areas of focus for market operators and issuers in CP 343 include:
A link to our full update on the consultation be found here and a copy of CP 343 can be found here. Submissions on CP 343 are due by 27 July 2021.
On 17 June 2021, the Treasury Laws Amendment (Your Future, Your Super) Bill 2021 (the YFYS Bill) was passed bringing effect to the “Your Future, Your Super”.
In summary, the YFYS Bill introduces the following superannuation reforms:
The measures commenced on 1 July 2021, except for the Stapled Fund amendment, which will come into effect on 1 November 2021.
A link to our full update on the YFYS Bill can be found here.
The Treasury Laws Amendment (More Flexible Superannuation) Bill 2021 (the More Flexible Super Bill) received royal assent on 22 June 2021, bringing about a number of changes to the Income Tax Assessment Act 1997 (ITAA 1997), including the expansion of the ‘bring forward’ rule to allow individuals under the age of 67 to make non-concessional super contributions for up to three years from 1 July 2020. Please refer to the Parliament of Australia website for the More Flexible Super Bill as passed by both Houses and the explanatory memorandum.
The More Flexible Super Bill now enables individuals under the age of 67 to make non-concessional super contributions for up to three years under the ‘bring forward’ rule. Subject to satisfying the conditions under the ITAA 1997, this amendment means individuals aged 65 and 66 can now make non-concessional contributions of up to two or three times the annual non-concessional contributions cap in a financial year. The modified ‘bring forward’ rule will apply to non-concessional contributions made on or after 1 July 2020.
From 1 July 2021, individuals who withdrew super amounts under the COVID-19 early access to super scheme (the Scheme), will be able to re-contribute these amounts. Re-contributed super amounts will not count towards non-concessional caps, from 1 July 2021 until 30 June 2030. Further, contributions cannot be more than the super amounts withdrawn under the Scheme, and cannot be claimed as a tax deduction.
From 1 July 2021, individuals will not be required to pay the excess contributions charge if they surpass their concessional contributions cap. The More Flexible Super Bill removes the excess concessional contributions charge, which is imposed on the additional income tax that is attributable to the inclusion of excess contributions in assessable income. Individuals who exceed their concessional contributions cap, will still be required to include the exceeded amount in their assessable income and taxed at their marginal tax rate (with a 15% tax offset to account for the contributions tax already paid by their super fund).
ASIC has highlighted the following key focus areas for directors, preparers of financial reports and auditors to pay particular attention to in relation to the reporting period ending 30 June 2021:
Entities may continue to face some uncertainties about future economic and market conditions, and the future impact on their businesses. Assumptions underlying estimates and assessments for financial reporting purposes should be reasonable and supportable. Assumptions should be realistic, and not overly optimistic or pessimistic.
ASIC Commissioner Cathie Armour said that ‘disclosing key assumptions, risks, the drivers of results, management strategies and future prospects will be important for investors and other users of financial reports. This includes both full-year and half-year reports.’
ASIC notes that the OFR should complement the financial report and tell the story of how the entity’s businesses are impacted by the COVID-19 pandemic.
Further information and more detail on the key areas to consider for this reporting period can be found here.
On 11 June, ASIC announced that it is has extended the transitional relief for FFSPs currently relying on class order or limited connection relief for a further 12 months, to 31 March 2023.
This extension follows the recent announcement contained in the Australian Federal Budget 2021-2022 in which the Government announced that it will consult on options to:
ASIC has therefore paused its assessment of foreign AFS licence applications lodged by FFSPs pending the outcome of the Government’s reforms, unless applicants specifically request that ASIC continue with the assessment of their application. However ASIC will continue to consider new applications for individual temporary licensing relief or new standard or foreign AFS licence applications from entities that cannot rely on the transitional relief.
Further information is available on ASICs website.
On 15 June, ASIC released Information Sheet 256 which provides guidance to financial advisers and advice licensees on their obligations when providing personal advice to retail clients.
The publication of Information Sheet 256 follows recent changes to the law that took effect on 1 July 2021, and will implement a number of recommendations from the Financial Services Royal Commission Final Report including to:
Further information can be found on ASICs website.
As part of the implementation of these recommendations, ASIC has also released consequential amendments to Regulatory Guide 175 Licensing: Financial product advisers – Conduct and disclosure (RG175).
The updated RG 175 reflects new advice obligations introduced into the Corporations Act 2001, following the Financial Services Royal Commission. It also includes an example of the lack of independence disclosure statement to help advisers understand the requirements of ASIC Corporations (Disclosure of Lack of Independence) Instrument 2021/125.
A link to the updated RG175 can be found here.
On 16 June, ASIC announced the results from its review of the financial reports of 85 listed entities for the year ended 31 December 2020.
ASIC made the largest number of inquiries in relation to impairment of non-financial assets, asset values and disclosure in the operating and financial review.
ASIC noted that many companies have continued to make useful and meaningful disclosures on the impact of COVID-19 conditions. However, ASIC warned that some entities with businesses adversely affected by the pandemic did not appear to give sufficient attention to the reporting of asset values and financial position.
For more detail, please follow this link.
ASIC has made new market integrity rules for capital, providing important protections for investors and the integrity of the market, whilst simplifying the capital framework for market participants.
The ASIC Market Integrity Rules (Capital) 2021 (Capital Rules) will replace the existing separate rule books for securities market participants and futures market participants to create a common set of rules for capital.
Commissioner Cathie Armour said, ‘ASIC’s new Capital Rules simplify and strengthen the current capital regime, better aligning our standards with comparable international capital frameworks and the financial requirements of the Australian financial services licensing regime. The Capital Rules further consider the risks associated with operating a market participant business, helping to better protect investors and counterparties.’
The Capital Rules will:
Following a 12-month transition period, market participants will be required to comply with the Capital Rules from 17 June 2022. However, market participants may wish to opt into the Capital Rules before 17 June 2022, by providing written notice to ASIC. Upon opting in, market participants will be required to lodge monthly risk-based returns through ASIC’s regulatory portal.
For more information and for access to the Capital Rules, please see link.
The High Court of Australia has denied special leave to appeal the decision of the New South Wales Court of Appeal in HDI Global Speciality SE v Wonkana No 3 Pty Ltd [2020] NSWCA 296, bringing to an end at least one element of confusion which has gripped policyholders and insurers since last year. This was the first business interruption test case launched in Australia. It considered whether an exclusion referring to the now repealed Quarantine Act 1908 (Cth) (Quarantine Act) could be enforced by insurers.
This case concerned a specific point, whether the expression “other diseases declared to be quarantinable diseases under the Australian Quarantine Act 1908 and subsequent amendments” extended to ‘listed human diseases’ under the Biosecurity Act 2015 (Cth) (Biosecurity Act). This point was significant because a number of policies purporting to provide business interruption insurance cover excluded such diseases. The Quarantine Act was repealed in June 2016 and COVID-19 measures have been implemented under the Biosecurity Act.
However the substantive matters relating to policy response were not covered by that case and will hopefully be covered by the second business interruption test case due to be heard in August 2021. Read our full update here.
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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