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An overview of the Nature Repair Market
In our previous articles, we highlighted that under Stage 1 of the nature reforms detailed in the Nature Positive Plan, the nature repair market was established.
Australia | Publication | April 2022
This article was co-authored with Stephanie Moss.
The month of March saw developments in relation to major legislative initiatives and regulatory consultations. Notably, the Security Legislation Amendment (Critical Infrastructure Protection) Bill 2022 passed both Houses of Parliament and Amended Regulations pertaining to both Foreign Acquisitions and Takeover and the CCIV framework were registered. ASIC also opened up industry consultation on the AFS licensing requirements for CCIVs.
Other notable updates from ASIC during March included the grant of extra time to hold virtual-only meetings, the provision of relief pertaining to emergency payments by insurers to customers, the provision of information related to the online discussion of financial products and services (specifically targeting “finfluencers”), the announced commencement of surveillance of managed funds’ promotional material, as well as extended relief for business introduction services and retirement estimates.
APRA announced it will not take action against Trustees regarding the divestment of Russian assets and it released an updated prudential standard to enhance the risk management of the use of offshore reinsurers by the Australian life insurance industry.
The Treasury has commenced consultation on proposed regulation of Crypto Asset Secondary Services Providers and appeals have been filed in the Second Business Interruption Test case.
On 31 March 2022, the Bill implementing the second tranche of changes to amend Australia’s critical infrastructure mechanism was passed by both Houses of Parliament. It has subsequently received assent.
Key provisions of this Bill include:
The Minister’s announcement can be found here and further information on the Bill can be found here.
The Foreign Acquisitions and Takeovers Amendment Regulations 2022 (the ‘Regulations’) were registered on 31 March 2022 and commenced on 1 April 2022. The Explanatory Statement notes the Regulations are intended to clarify particular aspects of the Foreign Acquisitions and Takeovers Regulation 2015 and to streamline processing of the less sensitive investment types. It also notes the Regulations give effect to the Government’s acceptance of the Secretary to the Treasury’s evaluation of the Government’s most recent foreign investment reforms.
The Explanatory Statement further states that for foreign investors that engage in moneylending, invest in unlisted land entities or Australian media businesses, acquire shares or units under rights issues and other pro-rata offers, or transact on behalf of institutional investors as part of a custodian service, the Regulations seek to reduce the regulatory burden. For such foreign investments, the amendments refine the rules for notification, which includes raising thresholds and the provision of broader exemptions from foreign investment screening.
Full text of the Explanatory Statement can be found here.
On 31 March 2022, the following regulations pertaining to the Corporate Collective Investment Vehicle Framework (‘CCIV’) were registered and commence on 1 July 2022:
The Explanatory Statement for the Corporations and Other Legislation Amendment (Corporate Collective Investment Vehicle Framework) Regulations 2022 states that the Regulations provide for various matters required or permitted to be prescribed under Chapter 8B of the Corporations Act, which include the following:
Full text of the Explanatory Statement can be found here.
Additionally, earlier in March, ASIC released a consultation paper seeking industry feedback on the financial services licensing requirements for CCIVs. As well as proposed updates to five licensing-related regulatory guides, Consultation Paper 360 incorporated proposals referencing:
Further information can be found here.
ASIC announced the granting of relief for certain companies and registered schemes by way of providing additional time for holding virtual-only meetings (subject to conditions), with the aim of allowing flexibility in the recovery of challenges presented by COVID-19 for those companies and registered schemes in preparing for AGMs or other meetings of members.
Under the ASIC Corporations (Virtual-only Meetings) Instrument 2022/129, ASIC granted additional time to hold virtual-only meetings for listed companies and listed and unlisted registered schemes, which will have the option to hold virtual-only meetings until 31 May 2022. Unlisted companies have an extension until 30 June 2022.
However, before the relief can be relied upon, the directors of the company or the responsible entity of a registered scheme must pass a resolution that due to the impact of the COVID-19 pandemic, it would be unreasonable to hold a meeting of its members either wholly or partially at one or more physical venues.
Further information can be found here.
To streamline the process for insurers to give emergency payments to customers impacted by the catastrophic severe weather and flooding in Queensland and Northern NSW, ASIC has provided legislative relief that means insurers can provide payments in emergency situations without first providing them with a Cash Settlement Fact Sheet.
This legislative relief applies in limited circumstances only, which include instances where:
The relief is also subject to conditions and is due to expire in 2025.
Further information can be found here.
On 21 March. ASIC published an information sheet (INFO 269) which covers its regulatory approach to discussing financial products and services online. The Information Sheet is specifically focused on outlining how the law applies to social media influencers and to the licensees who use them.
Key areas covered by the Information Sheet include:
Further information can be found here.
On 23 March, ASIC announced that it is continuing a further phase of surveillance following its ‘True to Label’ initiative, which examined whether managed funds’ advertising and promotion may have misled consumers as to the funds’ characteristics and underlying assets.
Under this latest development, the surveillance will seek to identify misleading performance and risk representations in the marketing material of funds that is targeting retail investors and potentially unsophisticated wholesale investors such as some retirees.
This scrutiny extends to both traditional and digital media marketing and includes search engine advertising.
Further information can be found here.
ASIC has granted an extension of the existing relief for business introduction services until 1 October 2022. The extended relief is subject to a new requirement that persons who rely on the relief from 1 April 2022 must provide notice to ASIC.
The relief will be further amended from 1 October 2022 to:
The relief is due to expire on 1 April 2025.
Further information can be found here.
The existing relief for superannuation trustees who give their members retirement estimates on a periodic statement has been extended by ASIC for nine months, allowing superannuation trustees to continue using the relief when sending annual statements to members for the 2021-22 financial year.
Further information can be found here.
On 3 March 2022, APRA confirmed in a media release that having noted the Government’s expectation Australian superannuation funds will review investment portfolios and divest Russian asset holdings, APRA will not take action against trustees seeking to divest Russian assets where the trustees have considered the divestments in accordance with their duties.
The media release can be found here.
The move by APRA is in response to the growing use of offshore reinsurers by the Australian life insurance industry. The revisions in the updated LPS 117 (Prudential Standard LPS 117 Capital Adequacy: Asset Concentration Risk Charge) aim to provide a balance of appropriately managing the risks of the use of offshore insurers while still allowing the realisation of the benefits from their use.
Additionally, arising from APRA’s recent consultation on AASB 17 Insurance Contracts and APRA’s LAGIC updates, APRA is seeking feedback on a small number of consequential amendments to LPS 117 as well as minor consequential amendments to a related capital standard and reporting form. Consultation is open until 29 April 2022 on these elements of the draft standards.
The revised LPS 117 will commence from 1 July 2023.
Further information can be found here.
Following the Full Federal Court decision in LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17, the Second Business Interruption Test Case, a special leave application has been filed in the High Court. Although insurers were largely successful in the Full Federal Court decision, the appeal was allowed in part, mainly in relation to adjustment for government payments and the payment of interest under s57 of the Insurance Contracts Act 1984 (Cth).
Further information about the business interruption test cases can be found here.
Following the recommendations of the Senate Select Committee on Australia as a Financial and Technology Centre, Treasury has released a consultation paper on licensing and custody requirements for Crypto Asset Secondary Service Providers (CASSPrs). Consultation is scheduled to close on 27 May 2022.
The consultation relates to approaches to licensing digital currency exchanges and custody requirements for crypto assets. Treasury will communicate the outcome to government by mid‑2022 with a view of implementing a licensing regime by the end of the year. Crypto assets subject to the proposed regulation will include crypto currencies and non‑fungible tokens (NFTs).
The proposed licensing regime will apply to all secondary service providers such as brokers, dealers or those who operate and market for crypto assets, as well as secondary service providers who offer custodial services in relation to crypto assets. The regime will not apply to decentralised platforms or protocols. The proposal also involves mandatory minimum principle‑based custody obligations for private keys held or stored by CASSPrs on behalf of consumers.
Assuming these proposals become law, it will be interesting to see whether CCASPrs will seek to obtain insurance to assist with some of these obligations. In particular, the processes for redress and compensation in the event the crypto assets held in custody are lost.
Further information can be found here.
We have recently updated our Insurance Regulatory Hub to reflect changes to the regulatory landscape affecting insurers, reinsurers, underwriting agencies, coverholders, brokers and third party claims administrators. The Hub now also includes a link to the latest on the business interruption test cases.
Visit the Insurance Regulatory Hub today.
Publication
In our previous articles, we highlighted that under Stage 1 of the nature reforms detailed in the Nature Positive Plan, the nature repair market was established.
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